[Federal Register Volume 78, Number 226 (Friday, November 22, 2013)]
[Rules and Regulations]
[Pages 70163-70188]
[FR Doc No: 2013-28078]

Vol. 78

Friday,

No. 226

November 22, 2013

Part III

Department of Energy

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

 Federal Energy Regulatory Commission

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

18 CFR Parts 38 and 284

Communication of Operational Information Between Natural Gas Pipelines
and Electric Transmission Operators; Final Rule

Federal Register / Vol. 78 , No. 226 / Friday, November 22, 2013 /
Rules and Regulations

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 38 and 284

[Docket No. RM13-17-000; Order No. 787]

Communication of Operational Information between Natural Gas
Pipelines and Electric Transmission Operators

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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

SUMMARY: In this Final Rule, the Federal Energy Regulatory Commission
(Commission) amends the Commission's regulations to provide explicit
authority to interstate natural gas pipelines and public utilities that
own, operate, or control facilities used for the transmission of
electric energy in interstate commerce to share non-public, operational
information with each other for the purpose of promoting reliable
service or operational planning on either the public utility's or
pipeline's system. The revised regulations will help maintain the
reliability of pipeline and public utility transmission service by
permitting transmission operators to share information with each other
that they deem necessary to promote the reliability and integrity of
their systems. The Final Rule adopts the regulations proposed in the
Notice of Proposed Rulemaking without modification.

DATES: This rule is effective December 23, 2013. The incorporation by
reference of certain publications in this rule is approved by the
Director of the Federal Register as of December 23, 2013.

FOR FURTHER INFORMATION CONTACT:
Caroline Daly (Technical Information),
Office of Energy, Policy & Innovation,
888 First Street NE.,
Washington, DC 20426,
(202) 502-8931,
<EMAIL_ADDRESS>Anna Fernandez (Legal Information),
Office of the General Counsel,
888 First Street NE.,
Washington, DC 20426,
(202) 502-6682,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Order No. 787

Table of Contents

------------------------------------------------------------------------
                                                              Paragraph
                                                               Numbers
------------------------------------------------------------------------
I. Introduction............................................           2.
    A. Background..........................................           2.
    B. NOPR................................................           5.
II. Discussion.............................................           7.
    A. Need For the Rule...................................          18.
        1. NOPR............................................          18.
        2. Comments........................................          20.
        3. Commission Determination........................          27.
    B. Scope of Information................................          33.
        1. NOPR............................................          33.
        2. Comments........................................          35.
        3. Commission Determination........................          41.
    C. Entities Covered Under the Rule.....................          46.
        1. NOPR............................................          46.
        2. Comments........................................          49.
        3. Commission Determination........................          56.
    D. The No-Conduit Rule and Competitive Concerns........          60.
        1. NOPR............................................          60.
        2. Adequacy of No-Conduit Rule to Protect against            65.
         Competitive Harm..................................
        3. Exceptions to the No-Conduit Rule...............          90.
III. Questions Posed by the Commission.....................         100.
    A. Generator to Electric Transmission Operator                  100.
     Communications........................................
        1. NOPR............................................         100.
        2. Comments........................................         101.
        3. Commission Determination........................         105.
    B. Three-Way Communication of Non-Public Operational            106.
     Information...........................................
        1. NOPR............................................         106.
        2. Comments........................................         107.
        3. Commission Determination........................         115.
    C. Examples of Non-Public Operational Information......         117.
        1. NOPR............................................         117.
        2. Comments........................................         119.
        3. Commission Determination........................         123.
IV. Clarification Regarding Table-Top Exercises............         126.
    A. NOPR................................................         126.
    B. Comments............................................         127.
    C. Commission Determination............................         128.
V. Miscellaneous...........................................         131.
    A. Monitoring, Existing Tariff Requirements, Document           131.
     Destruction...........................................
        1. Comments........................................         131.
        2. Commission Determination........................         134.
    B. Costs of Information Sharing........................         137.
        1. Comments........................................         137.
        2. Commission Determination........................         138.
    C. Implementation......................................         139.
        1. Comments........................................         139.
        2. Commission Determination........................         143.
VI. Information Collection Statement.......................         145.
VII. Environmental Analysis................................         152.

VIII. Regulatory Flexibility Act...........................         153.
IX. Document Availability..................................         155.
X. Effective Date and Congressional Notification...........         158.
------------------------------------------------------------------------

Order No. 787

Final Rule

(Issued November 15, 2013)

    1. In this Final Rule, the Federal Energy Regulatory Commission
revises Parts 38 and 284 of the Commission's regulations to provide
explicit authority to interstate natural gas pipelines and public
utilities that own, operate, or control facilities used for the
transmission of electric energy in interstate commerce to share non-
public, operational information with each other for the purpose of
promoting reliable service or operational planning on either the public
utility's or pipeline's system.\1\ The revised regulations will help
maintain the reliability of pipeline and public utility transmission
service by permitting transmission operators to share information with
each other that they deem necessary to promote the reliability and
integrity of their systems. The Final Rule adopts the regulations
proposed in the Notice of Proposed Rulemaking without modification.\2\
---------------------------------------------------------------------------

    \1\ In this Final Rule, the Commission refers to interstate
natural gas pipelines and public utilities that own, operate, or
control facilities used for the transmission of electric energy in
interstate commerce collectively as ``transmission operators.''
    \2\ Communication of Operational Information Between Natural Gas
Pipelines and Electric Transmission Operators, 78 FR 44900 (July 25,
2013), FERC Stats. & Regs ] 32,699 (2013) (cross-referenced at 144
FERC ] 61,043 (2013) (NOPR)).
---------------------------------------------------------------------------

I. Introduction

A. Background

    2. In recent years, reliance on natural gas as a fuel for electric
generation has steadily increased.\3\ This trend is expected to
continue into the future, resulting in greater interdependence between
the natural gas and electric industries.\4\ Several events over the
last few years, such as the Southwest Cold Weather Event,\5\
demonstrate the crucial interaction between natural gas pipelines and
electric transmission systems and the need for robust communication
between these industry sectors to ensure that both systems operate
safely and effectively for the benefit of their customers.
---------------------------------------------------------------------------

    \3\ See, e.g., Energy Information Administration, Fuel
Competition in Power Generation and Elasticities of Substitution
(June 2012); Richard Smead, All Industry Segments Working for
Success in Growing Gas-Fired Generation (Nov. 15, 2012); ISO-NE.,
Addressing Gas Dependence at 3 (July 2012) (reliance on natural gas-
fired electricity in the region increased from five percent in 1990
to 51 percent in 2011).
    \4\ See, e.g., North American Electric Reliability Corporation,
2013 Special Reliability Assessment: Accommodating an Increased
Dependence on Natural Gas for Electric Power; Phase II: A
Vulnerability and Scenario Assessment for the North American Bulk
Power System at 1 (May 2013) (``Over the past decade, natural gas-
fired generation rose significantly from 17 percent to 25 percent of
U.S. power generation and is now the largest fuel source for
generation capacity. Gas use is expected to continue to increase in
the future, both in absolute terms and as a share of total power
generation and capacity.''), available at http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_PhaseII_FINAL.pdf;
Energy Information Administration, Annual Energy Outlook 2013 Early
Release Overview (2013) (showing electric generation from natural
gas rising from 13 percent in 1993 to 30 percent in 2040), available
at http://www.eia.gov/forecasts/aeo/er/early_elecgen.cfm; The New
England State Committee on Electricity, Natural Gas Infrastructure
and Electric Generation: A Review of Issues Facing New England (Dec.
14, 2012), available at http://www.nescoe.com/uploads/Phase_I_Report_12-17-2012_Final.pdf.
    \5\ See FERC/NERC, Report on Outages and Curtailments During the
Southwest Cold Weather Event of February 1-5, 2011 (2011), available
at http://www.ferc.gov/legal/staff-reports/08-16-11-report.pdf.
---------------------------------------------------------------------------

    3. Since February 2012, the Commission has requested comment and
conducted multiple technical conferences on various aspects of gas-
electric interdependence and coordination in order to better understand
the interface between the electric and natural gas pipeline industries
and identify areas for improved coordination.\6\ In this proceeding,
the Commission addresses one aspect of gas-electric interdependence and
coordination: communication and information-sharing between the natural
gas and electric industries.
---------------------------------------------------------------------------

    \6\ The NOPR contains a detailed description of the Commission's
various actions on gas-electric coordination and will not be
repeated here.
---------------------------------------------------------------------------

    4. On December 7, 2012, the Commission issued a Notice of Request
for Comments and Technical Conference regarding information sharing and
communication issues between the natural gas and electricity
industries.\7\ In response, natural gas and electric industry
participants described a variety of actions that are currently being
taken to improve communications and information sharing between the two
industries. While several entities acknowledged that system reliability
and contingency planning could be further enhanced by the sharing of
non-public, operational information directly between transmission
operators, several transmission operators pointed out that there is
general reluctance to share such information because of concerns that
doing so could be a violation of current laws, regulations or tariffs,
including the Commission's prohibition on undue discrimination.
Accordingly, multiple industry participants requested that, in order to
facilitate the exchange of information between transmission operators,
the Commission should more clearly identify the types of operational
information that may be shared between transmission operators and
clarify that the sharing of such information does not violate the
prohibition against undue discrimination. While electric generators
generally did not oppose the sharing of such information, they,
together with other entities, expressed concern about the communication
of generator-specific information between an electric transmission
operator and an interstate natural gas pipeline operator without the
generator's knowledge. Some entities also expressed concern regarding
the potential harm to industry participants from the improper use of
commercially sensitive information.\8\
---------------------------------------------------------------------------

    \7\ Coordination between Natural Gas and Electricity Markets,
Docket No. AD12-12-000 (Dec. 7, 2012) (Notice of Request for
Comments and Technical Conference) (http://www.ferc.gov/EventCalendar/Files/20121207134434-AD12-12-000TC1.pdf ); 77 FR 74180
(Dec. 13, 2012) (http://www.gpo.gov/fdsys/pkg/FR-2012-12-13/pdf/2012-30063.pdf ).
    \8\ A summary of these views was presented in the NOPR, and will
not be repeated in detail here. See NOPR, FERC Stats. & Regs. ]
32,699 at PP 7-9 (cross-referenced at 144 FERC ] 61,043).
---------------------------------------------------------------------------

B. NOPR

    5. On July 18, 2013, the Commission issued the NOPR, in which it
proposed to revise Parts 38 and 284 of its regulations to provide
explicit authority to interstate natural gas pipelines and public
utilities that own, operate, or control facilities used for the
transmission of electric energy in interstate commerce to share non-
public, operational information with each other for the purpose of
promoting reliable service or operational planning on either the public
utility's or pipeline's system. As a protection against the disclosure
of non-public,

operational information, the Commission also proposed a No-Conduit Rule
that prohibits subsequent disclosure of that information to a marketing
function employee or to a third party.
    6. Comments on the NOPR were due on August 26, 2013. Thirty-three
parties filed comments. NGSA filed reply comments on September 30,
2013. Comments were received from Regional Transmission Organizations
and Independent System Operators (RTOs/ISOs), electric utilities,
interstate natural gas pipelines, LDCs, state regulators, generators,
and other parties. Of these, 30 supported or did not oppose the NOPR
\9\ and three opposed it.\10\ In general, most commenters support the
proposed rule to help promote the reliability and efficiency of the
natural gas and electric systems by eliminating legal uncertainty
regarding the ability of interstate natural gas pipelines and electric
transmission operators to exchange non-public, operational information.
Some commenters request that the Commission modify or clarify the
proposal in a number of respects.
---------------------------------------------------------------------------

    \9\ American Electric Power Service Corporation (AEP), American
Gas Association (AGA), American Public Power Association (APPA),
Boardwalk Pipeline Partners, LP (Boardwalk Pipelines), California
Independent Operator (CAISO), Duke Energy Corporation (Duke), Edison
Electric Institute (EEI), Electric Power Supply Association (EPSA),
Electricity Consumers Resource Council (ELCON), Enable Interstate
Pipelines (Enable), International Transmission Company (ITC),
Interstate Natural Gas Association of America (INGAA), ISO New
England Inc. (ISO-NE), ISO/RTO Council (IRC), Massachusetts
Municipal Wholesale Electric Company (MMWEC), Midcontinent
Independent System Operator (MISO), National Rural Electric
Cooperative Association (NRECA), Natural Gas Supply Association
(NGSA), New England Natural Gas Industry (NE Gas Industry), New
England Power Generators Association Inc. (NEPGA), New England
States Committee on Electricity (NESCOE), New York ISO (NYISO), New
York Public Service Commission (NYPSC), New York Transmission Owners
(NYTOs), North American Electric Reliability Corporation (NERC),
Pacific Gas and Electric Company (PG&E), Process Gas Consumers
(PGC), Public Utilities Commission of Ohio (PUCO), Tennessee Valley
Authority (TVA), Washington Gas Light Company (Washington Gas).
    \10\ American Public Gas Association (APGA), Consumers Energy
Company (Consumers Energy), and New Jersey Board of Public Utilities
(NJBPU).
---------------------------------------------------------------------------

II. Discussion

    7. In this Final Rule, the Commission is adopting the NOPR as
proposed. The Commission is modifying Parts 38 and 284 of the
Commission's regulations to provide explicit authority to interstate
natural gas pipelines and public utilities that own, operate, or
control facilities used for the transmission of electric energy in
interstate commerce to share non-public, operational information with
each other for the purpose of promoting reliable service or operational
planning on either the pipeline's or public utility's system. The
Commission also is adopting a No-Conduit Rule to provide additional
protections against undue discrimination and ensure that the non-
public, operational information shared under the rule remains
confidential.
    8. Communications between transmission operators serve a valuable
and necessary purpose to help ensure reliability on both systems. With
the increasing reliance on natural gas as a fuel for electric
generation, ensuring robust communications between the transmission
operators in the electric and natural gas industries is valuable to the
ability of both systems to operate reliably and effectively. Electric
transmission operators are continuously and near instantaneously
balancing supply and demand to ensure the system remains in
equilibrium.\11\ In contrast, due to the physical characteristics of
interstate natural gas pipelines, the pipelines require advance
nominations to ensure they have sufficient line pack and storage
available to meet scheduled daily load of all their customers,
including the gas-fired generators, which may constitute significant
load for a pipeline and which generally rely on a just-in-time natural
gas supply and pipeline delivery. While pipeline line pack and storage
provide some operational flexibility to pipelines to accommodate load
swings throughout the day, short term swings in demand by gas-fired
electric generators resulting from redispatch by electric transmission
operators may be difficult to manage, particularly during times of
coincident peak loads on interstate natural gas pipelines and electric
transmission systems, such as during unusual cold weather events when
end-use customers may rely on both natural gas and electricity.
Communication between interstate natural gas pipelines and electric
transmission operators can be invaluable to help ensure that electric
transmission operators maintain grid reliability and that interstate
natural gas pipelines can meet contractual and operational obligations
to all of their shippers.
---------------------------------------------------------------------------

    \11\ Electric transmission systems currently have limited
electric storage capabilities.
---------------------------------------------------------------------------

    9. Currently, interstate natural gas pipelines and electric
transmission operators share non-public information with other
transportation or transmission operators. For example, interstate
natural gas pipeline operators routinely exchange nomination and
scheduling information with other interstate natural gas pipeline
operators and with upstream and downstream entities to confirm
transportation nomination requests and to coordinate flows between the
parties.\12\ Transmitting electric utilities similarly coordinate the
sharing of non-public interchange schedule information on a routine
basis through mechanisms such as, for example, e-Tags.\13\ This
coordination helps ensure the safe and reliable transmission of
electric power across a region.
---------------------------------------------------------------------------

    \12\ The nomination process initiates the flow of gas with the
natural gas transportation service provider. The natural gas
transportation service provider then confirms the flow of natural
gas with the corresponding upstream and downstream entities. Once
the natural gas quantities are confirmed, the natural gas
transportation service provider sends the scheduled quantities
information to the shipper. See 18 CFR 284.12(a)(1)(1), NAESB
Nomination Standard 1.3.2 (establishing the standards governing
pipeline confirmations with upstream and downstream parties).
    \13\ e-Tags are used by applicable Balancing Authorities,
Reliability Coordinators, Interchange Authorities, Transmission
Service Providers, Purchasing-Selling Entities, Generator-Providing
Entities, and Load-Serving Entities to coordinate interchange
schedules. See, e.g., NAESB Wholesale Electric Quadrant (WEQ)
Business Practice Standards (Coordinate Interchange) requirement
004-2 (``Until other means are adopted by NAESB, the primary method
of submitting the RFI [Request for Interchange] shall be an e-Tag
communicated to and managed by the Sink BA's [Balancing Authority]
registered e-Tag authority service using protocols compliant with
the Version 1.8.1 Electronic Tagging Functional Specification.'')
and applicability section (``The Coordinate Interchange Business
Practice Standards apply to BA [Balancing Authority], RC
[Reliability Coordinator], IA [Interchange Authority], Transmission
Service Provider, PSE [Purchasing-Selling Entity], GPE [Generator-
Providing Entity], Load-Serving Entity [LSE], and any TPSE [a PSE
whose transmission approval rights are cited].'') NAESB WEQ Business
Practice Standards (Version 003), published July 31, 2012.
---------------------------------------------------------------------------

    10. In Order No. 698, the Commission recognized the need for inter-
industry communications by adopting industry-developed standards
requiring the exchange of operational information between the natural
gas and electric industries.\14\ These standards require a generator
and its directly connected natural gas pipeline(s) to ``establish
procedures to communicate material changes in circumstances that may
impact hourly flow rates.'' \15\ In

addition, these standards ensure that interstate natural gas pipelines
have relevant planning information to assist in maintaining the
operational integrity and reliability of pipeline service, as well as
to provide gas-fired generator operators with information as to whether
hourly flow deviations can be honored. NAESB Wholesale Electric
Quadrant (WEQ) Standard 011-1.6, also incorporated in the Commission's
regulations,\16\ requires that ISOs, RTOs, and other independent system
operators establish written operational communication procedures with
an appropriate interstate natural gas pipeline to be implemented when
an extreme condition occurs.
---------------------------------------------------------------------------

    \14\ Standards for Business Practices for Interstate Natural Gas
Pipelines; Standards for Business Practices for Public Utilities,
Order No. 698, FERC Stats. & Regs. ] 31,251 (2007), order on
clarification and reh'g, Order No. 698-A, 121 FERC ] 61,264 (2007).
In Order No. 698, the Commission incorporated by reference NAESB WGQ
Standard 0.3.12 into its regulations and NAESB WEQ Standard 011.
    \15\ NAESB WGQ Version 2.0 Business Practice Standard 0.3.12.
See also Standards for Business Practices for Interstate Natural Gas
Pipelines, Order No. 587-V, FERC Stats. & Regs. ] 31,332 (2012)
(cross-referenced at 140 FERC ] 61,036) (2012), (incorporating by
reference the Version 2.0 WGQ Business Practice Standards). See also
18 CFR 284.12(a) (2013).
    \16\ 18 CFR Part 38 (2013).
---------------------------------------------------------------------------

    11. Sharing of operational information between interstate natural
gas pipelines and electric transmission operators is akin to the
sharing of operational information among interconnected parties. Both
interstate natural gas pipelines and electric transmission operators
could benefit from information regarding whether scheduled transactions
on the others' systems will be carried out because of the potential
effect on reliable service and operational planning. In many cases,
gas-fired generators do not take natural gas at a uniform flow rate
over a 24 hour period, and the electric transmission operator may find
it valuable to know whether the interstate natural gas pipeline will be
able to provide a non-uniform flow rate to meet the demands on the
electric system. By the same token, it may be valuable to an interstate
natural gas pipeline to know the demands that may be placed on its
transportation system by gas-fired generators and whether such demands
may cause a problem with its ability to deliver gas to other customers.
Similarly, a disruption on an electric transmission line may force the
electric transmission operator to shut down a gas-fired generator,
which could cause increased gas pressure on an interstate natural gas
pipeline forced to terminate gas deliveries to that generator.
    12. Commenters participating in the Commission staff technical
conferences, as well as comments to this rulemaking, expressed concern
that, without further clarification of the ability of interstate
natural gas pipelines and electric transmission operators to exchange
information, necessary communications may not take place. Comments have
focused on the applicability of both the statutory prohibitions on
undue discrimination and the Standards of Conduct. Both interstate
natural gas pipelines and electric transmission operators have stated
that clarification of their ability to exchange non-public information
would assist them in efficiently and reliably planning the operations
of their respective systems and addressing emergencies. The Commission
provides the requested clarification in this Final Rule. Sharing of
information valuable to reliable operations between transmission
operations is not the type of preferential treatment the Federal Power
Act (FPA) and Natural Gas Act (NGA) are intended to restrict. We find,
as discussed below, that the FPA and NGA provisions regarding undue
discrimination or unjust and unreasonable acts and practices do not
prevent the exchange of information between operators of interstate
natural gas pipeline transportation systems and electric transmission
operators provided for in this Final Rule.
    13. Both the FPA and the comparable provisions of the NGA prohibit
undue discrimination or preference.\17\ However, FPA section 205(b) and
NGA section 4(b) do not forbid preferences, advantages and prejudices
per se.\18\ Rather, FPA section 205(b) and NGA section 4(b) prohibit
``undue'' preferences, advantages and prejudices.\19\ A difference in
treatment is not unduly discriminatory when the difference is
justified.\20\ In interpreting FPA section 205(b) and NGA section 4(b),
the courts have held that transmission providers cannot treat similarly
situated customers differently \21\ and that the disparate treatment of
two customer classes does not in and of itself result in an undue
preference or advantage or in an unreasonable difference in service if
the customer classes are not similarly situated.\22\ Whether a
preference is ``undue'' depends on the specific facts of the behavior
and the circumstances to determine whether disparities exist and
whether those disparities are rationally justified.\23\
---------------------------------------------------------------------------

    \17\ 16 U.S.C. 824d(b) (2012); 15 U.S.C. 717c(b) (2012).
    \18\ See, e.g., Cities of Bethany v. FERC, 727 F.2d 1131, 1139
(D.C. Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d
229 (1984).
    \19\ See, e.g., Boroughs of Chambersburg v. FERC, 580 F.2d 573,
577 (D.C. Cir. 1978).
    \20\ See Metropolitan Edison Co. v. FERC, 595 F.2d 851, 857
(D.C. Cir. 1979). See also Transmission Agency of N. California v.
FERC, 628 F.3d 538, 549 (D.C. Cir. 2010) (citing Ark. Elec. Energy
Consumers v. FERC, 290 F.3d 362, 367 (D.C. Cir. 2002) and Elec.
Consumers Res. Council v. FERC, 747 F.2d 1511, 1515 (D.C. Cir.
1984)).
    \21\ See Transmission Agency of N. California v. FERC, 628 F.3d
at 549 (citing Sacramento Mun. Util. Dist. v. FERC, 474 F.3d 797,
802 (D.C. Cir. 2007)).
    \22\ See, e.g., Sw. Elec. Coop., Inc. v. FERC, 347 F.3d 975, 981
(D.C. Cir. 2003). See also Michigan Consolidated Gas Co. v. FPC, 203
F.2d 895, 901 (3d Cir. 1953) and Complex Consol. Edison Co. of New
York, Inc. v. FERC, 165 F.3d 992, 1012 (D.C. Cir. 1999).
    \23\ See St. Michaels Utilities Comm'n v. Fed. Power Comm'n, 377
F.2d 912, 915 (4th Cir. 1967).
---------------------------------------------------------------------------

    14. We find that the sharing of non-public, operational information
between public utilities that own, operate, or control facilities used
for the transmission of electric energy in interstate commerce and
interstate natural gas pipelines for the purpose of promoting reliable
service or operational planning is reasonable and not unduly
discriminatory or preferential. Undue discrimination provisions apply
to ensure that similarly situated customers are not subject to
disparate rates or terms and conditions of service. As noted above,
transmission operators are not similarly situated to other customers
because they require access to non-public scheduling and other types of
information from a variety of sources to help them maintain the
reliability and integrity of the transportation and transmission
systems. In addition, interstate natural gas pipelines are generally
not wholesale customers of electric transmission operators. Likewise,
RTOs/ISOs are not shippers on pipelines. Thus, we find that it is
appropriate and necessary, with adequate safeguards, to expressly
permit the sharing of non-public, operational information between
transmission operators.\24\
---------------------------------------------------------------------------

    \24\ The Commission recognizes that some vertically-integrated
transmission operators may have marketing function employees or
affiliates, such as generators or local distribution companies that
handle gas transactions. The Commission addresses concerns infra
with respect to potential access and misuse of information shared
pursuant to this Final Rule in the subsection entitled Adequacy of
No-Conduit Rule to Protect against Competitive Harm.
---------------------------------------------------------------------------

    15. To protect against the potential for undue discrimination, the
Commission is relying on existing safeguards as well as the adoption of
a No-Conduit Rule. First, while non-public, operational information may
be useful for planning, transmission operators cannot deviate from the
terms of their tariffs, and cannot operate in an unduly discriminatory
manner.\25\ Transmission operators are also subject to the same
limitations on sharing information with their marketing function
employees as provided under the Standards of Conduct.\26\ The
Commission's Standards of Conduct were adopted with respect to one
aspect of potentially

undue discrimination which may occur through exchanges of information
between transmission providers and their marketing functions in certain
situations.
---------------------------------------------------------------------------

    \25\ See, e.g., ISO New England Inc., 142 FERC ] 61,058, at P 23
(2013) (available capacity must be dispatched ``consistent with the
pipeline's tariff'' and ``[t]he pipelines are required to allocate
available capacity on a not unduly discriminatory basis among the
various requestors of capacity.'').
    \26\ 18 CFR 358.6 and 358.7 (2013).
---------------------------------------------------------------------------

    16. Second, the No-Conduit Rule included in the Final Rule will
serve as an additional safeguard to ensure that transmission operators
comply with the prohibitions against undue discrimination or preference
with respect to their marketing function employees and third parties.
The No-Conduit Rule prohibits recipients of non-public, operational
information pursuant to the Final Rule from subsequently disclosing
that information to a third party or a marketing function employee, as
that term is defined in section 358.3(d) of the Commission's
regulations. As discussed below, adoption of this No-Conduit Rule
addresses many of the concerns regarding the sharing of commercially
sensitive, customer-specific information among transmission
operators.\27\
---------------------------------------------------------------------------

    \27\ As discussed further below, this No-Conduit Rule applies
only to the information the interstate natural gas pipeline and
electric transmission operator exchange pursuant to this Final Rule.
It does not otherwise affect the ability of interstate natural gas
pipelines and local distribution companies (LDCs) to exchange
operational information regarding actual or potential pipeline or
distribution system operational conditions affecting the gas flow
between these physically interconnected parties. Nor does it affect
the ability of an electric transmission operator to share its own
information with an LDC, if otherwise permitted under its tariff.
This Final Rule also does not prohibit electric transmission
operators from sharing non-public, operational information received
from a pipeline pursuant to this rule with LDCs, if otherwise
provided for in tariff provisions approved by the Commission.
---------------------------------------------------------------------------

    17. Based on the potential need for the exchange of information to
promote the reliability and operational integrity of the transmission
and transportation systems the Commission regulates, and the
protections against undue discrimination, the Commission finds that the
exchange of non-public, operational information between transmission
operators does not violate the statutory prohibitions on undue
discrimination or preference as discussed herein. As discussed in more
detail infra, to the extent that an electric transmission operator or
interstate natural gas pipeline has a tariff provision which precludes
a communication that would otherwise be authorized under the Final
Rule, it will have to make a filing under section 205 of the FPA or
section 4 of the NGA to revise that tariff provision to allow the
exchanges of information permitted by this Final Rule. Below, the
Commission will address the comments received on the NOPR.

A. Need For the Rule

1. NOPR
    18. In the NOPR, the Commission pointed out that, while several
entities acknowledged that system reliability and contingency planning
could be further enhanced by the sharing of non-public, operational
information directly between transmission operators, several
transmission operators pointed out that there is general reluctance to
share such information because of concerns that doing so could be a
violation of current laws, regulations or tariffs.\28\ Accordingly,
several entities, including interstate natural gas pipelines and
electric transmission operators, requested that, in order to facilitate
the exchange of information between transmission operators, the
Commission should more clearly identify the types of operational
information that may be shared between transmission operators and
clarify that the sharing of such information does not violate the
prohibition against undue discrimination.
---------------------------------------------------------------------------

    \28\ NOPR, FERC Stats. & Regs. ] 32,699 at P 7 (cross-referenced
at 144 FERC ] 61,043).
---------------------------------------------------------------------------

    19. In an effort to provide certainty to the industry and remove
barriers--real or perceived--to the sharing of non-public, operational
information, the Commission proposed to revise its regulations to
authorize expressly the exchange of non-public, operational information
between electric transmission operators and interstate natural gas
pipelines. In consideration of the concerns regarding the exchange of
non-public operational information, the Commission also proposed to
adopt a No-Conduit Rule which prohibits recipients of the non-public,
operational information from subsequently disclosing or being a conduit
for subsequently disclosing that information to third parties or
marketing function employees.
2. Comments
    20. The large majority of commenters generally support or do not
oppose the NOPR. Many commenters generally agree that the rule is
needed to provide certainty to interstate natural gas pipelines and
electric transmission operators so that they may exchange information
needed to promote reliable service and operational planning. They also
generally support the proposed scope of information that may be shared
under the rule, as well as the limitations on disclosures of such
information via the No-Conduit Rule.
    21. For example, NERC states that, based on its extensive study of
both industries and stakeholder discussions with electric and natural
gas operators, transmission operators could make better informed
operating decisions, particularly during seasonal peak electric system
conditions, if they have the ability to obtain information about
interstate natural gas pipeline flows and pipeline system
conditions.\29\ NESCOE states that the implementation of these
revisions in the near-term would provide regions like New England with
certainty and flexibility to put in place what has the strong potential
to be an effective and low cost reliability measure.\30\ INGAA states
that the proposed scope of information transmission operators may share
under the proposed regulations is appropriate and provides sufficient
flexibility and guidance.\31\
---------------------------------------------------------------------------

    \29\ NERC Comments at 5-6.
    \30\ NESCOE Comments at 7.
    \31\ INGAA Comments at 2.
---------------------------------------------------------------------------

    22. Three commenters, APGA, Consumers Energy, and NJBPU, oppose the
Commission's proposed rulemaking.
    23. As a general matter, APGA believes that the proposed
regulations in the NOPR open the door to the release of commercially
sensitive, non-public information without adequate support for such
action and without adequate guidelines for such release.\32\ First,
APGA contends that interstate natural gas pipelines have made clear
that they do not need additional information to operate reliably and
that they already make a significant amount of operational data
available to the public on a non-discriminatory basis.\33\ Second, APGA
contends that most electric transmission operators are not experiencing
reliability problems related to inadequate access to non-public, gas-
related information and that much of the operational data electric
transmission operators say they would like to have is already publicly
available.\34\ APGA contends that the other data electric transmission
operators say they would like to have, such as confidential gas
availability information indicating whether a specific generator can be
dispatched reliably, is information that the interstate natural gas
pipelines simply do not have. Third, APGA states that generators may be
harmed by secret communications between transmission operators
regarding whether a given generation facility may or may not have
adequate gas supplies to operate because interstate natural gas
pipelines do not have sufficient information to

answer that question accurately. APGA argues that, given that the
record fails to support a finding of a critical need for the exchange
of non-public information to foster reliability and due to the
importance of not permitting the sharing of confidential, non-public
data absent a showing that such sharing would be beneficial, the NOPR
should be abandoned.\35\
---------------------------------------------------------------------------

    \32\ APGA Comments at 1.
    \33\ Id. at 4.
    \34\ Id. at 4-5.
    \35\ Id. at 7.
---------------------------------------------------------------------------

    24. Instead, APGA argues that the Commission should conduct a case-
by-case evaluation of what non-public information specific interstate
natural gas pipelines and electric transmission operators may release
and under what circumstances, rather than the sweeping rule proposed in
the NOPR.\36\ APGA also states that the real issue is the lack of
interstate natural gas pipeline capacity to meet peak demand from
electric generators resulting from electric generators' failure to
subscribe to adequate firm transportation service.\37\
---------------------------------------------------------------------------

    \36\ Id. at 8 and 11.
    \37\ Id. at 11 & n.28.
---------------------------------------------------------------------------

    25. Similar to APGA, NJBPU is concerned about the potential for
harm to industry participants, as well as the potential for improper
use of non-public, operational information.\38\ NJBPU does not believe
that the Commission's proposed No-Conduit Rule adequately responds to
the concerns of NJBPU and various others. NJBPU states that, while the
proposed No-Conduit Rule may address subsequent disclosure to an
affiliate or third party, it does not address the problem of abuse,
gaming, and market manipulation by an initial recipient of non-public,
operational information.
---------------------------------------------------------------------------

    \38\ NJBPU Comments at 3.
---------------------------------------------------------------------------

    26. Consumers Energy argues that the proposed rule would do little
to help ensure reliable service.\39\ Consumers Energy points out that
there has never been an attempt to incent discussion by or between coal
producers, rail or barge transporters under the guise of increasing
electric transmission reliability. Consumers Energy asserts that
transmission operators can and will address reliability through the use
of tariffs and contracts. Consumers Energy believes contractually
specified flow rates and nominations limitations have provided and can
continue to provide the information that is necessary to ensure a
continued high level of reliability of interstate natural gas pipelines
and that this will, in turn, ensure a continued high level of
reliability of the electric transmission grid.\40\ Consumers Energy
further contends that RTOs' resource adequacy-related tariff provisions
adequately inform them as to the availability of resources under their
dispatch. Lastly, Consumers Energy states that, rather than permitting
the communication of non-public, operational information between
transmission operators to ensure service reliability, the appropriate
solution to the problem of ensuring service reliability in the face of
increased reliance on natural gas as a fuel for electric generation is
to recognize the true cost of such reliability.\41\ This, Consumers
Energy contends, will serve to increase investment in the interstate
natural gas pipeline and LDC infrastructure that will be needed to
serve this expanding load.
---------------------------------------------------------------------------

    \39\ Consumers Energy Comments at 3.
    \40\ Id. at 4.
    \41\ Id. at 5.
---------------------------------------------------------------------------

3. Commission Determination
    27. We conclude that we need to revise our existing regulations to
provide greater certainty to electric transmission operators and
interstate natural gas pipelines regarding the permissibility of
sharing non-public, operational information, including customer-
specific information, for the purpose of promoting reliable service or
operational planning. As discussed above, the record and the
operational realities of the two industries show that the exchange of
non-public, operational information would be valuable to foster
reliability. While interstate natural gas pipelines and electric
transmission operators publicly post a significant amount of important
information needed by interstate natural gas pipeline shippers and
electric transmission customers, interstate natural gas pipelines and
electric transmission operators need other operational information,
including non-public information, in order to reliably manage the
operations of these systems. Interstate natural gas pipelines already
provide non-public operational information to other interconnected
physical parties to ensure accurate scheduling of flows on their
systems. Electric transmission operators similarly communicate non-
public interchange scheduling information and other information among
themselves and with Balancing Authorities. Permitting interstate
natural gas pipelines and electric transmission operators to exchange
non-public, operational information with each other will help them
better plan for day-to-day operations as well as better manage their
respective system needs during potential coincident peaks that may
limit the flexibility of both systems.
    28. Further, the adoption of a No-Conduit Rule, together with
existing safeguards, reasonably addresses the concerns around the
improper use of non-public, operational information.\42\
---------------------------------------------------------------------------

    \42\ As discussed earlier, interstate natural gas pipelines and
electric transmission operators are not similarly situated to other
customers since they (1) are not typically customers of each other;
and (2) operate physical systems and require information about
physically interconnected and interdependent systems in order to
maintain efficient and reliable service to their customers.
---------------------------------------------------------------------------

    29. We disagree with APGA's characterization that the proposed rule
lacks value. The majority of commenters expressly support the rule and
in many of their comments they affirm that the rule would promote
reliable service. We are persuaded by these comments that argue that
expressly permitting the sharing of non-public, operational information
will promote reliable service and operational planning. For example,
representatives and members of the interstate natural gas pipeline
industry, including INGAA and Boardwalk Pipelines, are among the many
commenters that expressly support the rule. Also, several entities,
including electric transmission operators, have specifically identified
non-public information that they would like to receive from or share
with interstate natural gas pipelines under the rule because they
believe it would promote reliable service or operational planning on
both systems. Such information includes real-time pipeline flow
information, generator service nominations and priority, and generator
outage information. Improved reliability and operational planning
amongst transmission operators will benefit both electric and natural
gas industries as well as ultimate consumers.
    30. We do not agree with Consumers Energy and APGA that this rule
is unnecessary because the exchange of information can be achieved
solely through the use of tariffs and contracts or through a case-by-
case evaluation. As explained above, interstate natural gas pipelines
and electric transmission operators may need a variety of information
from each other depending on individual circumstances and may not be in
a position to anticipate in advance exactly what information needs to
be exchanged. Despite this need, these transmission operators have
expressed concerns that the Commission's current regulations and
uncertainty over their ability to share non-public, operational
information acts as an impediment to exchange of this information.
Adopting regulations that

eliminate transmission operator concerns about such exchanges will
provide the flexibility that they require.
    31. APGA also suggests that the real issue is the lack of pipeline
capacity resulting from generators' failure to subscribe to adequate
firm transportation service. That does not diminish the need for
transmission operators to be able to exchange non-public, operational
information. No one disputes that the electric industry has become
increasingly dependent on gas-fired generation and coordination is
integral to promoting reliable service. Natural gas and electric
coordination has many facets including communications, scheduling, and
capacity release.\43\ In this Final Rule, the Commission is focused
solely on communications.
---------------------------------------------------------------------------

    \43\ Coordination between Natural Gas and Electricity Markets,
Docket No. AD12-12-000 (July 5, 2012) (Notice of Technical
Conferences) (available at http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=13023450); 77 FR 41184 (July 12, 2012) (available
at http://www.gpo.gov/fdsys/pkg/FR-2012-07-12/pdf/2012-16997.pdf);
Coordination between Natural Gas and Electricity Markets, Docket No.
AD12-12-000 (Dec. 7, 2012) (Notice Of Request for Comments and
Technical Conference) (http://www.ferc.gov/EventCalendar/Files/20121207134434-AD12-12-000TC1.pdf); 77 FR 74180 (Dec. 13, 2012)
(http://www.gpo.gov/fdsys/pkg/FR-2012-12-13/pdf/2012-30063.pdf);
Coordination between Natural Gas and Electricity Markets, Docket No.
AD12-12-000 (Mar. 5, 2013) (Notice of Technical Conference).
---------------------------------------------------------------------------

    32. The Commission also finds that existing safeguards, together
with the adoption of a No-Conduit Rule, reasonably address APGA's and
NJBPU's concerns regarding the improper use of non-public, operational
information, whether by an initial recipient of non-public, operational
information or in a subsequent disclosure. In addition, the
Commission's regulations expressly preclude the type of abuse, gaming,
and market manipulation that NJBPU warns against.\44\ As we have noted,
both interstate pipelines and electric transmission operators must
comply with their tariffs and applicable Commission regulations when
making capacity allocation and other operational determinations.\45\
Moreover, under the Standards of Conduct and the No-Conduit Rule
adopted in this proceeding, interstate natural gas pipelines and
electric transmission operators cannot share this information with
their marketing function employees.\46\ Nor can they provide this
information to third-parties. While any exchange of non-public
information may pose some disclosure risks, we find that, on balance,
the regulations adopted here, including the No-Conduit Rule,
appropriately balance the significant benefits to be gained by robust
information exchange among interdependent transmission operators
against the potential risks from disclosure of non-public information.
---------------------------------------------------------------------------

    \44\ The Commission would have jurisdiction to pursue violations
of the Commission's Anti-Manipulation Rule, 18 CFR 1c (2013) if an
entity (including a non-jurisdictional entity) uses a fraudulent
scheme or makes a material misrepresentation that would operate as a
fraud or deceit upon any entity or market; has the requisite
scienter; and in connection with a transaction subject to the
Commission's jurisdiction.
    \45\ See ISO New England Inc., 142 FERC ] 61,058, at P 23 (2013)
(available capacity must be dispatched ``consistent with the
pipeline's tariff'' and ``[t]he pipelines are required to allocate
available capacity on a not unduly discriminatory basis among the
various requestors of capacity.'')
    \46\ See 18 CFR 358.6 and 358.7 (2013).
---------------------------------------------------------------------------

B. Scope of Information

1. NOPR

    33. In the NOPR, the Commission proposed to authorize public
utilities providing transmission service and interstate natural gas
pipelines to share non-public, operational information when such
information is for the purpose of promoting reliable service or
operational planning. The Commission stated that the term ``non-public,
operational information'' is information that is not publicly posted,
yet helps transmission operators to operate and maintain either a
reliable pipeline system or a reliable electric transmission system on
a day-to-day basis, as well as during emergency conditions or for
operational planning. The NOPR stated that non-public, operational
information may also include generator, pipeline, or transmission-
specific information. In using the term ``non-public, operational
information,'' the Commission intends that transmission operators would
be permitted to share information dealing with actual, anticipated, or
potential effects on the ability to provide electric and gas service
based on the respective operator's experience and understanding of the
operational capability and customer demands on their respective
systems.
    34. The NOPR sought comment on the scope of the non-public,
operational information that transmission operators may share under the
proposed regulations.\47\ The Commission stated that the proposed
regulations were structured to provide significant flexibility to
individual transmission operators--who have the most insight and
knowledge of their systems--to determine what non-public operational
information, if any, would promote reliable service on their systems,
without fear of violating the Commission's prohibitions on undue
discrimination and undue preference or such an exchange being
considered an unjust or unreasonable practice.\48\ In proposing the
regulations, the Commission stated its intent to remove barriers to the
sharing of non-public, operational information, not just during
emergencies, but also for day-to-day operations, planned outages, and
scheduled maintenance.\49\
---------------------------------------------------------------------------

    \47\ NOPR, FERC Stats. & Regs. ] 32,699 at P 24 (cross-
referenced at 144 FERC ] 61,043).
    \48\ Id. P 11.
    \49\ Id. P 10.
---------------------------------------------------------------------------

2. Comments
    35. Several commenters express support for allowing transmission
operators to determine the specific non-public, operational information
to share, as opposed to the Commission providing a prescriptive,
exhaustive list of information that may be shared.\50\ In supporting
the NOPR's proposed scope, these commenters state that the proposed
rule would permit flexible communications that are appropriately suited
to the differences in information needs of each region. For example,
NEPGA states that the NOPR provides for an appropriate amount of
deference by defining the categories and scope of information that may
be shared without narrowly defining each type of information.\51\
---------------------------------------------------------------------------

    \50\ MMWEC Comments at 4; NEPGA Comments at 3; PG&E Comments at
4 and 5; TVA Comments at 2; NYTOs Comments at 7; MISO Comments at 3;
INGAA Comments at 2 and 4; Enable Comments at 1; APPA Comments at 5;
PUCO Comments at 6; NRECA Comments at 7; CAISO Comments at 3; and
EEI Comments at 4 and 5.
    \51\ NEPGA Comments at 3.
---------------------------------------------------------------------------

    36. AGA agrees with the Commission that the proposed communications
are important not only during emergencies or critical situations, but
also when conditions, or emerging conditions, could lead to events on
either system that have the potential to threaten the integrity or
reliability of one or both of the systems.\52\ NERC contends that the
exchange and availability of real-time, day-ahead, and season-ahead gas
flow information and data to transmission system operators will best
address electric vulnerabilities related to natural gas fuel
disruptions.\53\
---------------------------------------------------------------------------

    \52\ AGA Comments at 5.
    \53\ NERC Comments at 6.
---------------------------------------------------------------------------

    37. Beyond supporting the approach proposed in this rulemaking,
some commenters warned of the dangers of trying to develop an
exhaustive list of the permitted communications. For example, MMWEC
expressed concern about the chilling effect on system operators that
would result if the Commission issued a specific list of information
permitted to be shared.

MMWEC states that under such a proscriptive approach, operators would
be wary of violating Commission rules by sharing information not
specifically identified.\54\ MMWEC further argues that it is better to
encourage a broad range of information sharing rather than a
restrictive approach considering the critical situation in New
England.\55\ PG&E notes that the use of a specific list of information
may also impede communications should such a list exclude a key type of
information.\56\
---------------------------------------------------------------------------

    \54\ MMWEC Comments at 4.
    \55\ Id.
    \56\ PG&E Comments at 5.
---------------------------------------------------------------------------

    38. A few commenters, however, oppose the generality of the
proposed scope of communications permitted in the NOPR and request
greater specificity of the non-public, operational information that may
be shared between transmission operators.\57\ For example, NGSA
contends that the lack of specific parameters on what information
sharing is acceptable creates further uncertainty and concern for
market participants.\58\ NGSA argues that the scope of the NOPR, which
allows the sharing of any information for the purpose of promoting
reliable service and operational planning, is overly broad and could
allow operators to share commercially sensitive information.\59\ NGSA
proposes that the Commission limit interstate natural gas pipeline and
electric transmission operators' ability to share non-public
information by setting parameters for what information is acceptable
for operators to share.\60\ NGSA contends that providing parameters for
what information can be shared would reduce confusion and give industry
greater confidence that commercially sensitive information was not
being disclosed without companies' knowledge. NJBPU states that the
Commission should provide clear and explicit limits as to what
information should be kept confidential and what information may be
disclosed.\61\
---------------------------------------------------------------------------

    \57\ AEP Comments at 4; NGSA Comments at 6-9; and NJBPU Comments
at 3.
    \58\ NGSA Comments at 6.
    \59\ Id. at 7.
    \60\ Id. at 8.
    \61\ NJBPU Comments at 3.
---------------------------------------------------------------------------

    39. Consumers Energy is concerned that because the proposed rule
does not provide a specific list of non-public, operational information
that can be shared, the proposal raises the potential for compliance
issues related to interpreting what information may and may not
permissibly be shared.\62\ Consumers Energy is also concerned with the
potential consequences for unknowingly receiving information that could
not permissibly be shared and the consequences of taking action, or
failing to act, based on the receipt of such information.
---------------------------------------------------------------------------

    \62\ Consumers Energy Comments at 5.
---------------------------------------------------------------------------

    40. In addition, some commenters believe that the sharing of non-
public, operational information should be limited to emergencies. In
particular, ELCON urges the Commission to emphasize that the central
purpose of information sharing between interstate natural gas pipelines
and electric transmission operators is to address system reliability
and information sharing and, therefore, should focus on unusual non-
routine circumstances and not on normal day-to-day operations.\63\
ELCON states that outages, potential delivery restrictions, or
curtailments that could occur during extreme weather events are
examples of such unusual circumstances that would warrant the
information sharing between operators. NE Gas Industry states that the
proposed communications are critical in emergency situations of
imminent reliability concerns when the communications can have the most
immediate and positive impact, but should not be relied upon by the
RTOs/ISOs on a day-to-day basis in ensuring the reliability of the
natural gas-fired generators in their service territories.\64\
---------------------------------------------------------------------------

    \63\ ELCON Comments at 2.
    \64\ NE Gas Industry Comments at 8.
---------------------------------------------------------------------------

3. Commission Determination
    41. The Commission adopts the NOPR proposal to provide explicit
authority to transmission operators to share non-public, operational
information with each other for the purpose of promoting reliable
service or operational planning on either the public utility or
interstate natural gas pipeline's system. In adopting the NOPR
proposal, the Commission is intentionally permitting the communication
of a broad range of non-public, operational information to provide
flexibility to individual transmission operators, who have the most
insight and knowledge of their systems, to share that information which
they deem necessary to promote reliable service on their system. The
Commission is not persuaded by the requests of NGSA, AEP, and NJBPU
that the Commission specify the communications that transmission
operators may share under the rule. As described above, the exchange of
non-public, operational information between transmission operators
would be to promote the reliability and operational integrity of both
the electric transmission and pipeline systems. Given the wide variety
of non-public operational information that may be needed for this
purpose both now and in the future, it is not practicable to develop a
specific and exhaustive list defining the permissible
communications.\65\ The Commission finds that the inclusion of such a
list in the regulations would unreasonably limit the flexibility of
transmission operators to determine what information they need based
upon the individual circumstances of their systems.
---------------------------------------------------------------------------

    \65\ Below in section III.C we address comments regarding the
examples of non-public operational information included in the NOPR.
---------------------------------------------------------------------------

    42. In addition, the Commission recognizes that the informational
needs of system operators vary by region and, therefore, a specific and
exhaustive list of permissive communications that may be relevant in
one region may not address the communications and operational needs of
transmission operators in another region. The Commission also
recognizes that the informational needs of transmission operators may
evolve over time as the generation mix in regions change and as
transmission operators develop further insight into, and gain
additional experience with, gas and electric coordination issues. In
response to Consumers Energy's concern about what information may
permissibly be shared, to the extent that a transmission operator is
uncertain as to what information may and may not permissibly be shared,
the Commission's compliance help desk is available to industry for
informal guidance.\66\
---------------------------------------------------------------------------

    \66\ The Compliance Help Desk is available for persons seeking
technical assistance involving compliance with the statutes, rules,
regulations, and tariffs administered by the Commission. See http://www.ferc.gov/contact-us/compliance-help-desk/compliance-help-desk.asp.
---------------------------------------------------------------------------

    43. The Commission reaffirms its intention, as stated in the NOPR,
to remove barriers to the sharing of non-public, operational
information between transmission operators not just during emergencies,
but also for day-to-day operations, planned outages, and scheduled
maintenance. The communication of non-public, operational information
permitted under this Final Rule will be applicable in all operational
situations, that is, during both emergency and non-emergency
situations. While communications permitted under the rule will be
especially valuable in emergency situations, transmission operators
should feel confident in their ability to engage in robust
communications with each other, subject to the No-Conduit Rule,

whenever necessary to promote reliable service, including on a day-to-
day basis.
    44. The Commission disagrees with ELCON that information sharing
permitted under the rule should focus on unusual, non-routine
circumstances such as outages during extreme weather events. The
Commission's intent in providing explicit authority to transmission
operators to share non-public, operational information with each other
is to provide certainty. In part, the rule is designed to permit
exchanges of information that may limit or prevent extreme weather
events from having the impacts about which ELCON is concerned. It could
create further confusion or complexity to require transmission
operators to decipher whether system conditions have risen to the level
of unusual or non-routine before they engage in communications that
promote reliable service or operational planning. Therefore, the
Commission declines to limit communications or to create a new
definition of what constitutes an emergency for the purpose of
expressly authorizing communications under this rule.
    45. In order to maintain reliability, it will be important for
transmission operators to coordinate planned outages and scheduled
maintenance on both natural gas and electric systems so that any
potential challenges may be identified more quickly, thus allowing more
time to develop reliable solutions. The Commission is encouraged by the
ongoing efforts regions are undertaking to improve coordination of
scheduled maintenance and planned outages, and is hopeful that this
Final Rule will allow for greater collaboration between the industries.
The Commission re-emphasizes that communications for both electric
transmission operators and interstate natural gas pipelines are
voluntary, and encourages regions to develop the communications
processes or protocols appropriately tailored to the needs of
transmission operators in each individual region.

C. Entities Covered Under the Rule

1. NOPR
    46. In the NOPR, the Commission proposed to provide explicit
authority to interstate natural gas pipelines and public utilities that
own, operate, or control facilities used for the transmission of
electric energy in interstate commerce to share non-public, operational
information with each other for the purpose of promoting reliable
service or operational planning on either the public utility's or
pipeline's system.
    47. The NOPR recognized the existing exchanges of information among
pipelines and among electric transmission operators that promote
reliable service or operational planning. It also noted that, while the
Commission regulates interstate service provided by intrastate
pipelines, Hinshaw pipelines, and LDCs, the companies themselves are
subject to state regulation and may exchange information subject to any
state regulations that govern their operations.
    48. It was also noted in the NOPR that communications between
transmission operators and generators are not covered by the proposed
rule, but that transmission operators may always discuss generator-
specific information with the relevant generator.
2. Comments
    49. AGA and Duke urge the Commission to clarify that public
utilities and interstate natural gas pipelines may share non-public,
operational information with intrastate pipelines and LDCs for the
purpose of promoting reliable service or operational planning.\67\ In
its reply comments, NGSA states that, to the extent that LDCs,
intrastate pipelines, gatherers and generators are allowed to
communicate with interstate natural gas pipelines and electric
transmission operators, the Commission should require that the No-
Conduit Rule be extended to them as a measure of protection for any
non-public information that may have been inadvertently conveyed.
Applying the No-Conduit Rule to all entities that are allowed to
communicate under the proposed rule, NGSA asserts, could help protect
commercially sensitive information.\68\
---------------------------------------------------------------------------

    \67\ AGA Comments at 5-6, 8; Duke Comments at 3.
    \68\ NGSA Reply Comments at 4-5.
---------------------------------------------------------------------------

    50. The NYTOs urge the Commission to make clear in the Final Rule
that transmission operators may share non-public, operational
information with LDCs on a confidential basis.\69\ While the NYISO is
aware that state regulations govern the operations of intrastate
pipelines, Hinshaw pipelines, and LDCs,\70\ the NYISO states that
receiving information from intrastate and LDC pipelines would be
helpful and urges the Commission to encourage the same shared
communication between these entities and transmission operators.\71\
The NYTOs state that, like transmission operators, LDCs are not
similarly situated to other customers because they require access to
non-public information from a variety of sources to assist in ensuring
the reliability and integrity of their systems.\72\ Further, the NYTOs
state that LDCs are not generally customers of electric system
operators and RTOs/ISOs are not customers of LDCs. The NYTOs state
that, while LDCs are shippers on interstate natural gas pipelines, for
the purposes of maintaining reliability and operational planning, LDCs'
actions are more akin to a system operator than a gas customer--
especially when evaluating fuel security risks for gas-fired generation
located behind their city-gates.
---------------------------------------------------------------------------

    \69\ NYTOs Comments at 6.
    \70\ NYISO Comments at 3.
    \71\ Id. at 2-3. NYISO asserts that the majority of New York
Control Area gas-fired generators are located behind an LDC, as
opposed to directly connected to the interstate pipelines.
    \72\ NYTOs Comments at 6.
---------------------------------------------------------------------------

    51. AGA asserts that LDC employees directly responsible for
operating the local gas system need access to such non-public,
operational information to assist in ensuring the integrity of their
system. Moreover, AGA believes that such communications are not
currently prohibited under the NGA or the Commission's Standards of
Conduct.\73\
---------------------------------------------------------------------------

    \73\ AGA Comments at 6.
---------------------------------------------------------------------------

    52. Further, AGA states that the Commission's proposed revisions
are unclear with respect to LDCs.\74\ AGA states that proposed sections
38.2 and 284.12 refer to pipelines covered by section 284.12(b)(4) of
the Commission's regulations as entities authorized to receive non-
public, operational information for the purposes of promoting reliable
service or operational planning. AGA states that it is unclear whether
the term ``pipelines'' in that context is limited to interstate natural
gas companies subject to the Commission's jurisdiction under section
1(b) of the NGA or includes any pipeline providing service under the
Commission's Part 284 regulations implementing the Natural Gas Policy
Act of 1978. AGA states that, if the former, LDCs would not be
considered pipelines authorized to receive non-public, operational
information and, if the latter, an LDC would only be considered a
pipeline authorized to receive non-public, operational information to
the extent the LDC provides interstate transportation or storage
service under Part 284, Subpart C or G. AGA states that LDCs in their
traditional role as bundled retail sales or gas service providers would
not be considered ``pipelines'' under the Commission's proposal.\75\
AGA,

therefore, recommends that the Commission clarify that public utilities
and interstate natural gas pipelines may share non-public, operational
information with LDCs for the purpose of promoting reliable service or
operational planning.\76\
---------------------------------------------------------------------------

    \74\ Id. at 7.
    \75\ Id. at 7-8.
    \76\ Id. at 8.
---------------------------------------------------------------------------

    53. As a separate issue, AGA is also concerned that ``the
interpretation that `pipelines' under proposed sections 38.2 and
284.12(b)(4) would include an intrastate or Hinshaw pipeline providing
interstate transportation or storage service under Part 284, Subpart C
or G, may impose new obligations on LDCs contrary to the Commission's
permissive approach in this proceeding.'' \77\ AGA states that,
currently, the Commission's Standards of Conduct apply to interstate
natural gas pipelines and impose no regulatory obligations directly on
LDCs. AGA further states that, if an intrastate or Hinshaw pipeline
were to be considered a ``pipeline'' subject to revised section
284.12(b)(4), questions arise regarding whether and how it must comply
with the proposed No-Conduit Rules, which prohibit disclosure to
marketing function employees as defined in section 358.3(d). In light
of the potential ambiguity, AGA urges the Commission to ``reiterate its
intent not to impose new regulatory obligations in this proceeding and
clarify that an intrastate or Hinshaw pipeline providing interstate
service under Part 284 of the Commission's regulations is not a
`pipeline' for purposes of proposed section 284.12(b)(4).'' \78\
---------------------------------------------------------------------------

    \77\ Id.
    \78\ Id.
---------------------------------------------------------------------------

    54. EEI and Duke Energy request confirmation that otherwise
permissible communications will not be impacted by the NOPR.\79\
Specifically, EEI requests that the Final Rule include regulatory text
that expressly states that its scope does not and is not intended to
prohibit otherwise permissible communication between market
participants.\80\ EEI states that this would include, for example,
communications between: public utilities and their customers;
interstate natural gas pipelines and their customers; interstate
natural gas pipelines and LDCs; and LDCs and generators, as there are
many generation units that are served by LDCs behind the city gate.
---------------------------------------------------------------------------

    \79\ Duke Comments at 2; EEI Comments at 3.
    \80\ EEI Comments at 3-4.
---------------------------------------------------------------------------

    55. Similarly, Duke Energy requests that the Commission clarify
that communication between interstate natural gas pipelines and LDCs,
and LDCs and generators (served behind the city gate), as well as
communications among the pipelines, transmission operators, generators
being served by the interstate natural gas pipeline and transmission
operator, and other non-marketing employees of the transmission
operator, are not prohibited, provided that the Standards of Conduct
No-Conduit Rule is followed and non-public transmission or customer
information is not shared with marketing function employees.\81\
---------------------------------------------------------------------------

    \81\ Duke Comments at 2.
---------------------------------------------------------------------------

3. Commission Determination
    56. In this Final Rule, the Commission adopts proposed sections
38.2 and 284.12(b)(4) as proposed in the NOPR. The Commission finds
that the nature and scope of non-public, operational information that
may expressly be shared under the rule, including commercially
sensitive, customer-specific information, warrants limiting the blanket
authorization of the exchange of such information granted herein to
interstate natural gas pipelines and public utilities that own,
operate, or control facilities used for the transmission of electric
energy in interstate commerce subject to the Commission's
jurisdiction.\82\ As discussed below, we decline to authorize in this
Final Rule the disclosure of non-public, operational information, which
may include commercially sensitive, customer specific information, to
LDCs, intrastate pipelines, or gatherers. However, we clarify that the
No-Conduit Rule adopted in this Final Rule only applies to the non-
public, operational information an electric transmission operator
provides to the interstate pipeline pursuant to this rule or vice
versa. Therefore, the No-Conduit Rule adopted in this Final Rule does
not otherwise affect the ability of interstate natural gas pipelines to
exchange operational information among themselves or with LDCs
regarding actual or potential pipeline or distribution system
operational conditions affecting the gas flow between these physically
interconnected parties. Nor does it affect the ability of an electric
transmission operator to share its own information with an LDC, if
otherwise permitted under its tariff. Similarly, the No-Conduit Rule
does not otherwise affect the ability of interstate natural gas
pipelines and intrastate natural gas pipelines and gatherers to
exchange operational information regarding operational conditions
affecting the gas flows between these physically interconnected
parties. Moreover, this Final Rule does not prohibit electric
transmission operators from sharing non-public, operational information
received from a pipeline pursuant to this Final Rule with LDCs, if the
information sharing and appropriate safeguards to prevent inappropriate
use or disclosure of shared information is separately authorized by the
Commission, for example pursuant to a FPA section 205 tariff filing by
an ISO or RTO.
---------------------------------------------------------------------------

    \82\ Wholesale Competition in Regions with Organized Electric
Markets, Order No. 719, FERC Stats. & Regs. ] 31,281 at P 423 (2008)
(cross-referenced at 125 FERC ] 61,071 (2008)) (Commission
determined that it was necessary to retain the practice of masking
the identity of participants when releasing offer and bid data).
---------------------------------------------------------------------------

    57. We recognize that LDCs and other parties do have a significant
role to play in maintaining reliability of both interstate natural gas
pipeline transportation systems and electric transmission systems, as
the commenters point out, particularly since many electric generators
take service from LDCs, rather than directly from interstate pipelines.
However, because the Commission generally does not have jurisdiction
over LDCs, and because the scope of the authorized non-public,
operational information exchange between interstate natural gas
pipelines and electric transmission operators under this Final Rule is
broad, we are reluctant to authorize blanket authority for interstate
natural gas pipelines or electric transmission operators to pass such
information to non-jurisdictional LDCs. Instead, we prefer to proceed
on a case-by-case basis with respect to electric transmission operators
sharing non-public, operational information received from a pipeline
pursuant to this Final Rule with LDCs. Electric transmission operators
that see the need for such communication given the circumstances on
their systems may develop tariff provisions that establish acceptable
procedures for the handling and protection from inappropriate
disclosure or use of such information.\83\
---------------------------------------------------------------------------

    \83\ For example, such tariff conditions might require the LDC
to enter into a non-disclosure agreement (NDA).
---------------------------------------------------------------------------

    58. For example, in a recent, unprotested tariff filing by the
California Independent System Operator (CAISO),\84\ CAISO amended its
tariff to specifically authorize the CAISO to share, under a non-
disclosure agreement, outage information with natural gas transmission
and distribution utilities operating interstate and/or intrastate
natural gas pipelines

that serve natural gas-fired generation resources within the CAISO
Balancing Authority Area, with or without notice to the affected market
participant. The information CAISO may share includes, but is not
limited to, the identity of individual natural gas-fired generation
resources that are needed to support reliability of the CAISO Balancing
Authority Area in the event of a natural gas shortage, natural gas
pipeline testing and maintenance, or other curtailment of natural gas
supplies. If they believe it necessary or appropriate, other electric
transmission operators may make similar FPA section 205 tariff filings
to facilitate greater sharing of non-public, operational information
received from a pipeline pursuant to this Final Rule with entities such
as LDCs. We encourage those electric transmission operators that are
concerned about generators that are located behind an LDC to consider
developing such tariff revisions.
---------------------------------------------------------------------------

    \84\ Cal. Indep. Sys. Operator Corp., Docket No. ER12-278-000
(Dec. 8, 2011) (delegated letter order).
---------------------------------------------------------------------------

    59. AGA requests clarification as to the whether the term pipeline
includes intrastate pipelines. The Commission clarifies that the term
``pipeline'' in section 284.12(b)(4) adopted in this Final Rule refers
to interstate natural gas pipelines that transport gas under subparts B
or G of Part 284.\85\ Section 284.12(b)(4) is a new subsection of
existing section 284.12(b). The first sentence of that section makes
clear that the word ``pipeline'' as used throughout section 284.12(b)
refers only to ``an interstate pipeline that transports gas under
subparts B or G of this part.'' Thus, an intrastate or Hinshaw pipeline
providing interstate service under Part 284 of the Commission's
regulations is not a ``pipeline'' for purposes of section 284.12(b)(4).
---------------------------------------------------------------------------

    \85\ See 18 CFR 284.12(b) (2013).
---------------------------------------------------------------------------

D. The No-Conduit Rule and Competitive Concerns

1. NOPR
    60. In the NOPR, the Commission proposed to adopt a No-Conduit Rule
that would prohibit all public utilities and interstate natural gas
pipelines, as well as their employees, contractors, consultants, or
agents, from disclosing, or using anyone as a conduit for the
disclosure of, non-public, operational information they receive under
this rule to a third party or to its marketing function employees, as
that term is defined in section 358.3 of the Commission's regulations.
The Commission stated that the No-Conduit Rule, in addition to
protections already in place, would ensure that any non-public,
operational information shared under the proposed regulations remains
confidential and is shared among transmission operators in a manner
that is consistent with the prohibition on undue discrimination.\86\
---------------------------------------------------------------------------

    \86\ NOPR, FERC Stats. & Regs. ] 32,699 at P 26 (cross-
referenced at144 FERC ] 61,043).
---------------------------------------------------------------------------

    61. In describing the need for the No-Conduit Rule, the Commission
explained that the existing No-Conduit Rule under the Standards of
Conduct would not sufficiently limit the disclosure of the information
received under this proposed rule.\87\ Therefore, the Commission
proposed a No-Conduit Rule tailored to the entities and information
covered by the proposed rule and extends the disclosure prohibition to
non-affiliates.
---------------------------------------------------------------------------

    \87\ Id. P 26 & n. 50.
---------------------------------------------------------------------------

    62. The Commission also noted the concerns expressed by some
entities that generator-specific, non-public information provided to a
pipeline by an electric transmission operator could provide the
pipeline with a competitive advantage over the generator in pricing
transportation services.\88\ The Commission found no need to propose
additional protections regarding interstate natural gas pipeline
transportation. The Commission reasoned that interstate pipelines are
required to allocate service, on a not unduly discriminatory basis,
based on their tariffs, at a rate not exceeding the just and reasonable
rate on file. The Commission also explained that pipelines are not
required to discount services, and if they choose to discount, are
permitted to obtain information from any source to demonstrate that the
shipper requesting the discount has competitive alternatives.\89\
---------------------------------------------------------------------------

    \88\ Id. P 27.
    \89\ Id.
---------------------------------------------------------------------------

    63. The Commission stated that unauthorized disclosure of any non-
public, operational information may subject the entity or individual
making the prohibited disclosure to the enforcement provisions of the
FPA and NGA, including potential civil penalties.\90\
---------------------------------------------------------------------------

    \90\ Id. P 26 & n. 52 (citing section 22 of the NGA, 15 U.S.C.
717t2-1 (2012), and section 316A of the FPA, 16 U.S.C. 825o-1
(2012)).
---------------------------------------------------------------------------

    64. Thirteen commenters filed in support of the proposed No-Conduit
Rule.\91\ Arguing that the No-Conduit Rule was either too strict or not
strict enough, several commenters proposed modifications to or
requested clarifications of the No-Conduit Rule. Those comments are
discussed below.
---------------------------------------------------------------------------

    \91\ AEP Comments at 5-6; CAISO Comments at 5; Duke Energy
Comments at 3; ELCON Comments at 3; EPSA Comments at 7; MISO
Comments at 2; MMWEC Comments at 5; NESCOE Comments at 4,6; NRECA
Comments at 5; NYTOs Comments at 1; PG&E Comments at 2-3; PUCO
Comments at 5; TVA Comments at 3.
---------------------------------------------------------------------------

2. Adequacy of No-Conduit Rule To Protect Against Competitive Harm
a. Comments
    65. Several commenters are concerned that the proposed No-Conduit
Rule is inadequate to prevent the misuse of non-public, operational
information exchanged between electric transmission operators and
pipelines and protect against competitive harm to generators, natural
gas marketers, and others. These commenters recommend that the
Commission adopt various modifications to the No-Conduit Rule or place
additional limits on the information which transmission operators may
share, as discussed below.\92\
---------------------------------------------------------------------------

    \92\ AEP Comments at 6; APGA Comments at 2-3; Duke Comments at
3; NGSA Comments at 2-3; and PUCO Comments at 7.
---------------------------------------------------------------------------

    66. EPSA and NGSA seek clarification that the No-Conduit Rule
covers non-operational interstate natural gas pipeline employees that
market transportation capacity.\93\ NGSA states that giving access to
non-public, operational information to pipeline capacity marketing
employees that negotiate shipper discounts could be problematic.\94\
NGSA states that, for example, a pipeline capacity marketing employee
could decide not to discount interruptible capacity because they have
prior knowledge of a transmission operator's intent to ramp up gas-
fired generators, increasing demand on the pipeline. Or, the pipeline
capacity marketing employee could use knowledge of upcoming generator
outages to lower interruptible prices for a period to compete with
capacity releases. NGSA states that, while the Commission correctly
notes that its non-discrimination rules already forbid any
discriminatory behavior, it still would seem prudent to limit access to
non-public, operational information for pipeline transportation
capacity sellers.\95\
---------------------------------------------------------------------------

    \93\ EPSA Comments at 4; NGSA Comments at 4-6.
    \94\ NGSA Comments at 4.
    \95\ Id. at 5.
---------------------------------------------------------------------------

    67. Washington Gas is concerned that the NOPR does not explain how
information can or cannot be shared within a public utility that
receives non-public operating information.\96\ Washington Gas contends
that if the generator employees only serve the function of purchasing
gas--rather than selling energy at wholesale--they may not come within
the definition of

``marketing function employees'' because the currently effective
Standards of Conduct do not consider gas purchasing to be a marketing
function activity. Washington Gas argues, if non-public information is
shared within a public utility, it would create a preference for public
utility-owned generation over independent generators because
independent generators would be ``third parties'' prohibited from
information sharing. Washington Gas concludes that, if the Commission
relies on a No-Conduit Rule to protect information from reaching beyond
transmission function employees, the Commission should provide detailed
examples of exactly how the No-Conduit Rule will be implemented to
protect the fairness of the market and assure that no shipper is
afforded an undue preference.\97\
---------------------------------------------------------------------------

    \96\ Washington Gas Comments at 10.
    \97\ Id. at 11.
---------------------------------------------------------------------------

    68. Washington Gas claims that the best way to resolve the tension
between information sharing and market fairness is to continue to make
critical operating information public. Washington Gas contends that
certain of the examples of ``non-public, operational information''
listed in the NOPR should never be considered non-public, operational
information.\98\ Rather, Washington Gas contends, this information
should be considered public information to be promptly posted.
Washington Gas believes that the only information properly shared on a
non-public basis would be transaction-specific information.\99\
Accordingly, Washington Gas urges the Commission to clarify that all
pipeline facility outage and maintenance information needs to be made
public and posted on the pipeline's internet Web site and to establish
clear instructions as to what exact information must be posted and what
can be shared voluntarily in a non-public way.\100\
---------------------------------------------------------------------------

    \98\ Id. at 3.
    \99\ Id. at 4.
    \100\ Id. at 3-4.
---------------------------------------------------------------------------

    69. Similar to Washington Gas, AGA states that it assumes that the
Commission would continue to require interstate pipelines to provide
all shippers with equal access to information regarding system
conditions, maintenance schedules and outages, and available capacity
so as not to create competitive advantages for certain shippers.\101\
---------------------------------------------------------------------------

    \101\ AGA Comments at 5 & n. 14.
---------------------------------------------------------------------------

    70. PUCO supports the proposed No-Conduit Rule, but contends that
proposed section 38.2 should be modified to include additional language
to require that no non-public information be shared with any person or
company affiliate except to ensure the reliable and efficient
operations of the pipeline, transmission grid, and the delivery of
generation service.\102\
---------------------------------------------------------------------------

    \102\ PUCO Comments at 5.
---------------------------------------------------------------------------

    71. Duke Energy notes that there are a number of small public
utilities who currently have waivers of the requirement to abide by the
Standards of Conduct or are otherwise not subject to the Standards of
Conduct. Duke Energy requests that the Commission address its concern
that these entities could receive commercially sensitive and non-public
transmission information under the NOPR which could potentially give
them an unfair advantage.\103\
---------------------------------------------------------------------------

    \103\ Duke Energy Comments at 3.
---------------------------------------------------------------------------

    72. To alleviate concerns of confidential information disclosure,
TVA recommends that, in addition to the No-Conduit Rule, the Commission
should encourage and support the execution of confidentiality
agreements between electric transmission operators and natural gas
pipelines relative to these discussions.\104\
---------------------------------------------------------------------------

    \104\ TVA Comments at 3-4.
---------------------------------------------------------------------------

    73. ELCON proposes two modifications to the No-Conduit Rule. First,
ELCON asserts that the Commission should require electric transmission
operators and interstate natural gas pipelines to submit an annual
filing with the Commission listing entities with whom they have entered
into information sharing arrangements and further certify that they
acknowledge and comply with the No-Conduit Rule. Second, ELCON argues
that the Commission should require electric transmission operators and
pipelines to maintain and implement a written compliance policy.\105\
---------------------------------------------------------------------------

    \105\ ELCON Comments at 3.
---------------------------------------------------------------------------

    74. PUCO also maintains that the Commission should, via an
expansion of the instant proceeding, arrive at the appropriate
requisite sanctions for the inappropriate sharing of potentially
commercially sensitive, non-public information in violation of the No-
Conduit Rule.\106\
---------------------------------------------------------------------------

    \106\ PUCO Comments at 5.
---------------------------------------------------------------------------

    75. Some commenters expressed concern about the scope of the non-
public, operational information to be shared under the rule based on
competitive concerns about the use of that information. NGSA is also
concerned that the NOPR could allow transmission operators to share
commercially sensitive information that could harm producers and
marketers by revealing their positions in the market to outside
parties.\107\ NGSA states, for example, that a marketer's commercial
strategy could be revealed if the confidential details of the
scheduling priorities it has contracted with its clients were
shared.\108\ NGSA further contends that while it may be useful for
utility operators to share information on overall pipeline capacity,
sharing commercially sensitive information such as individual shipper
nominations offers little insight into the reliability of deliveries
and could cause significant harm to some market participants.\109\
---------------------------------------------------------------------------

    \107\ NGSA Comments at 7.
    \108\ Id.
    \109\ Id.
---------------------------------------------------------------------------

    76. Along the same lines, PUCO argues that electric transmission
operators should be required to furnish pipelines with aggregated, non-
unit specific generation data to ensure against inadvertently providing
pipelines with confidential or proprietary information that could
result in a competitive advantage concerning the pricing of gas to that
facility.\110\
---------------------------------------------------------------------------

    \110\ PUCO Comments at 7.
---------------------------------------------------------------------------

b. Commission Determination
    77. In this Final Rule, the Commission adopts the proposed No-
Conduit Rule as set forth in sections 38.2(b) and 284.12(b)(4)(ii) of
the NOPR, without modification. The No-Conduit Rule prohibits all
public utilities and interstate natural gas pipelines, as well as their
employees, contractors, consultants, or agents, from disclosing, or
using anyone as a conduit for the disclosure of, non-public,
operational information they receive under this rule to a third party
or to its marketing function employees, as that term is defined in
Sec.  358.3 of the Commission's regulations. The Commission concludes
that the No-Conduit Rule, as proposed, is necessary to ensure that any
non-public, operational information shared under the regulations in
this Final Rule remains confidential and is shared among transmission
operators in a manner that is consistent with the prohibition on undue
discrimination. As several commenters, including generators, pointed
out, the No-Conduit Rule addresses many of the concerns over the
sharing of commercially sensitive, customer-specific information among
transmission operators.
    78. At this time, we do not see the need to expand the No-Conduit
Rule to explicitly prohibit disclosures to other employees or entities.
We believe that, through this Final Rule and other Commission rules and
regulations, we have adequate safeguards in place. In

response to the comments received, we take this opportunity to explain
the Commission's requirements associated with the sharing of
information and remind industry of the information already made
available by the Commission's regulations.
    79. Washington Gas, NGSA, and EPSA assert that certain employees
may fall outside the Standards of Conduct definition of ``marketing
function employees'' and therefore may receive information under this
Final Rule, and be in a position to use that information to provide an
undue preference.
    80. First, Washington Gas expresses concern that the proposed rule
does not explain how non-public, operational information received by a
public utility can or cannot be shared within that public utility,
including with employees that fall outside the definition of
``marketing function employee,'' in particular, public utility
employees that purchase gas. In Order Nos. 717 and 717-A, the
Commission restricted its affiliate rule to cover only those employees
that participate in electric sales markets and eliminated or rejected
proposals that would have expanded the rule to cover other
employees.\111\ The Commission explained:
---------------------------------------------------------------------------

    \111\ See Standards of Conduct for Transmission Providers, Order
No. 717, FERC Stats. & Regs. ] 31,280 at PP 77, 103 (cross-
referenced at 125 FERC ] 61,064 (2008)); Order No. 717-A, FERC
Stats. & Regs. ] 31,297 at P 35 (cross-referenced at 129 FERC ]
61,043 (2009)).

    The Commission agrees that restricting the definition of
marketing functions to include only sales, rather than purchases,
more closely matches the statutory prohibitions against undue
preferences. Furthermore, the removal of purchases from the
definition of marketing functions frees companies to conduct the
informational exchanges necessary to engage in integrated resource
planning . . . .\112\
---------------------------------------------------------------------------

    \112\ Order No. 717, FERC Stats. & Regs ] 31,280 at P 77 (cross-
referenced at 129 FERC ] 61,043 (footnotes omitted). See also Order
No. 717-A, FERC Stats. & Regs. ] 31,297 at P 35 (cross-referenced at
129 FERC ] 61,043) (explaining that restricting the definition of
marketing function to include only sales more closely matches the
statutory prohibitions against undue preference. Specifically,
sections 205 and 206 of the Federal Power Act prohibit undue
preference or advantage to any person with respect to ``any
transmission or sale subject to the jurisdiction of the Commission.
. . .'' Similarly, sections 4 and 5 of the Natural Gas Act prohibit
undue preference with respect to ``any transportation or sale of
natural gas subject to the jurisdiction of the Commission.).

    For similar reasons, the Final Rule is limited and therefore we
find it is not appropriate to expand the No-Conduit Rule adopted here
to include employees who are not ``marketing function employees,'' such
as gas purchasing employees.
    81. In addition, Washington Gas has not provided sufficient reason
to expand the No-Conduit Rule to gas purchasing employees or other
employees of the public utility who are not marketing function
employees. In this Final Rule the Commission's intent is to remove
barriers to the sharing of non-public, operational information between
transmission operators for the purpose of promoting reliable service
and operational planning. While certain gas purchasing employees may
fall outside the definition of marketing function employees, within a
vertically integrated utility, it may be necessary for an electric
transmission operator, based on information received by an interstate
natural gas pipeline, to inform its gas purchasers that it needs
additional natural gas at another generating unit. Restricting such
internal disclosure may limit the effectiveness of any such
communication in responding to operational problems.
    82. Moreover, under section 284.13(d) of the Commission
regulations,\113\ pipelines are already required to post important
capacity and outage information at each scheduling opportunity. This
includes ``equal and timely access to information relevant to the
availability of all transportation services whenever capacity is
scheduled, including, but not limited to, the availability of capacity
at receipt points, on the mainline, at delivery points, and in storage
fields; whether the capacity is available directly from the pipeline or
through capacity release; the total design capacity of each point or
segment on the system; the amount scheduled at each point or segment
whenever capacity is scheduled; and all planned and actual service
outages or reductions in service capacity.'' Washington Gas has not
provided sufficient justification that, given the extent of these
posting requirements, the potential risks it identifies associated with
permitting the exchange of non-public, operational information between
transmission operators, outweighs the efficiency and reliability
benefits of permitting such communications.
---------------------------------------------------------------------------

    \113\ 18 CFR 284.13(d) (2013).
---------------------------------------------------------------------------

    83. While non-public, operational information falls outside of the
posting requirements, we are not convinced such information needs to be
disclosed to all shippers. For example, certain information may be
relevant only to the operations of the public utility and may not need
to be disclosed to all shippers.
    84. We also deny EPSA's and NGSA's requests to expand the No-
Conduit Rule to prohibit disclosures to interstate natural gas pipeline
employees who market pipeline capacity, as well as PUCO's request to
require electric transmission operators to furnish pipelines
aggregated, non-unit specific generation data to ensure against
providing pipelines with confidential or proprietary information that
could result in a competitive advantage concerning the pricing of gas
to that facility. The Commission agrees with NGSA that ``marketing
function employees,'' as that termed is defined in the Standard of
Conduct, does not include employees that market transportation
capacity. However, EPSA and NGSA have not shown that employees who
market pipeline capacity can use non-public, operational information
shared under this Final Rule to provide an undue preference or unduly
discriminate in a manner inconsistent with the Commission's policies or
regulations. NGSA's specific concern is that employees who market
transportation capacity could use non-public, operational information
shared under this rule to discriminate in their allocation or pricing
of capacity. In response, we note that interstate natural pipelines are
required by the NGA and their tariffs to allocate service on a not
unduly discriminatory basis at a rate not exceeding the just and
reasonable rate on file. Further, the Commission does not require
pipelines to discount services below the pipeline's maximum tariff
rate, which the Commission has found just and reasonable. If a pipeline
chooses to provide selective discounts based on the elasticity of
demand of its customers,\114\ the pipeline needs to obtain information
to demonstrate that a shipper requesting a discount does have
competitive alternatives justifying the discount in order to ensure
that it treats all similarly situated customers on a comparable
basis.\115\
---------------------------------------------------------------------------

    \114\ See Associated Gas Distributors v. FERC, 824 F.2d 981
(D.C. Cir. 1987) (permitting selective discounting only when
justified by competitive alternatives and elastic demand
conditions); Williston Basin Interstate Pipeline Co., 85 FERC ]
61,247 (1998) (finding that a pipeline does not necessarily have to
offer the same discount to all customers at a point when the
pipeline knows, if some customers at the point have elastic demand,
while others have inelastic demand).
    \115\ See, e.g., Panhandle Eastern Pipe Line Co., Opinion No.
395, 71 FERC ] 61,228, at 61,867 (1995) (Commission cited to
pipeline's policy of requiring documentation from its customers
detailing the competitive circumstances justifying their need for a
discount, such as potentially sensitive information concerning the
end use customer for whom the gas will be transported, and
competitive energy supplies, including the customer's source and
cost of alternative natural gas supplies or the type and cost of
alternative fuels); Panhandle Eastern Pipe Line Co., Opinion No.
404, 74 FERC ] 61,109, at 61,405 (1996).

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

    85. We also deny PUCO's request to expand the No-Conduit Rule to
require that non-public, operational information not be shared with any
person or company affiliate except to ensure the reliable and efficient
operations of the pipeline, transmission grid, and the delivery of
generation service. As we explain elsewhere in this Final Rule, the
Commission is concerned that adding further qualifiers to the
definition of operational information will restrict the flexibility of
transmission operators to determine what information it must share to
promote reliable service and engage in effective operational planning.
Moreover, adding further qualifiers is unnecessary, given our
conclusion that the existing safeguards (e.g., the Standards of
Conduct, prohibition against undue discrimination or preference,
prohibition on market manipulation) together with the third-party
limitation in the No-Conduit Rule we are putting in place are
sufficient to protect against unnecessary disclosure.
    86. TVA proposes that, in addition to the No-Conduit Rule, the
Commission require confidentiality agreements, while ELCON proposes
that the Commission also require annual filings and written compliance
procedures. Under this Final Rule, communication and sharing of non-
public, operational information is voluntary. While the Commission will
not embed such a requirement in its regulations, we note that CAISO and
ISO-NE have both adopted such practices, and this Final Rule does not
prescribe the mechanics of how voluntary sharing will be conducted. To
the extent a transmission operator has a need for additional or changed
information sharing procedures such as confidentiality agreements, the
Commission will evaluate such requests on a case-by-case basis. With
respect to PUCO's comments regarding sanctions, the Commission
reiterates that unauthorized disclosure of any non-public, operational
information may subject the entity or individual making the prohibited
disclosure to the enforcement provisions of the FPA and NGA, including
potential civil penalties.\116\ The Commission declines to further
delineate the specific sanctions that might apply in the event of an
unauthorized disclosure, as any sanctions would need to be tailored to
the facts and circumstances of the disclosure at issue.
---------------------------------------------------------------------------

    \116\ See Section 22 of the NGA, 15 U.S.C. 717t2-1 (2012), and
section 316A of the FPA, 16 U.S.C. 825o-1 (2012).
---------------------------------------------------------------------------

    87. Duke argues that some small public utilities that currently
have waivers of the requirement to abide by the Standards of Conduct
could be given an unfair advantage if they receive commercially
sensitive and non-public transmission information under the Final Rule.
The Commission clarifies that existing waivers from the Standards of
Conduct do not automatically apply to the No-Conduit Rule adopted in
this Final Rule. That is, an existing waiver of the Standards of
Conduct does not waive the No-Conduit Rule adopted here. In this Final
Rule, the Commission is expressly authorizing the exchange of non-
public, operational information that could include commercially
sensitive, customer-specific information. The No-Conduit Rule was
developed to address concerns that broadly sharing this kind of
information with marketing function employees or third parties could
cause competitive harm. Given that the information covered by this rule
is potentially commercially sensitive, the Commission finds that a
determination as to whether a waiver of the No-Conduit Rule adopted
here is appropriate is best made on an individual basis, pursuant to a
filing under FPA section 205 or NGA section 4.
    88. In response to comments raising general concerns about the
competitive impact of the use of non-public, operational information
exchanged under this rule, the Commission finds that the No-Conduit
Rule is sufficient to address these concerns. For example, NGSA asserts
that a natural gas marketer's commercial strategy could be revealed if
the confidential details of the scheduling priorities it has contracted
with its clients are revealed. While the Commission recognizes that a
natural gas marketer's scheduling priorities for its downstream clients
are commercially sensitive, the No-Conduit Rule should ensure that the
electric transmission operators, with whom pipelines may share such
information, do not disclose that information to third party
participants in the natural gas sales market. NGSA has not explained
how a pipeline's sharing of a natural gas marketer's nominations with
an electric transmission operator would cause competitive harm to the
natural gas marketer, so long as the electric transmission operator
complies with the No-Conduit Rule.
    89. The Commission similarly is not persuaded by PUCO's concern
that an electric transmission operator's sharing of confidential unit-
specific generator information with interstate pipeline providers could
result in ``a competitive advantage concerning the pricing of gas to
that facility.'' \117\ Interstate natural gas pipelines only provide
unbundled transportation service and do not sell gas except for
incidental sales required for the conduct of their transportation
service. As discussed above, there are protections already in place to
prevent undue discrimination or preference in the pipeline's sale of
transportation service.\118\ Given the protections already in place, we
see no need to propose additional protections regarding pipeline
transportation at this time.
---------------------------------------------------------------------------

    \117\ PUCO Comments at 7.
    \118\ See, e.g., 18 CFR 284.286 (2013).
---------------------------------------------------------------------------

3. Exceptions to the No-Conduit Rule
a. Comments
    90. Several parties contend that the No-Conduit Rule is too
restrictive and recommend that the Commission adopt various
modifications, as discussed below. For example, NE Gas Industry and
INGAA request that the proposed No-Conduit Rule be modified in the
Final Rule to include an exception to allow sharing of non-public,
operational information between all relevant industry participants in
an emergency.\119\ INGAA, for example, states that there should be no
limit on sharing of non-public, operational information between
transmission operators during an emergency, including communications
between third parties, subject to a record of the exchange as soon as
practicable after the fact.\120\ NE Gas Industry and INGAA propose that
communications in such emergencies could include RTOs and ISOs,
interstate natural gas pipelines, generators of all fuel types, LDCs,
liquefied natural gas suppliers, producers, marketers, asset managers,
and other relevant participants in the energy industry.\121\
Alternatively, NE Gas Industry requests that the Commission clarify
that the No-Conduit Rule does not prohibit such larger group
discussions and apart from the Final Rule, pipelines and public
utilities are permitted to share non-public, operational information
with all relevant entities as necessary to mitigate or solve an
emergency that threatens the reliability of electric or natural gas
service.
---------------------------------------------------------------------------

    \119\ NE Gas Industry at 3-4, INGAA Comments at 7. NE Gas
Industry states that existing focus groups and joint industry task
forces in New England can serve as the mechanisms to facilitate such
open communication in times of emergency.
    \120\ INGAA Comments at 7.
    \121\ NE Gas Industry Comments at 5; INGAA Comments at 7.
---------------------------------------------------------------------------

    91. In its reply comments, NGSA states that the Commission should
deny requests to suspend the communications rules during emergencies or
clearly define what

constitutes an emergency.\122\ NGSA is concerned that identifying what
situations constitute an emergency can be subjective. NGSA states that
at a minimum, the Commission should strictly maintain the No-Conduit
Rule, restricting communications to operational (i.e. non-marketing)
employees, at all times, regardless of any relaxation of the associated
communications rules.
---------------------------------------------------------------------------

    \122\ NGSA Reply Comments at 5.
---------------------------------------------------------------------------

    92. Enable contends that the Commission should adopt a modified
version of the No-Conduit Rule that allows interstate pipelines to
share non-public, operational information with non-marketing function
employee third parties for the purpose of promoting reliable service
and operational planning.\123\ Enable asserts that the NOPR provides no
rational basis for distinguishing between (A) ``non-public, operational
information'' received from electric public utilities through this new
regime, which interstate natural gas pipelines are barred from
disclosing to anyone, and (B) general ``non-public, operational
information,'' which pipelines may share with non-marketing function
employees for operational reasons.\124\ Enable asserts that currently,
interstate pipelines receive non-public, operational information from a
variety of sources and the NOPR sets forth no evidence that such
information, when received from public utilities, would not be
sufficiently protected by the current No-Conduit Rule as stated in the
Standards of Conduct or by a less restrictive No-Conduit Rule.\125\
Enable states that the NOPR gives interstate gas pipelines access to
information from electric public utilities for the purpose of improving
reliability, but at the same time bars those pipelines from sharing
such information with third parties with whom they would normally share
operational information for that purpose (e.g., interconnected
intrastate and gathering lines).\126\
---------------------------------------------------------------------------

    \123\ Enable Comments at 9-10.
    \124\ Id. at 6.
    \125\ Id.
    \126\ Id.
---------------------------------------------------------------------------

    93. Enable also contends that the NOPR's No-Conduit Rule creates
two classifications of ``non-public, operational information'' and
different rules regarding interstate pipelines' sharing of each,
thereby imposing significant administrative burdens and compliance
challenges on the pipelines.\127\ Enable states that under the current
rules, interstate pipelines may exchange information with employees of
their intrastate pipeline and gathering affiliates, provided those
employees are not marketing function employees. Enable states that the
proposed No-Conduit Rule creates an inconsistency and potential
compliance difficulty because these employees of the non-jurisdictional
affiliates would be allowed to receive some operational information but
not the new category of non-public information received from electric
public utilities.\128\ Enable states that the proposed No-Conduit Rule
renders impractical--if not impossible--interstate pipelines'
otherwise-appropriate sharing of non-marketing function employees with
affiliated intrastate pipelines and gatherers.\129\ Additionally,
Enable states that interstate pipelines will need to implement two
separate compliance walls regarding operational information: one wall
to prevent the disclosure of non-public transmission function
information or customer information (directly or through a conduit) to
the pipeline's marketing function employees; and another wall to
prevent the disclosure of non-public, operational information received
from public utilities to the pipeline's marketing function employees or
to any third party (including the pipeline's own intrastate pipeline
and gathering affiliates).\130\
---------------------------------------------------------------------------

    \127\ Id. at 7.
    \128\ Id.
    \129\ Id. at 8.
    \130\ Id.
---------------------------------------------------------------------------

    94. Enable maintains that the NOPR does not identify a need for the
absolute prohibition against interstate pipelines' disclosure of
operational information to non- marketing function employee third
parties for the purpose of system reliability.\131\ Enable argues that
the NOPR points only to the theoretical threat of harmful disclosure of
the electric public utility's non-public information and undue
discrimination or preference and provides no explanation of how the
potential danger of improper disclosure by interstate pipelines,
unsupported by a record of abuse, justifies such a broad and burdensome
prophylactic rule.
---------------------------------------------------------------------------

    \131\ Id. at 9 (citing National Fuel Gas Supply Corp. v. FERC,
468 F.3d 831, 844 (D.C. Cir. 2006) (indicating that FERC must supply
a factual basis for its administrative actions or, in the absence of
such a basis, explain how potential dangers, unsupported by a record
of abuse, justifies costly rules); 5 U.S.C. 553(c) (``After
consideration of the relevant matter presented [through notice and
comment], the agency shall incorporate in the rules adopted a
concise general statement of their basis and purpose.''); Motor
Vehicle Mfrs. Ass'n of U.S, Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 56 (1983) (requiring agency to explain reasons for
decision); St. James Hosp. v. Heckler, 760 F.2d 1460, 1469 (7th Cir.
1985) (finding explanation for rule not adequately supported by
evidence offered as justification)).
---------------------------------------------------------------------------

    95. AGA and Duke Energy express concern that the proposed No-
Conduit Rule could be interpreted to prohibit communications that are
currently permitted under the Standards of Conduct.\132\ Specifically,
AGA and Duke maintain the rule should not prevent a public utility or
interstate pipeline from disclosing non-public, operational information
to a third-party LDC, especially where such information would promote
reliable service or operational planning with regard to gas-fired
generators located on an LDC's system.
---------------------------------------------------------------------------

    \132\ AGA Comments at 7, Duke Energy Comments at 3.
---------------------------------------------------------------------------

b. Commission Determination
    96. As stated above, the Commission adopts the No-Conduit Rule as
set forth in the NOPR, without modification. The non-public,
operational information permitted to be shared under this Final Rule
could include the exchange of confidential generator information, and
as explained below, the scope of the information allowed to be shared
under this Final Rule warrants the restrictions in the No-Conduit Rule,
as proposed.
    97. AGA, Duke Energy and Enable request exceptions to the third
party restriction in the No-Conduit Rule. The Commission denies these
requests. As stated earlier, the No-Conduit Rule does not prohibit
transmission operators from sharing their own operational information
with other interconnecting entities involved in ensuring the
reliability of system operations, such as LDCs, intrastate pipelines or
gathering facilities. The No-Conduit Rule only applies to the
subsequent disclosure of non-public, operational information, including
commercially sensitive, customer-specific information, received by an
interstate natural gas pipeline or electric transmission operator under
the rule and does not otherwise affect the ability of an interstate
natural gas pipeline or electric transmission operator to exchange
operational information about its own system with its customers/
stakeholders or members under the same rules and conditions as it
currently does. Moreover, the information that may permissibly be
shared under this rule is not limited to ``transmission function''
information covered under the Standards of Conduct. The scope of
information that transmission operators may permissibly share under
this rule is broader than transmission function information and, as a
result therefore warrants the restriction on disclosure to third
parties,

as well as marketing function employees, via the No-Conduit Rule.
    98. The Commission similarly denies NE Gas Industry's and INGAA's
requests that, if the Commission does not eliminate the third-party
prohibition, the Commission at least include an exception to permit
sharing of non-public, operational information between all relevant
industry participants during emergencies. We see little reason to
create an emergency exception since, as we explained, the Final Rule
does not otherwise affect the ability of an interstate natural gas
pipeline or electric transmission operator to exchange operational
information about its own system with its customers/stakeholders or
members under the same rules and conditions as it is currently does,
including during an emergency. In addition, the Commission clarifies
that the proposed No-Conduit Rule does not prohibit, either during
routine or emergency circumstances, electric transmission or interstate
natural gas pipeline operators from jointly and simultaneously
communicating non-public, operational transmission or transportation
information (except for customer-specific information) with all market
participants. Because such information is being shared
contemporaneously with all market participants, it would not be
considered non-public and its disclosure would not be unduly
preferential or discriminatory. Undue discrimination concerns only
arise when communications take place with some, but not all, market
participants.
    99. Enable is concerned that the proposed No-Conduit Rule creates a
new compliance issue for pipeline companies that have operational
personnel who are involved in operational planning for an interstate
pipeline and affiliated gathering facilities or intrastate pipelines.