[Federal Register: January 26, 2006 (Volume 71, Number 17)]
[Rules and Regulations]
[Page 4244-4258]
[DOCID:fr26ja06-9]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 1c

[Docket No. RM06-3-000; Order No. 670]

Prohibition of Energy Market Manipulation

Issued January 19, 2006.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: In this Final Rule, pursuant to Title III, Subtitle B, and
Title XII, Subtitle G of the Energy Policy Act of 2005, the Federal
Energy Regulatory Commission (Commission) is amending its regulations
to implement new section 4A of the Natural Gas Act and new section 222
of the Federal Power

Act, prohibiting the employment of manipulative or deceptive devices or
contrivances.

DATES: Effective Date: January 26, 2006.

FOR FURTHER INFORMATION CONTACT:
Mark Higgins, Office of Market Oversight and Investigations, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.<PHONE_NUMBER><EMAIL_ADDRESS>Frank Karabetsos, Office of General Counsel, Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426. (202) 502-
8133<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

                                                               Paragraph
                                                                  No.

I. Introduction.............................................          1.
II. Background                                                        6.
III. Discussion.............................................          8.
    A. Scope of Application of Regulations..................          9.
        1. Comments.........................................          9.
        2. Commission Determination.........................         16.
    B. General Applicability of Securities Law Concepts.....         26.
        1. Comments.........................................         26.
        2. Commission Determination.........................         30.
    C. Disclosure...........................................         33.
        1. Duty of Disclosure...............................         34.
            a. Comments.....................................         34.
            b. Commission Determination.....................         35.
        2. Sections 1c.1(a)(2) and 1c.2(a)(2) and Omissions          38.
         of Material Fact...................................
            a. Comments.....................................         38.
            b. Commission Determination.....................         41.
    D. Sections 1c.1(a)(3) and 1c.2(a)(3) and Intent........         43.
        1. Comments.........................................         43.
        2. Commission Determination.........................         45.
    E. Elements of a Manipulation Claim.....................         46.
        1. Comments.........................................         46.
        2. Commission Determination.........................         48.
    F. Interplay with Market Behavior Rules.................         55.
        1. Comments.........................................         55.
        2. Commission Determination.........................         58.
    G. Statute of Limitations...............................         61.
        1. Comments.........................................         61.
        2. Commission Determination.........................         62.
    H. Safe Harbors and Affirmative Defenses................         64.
        1. Comments.........................................         64.
        2. Commission Determination.........................         66.
    I. Procedures for Handling Manipulation Claims..........         68.
        1. Comments.........................................         68.
        2. Commission Determination.........................         70.
    J. Miscellaneous Issues.................................         75.
        1. Use of ``Entity'' in place of ``Person'' in               75.
         sections 1c.1(a)(3) and 1c.2(a)(3).................
            a. Comments.....................................         75.
            b. Commission Determination.....................         76.
        2. Impact of New Regulations on the Policy Statement         77.
         on Natural Gas and Electric Price Indices..........
            a. Comments.....................................         77.
            b. Commission Determination.....................         78.
        3. Special Pleading.................................         79.
            a. Comments.....................................         79.
            b. Commission Determination.....................         80.
IV. Regulatory Flexibility Act Certification................         81.
V. Information Collection Statement.........................         83.
VI. Environmental Statement.................................         84.
VII. Document Availability..................................         85.
VIII. Effective Date and Congressional Notification.........         88.
Regulatory Text.............................................
Appendix: Parties Filing Initial and Reply Comments and
 Acronyms...................................................

Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead
Brownell, and Suedeen G. Kelly.

I. Introduction

    1. On October 20, 2005, the Commission issued a Notice of Proposed
Rulemaking (NOPR) to prohibit energy market manipulation.\1\ Pursuant
to section 4A of the Natural Gas Act (NGA) \2\ and section 222 of the
Federal Power Act (FPA),\3\ as added to the statutes by the Energy
Policy Act of 2005 (EPAct 2005),\4\ the Commission proposed to add a
Part 159 under Subchapter E and a Part 47 under Subchapter B to Title
18 of the Code of Federal Regulations. Under the proposed regulations,
it would be

unlawful for any entity, directly or indirectly, in connection with the
purchase or sale of natural gas or the purchase or sale of
transportation services subject to the jurisdiction of the Commission,
or in connection with the purchase or sale of electric energy or the
purchase or sale of transmission services subject to the jurisdiction
of the Commission, (1) to use or employ any device, scheme, or artifice
to defraud, (2) to make any untrue statement of a material fact or to
omit to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading, or (3) to engage in any act, practice, or course of
business that operates or would operate as a fraud or deceit upon any
person.
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    \1\ Prohibition of Energy Market Manipulation, 113 FERC ] 61,067
(2005); 70 FR 61930, October 27, 2005.
    \2\ 15 U.S.C. 717 et al. (2000).
    \3\ 16 U.S.C. 791a et al. (2000).
    \4\ Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594
(2005), 315 and 1283, respectively.
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    2. In the NOPR, the Commission stated that sections 315 and 1283 of
EPAct 2005 ``apply to the conduct of `any entity,' not just
jurisdictional market-based rate sellers, natural gas pipelines, or
holders of blanket certificate authority,'' and ``includes not only
regulated utilities but also governmental utilities and other market
participants.'' \5\ Furthermore, we stated in the NOPR that sections
1c.1(a)(1)-(3) and 1c.2(a)(1)-(3) of the proposed regulations were
patterned after the Securities and Exchange Commission's (SEC) Rule
10b-5,\6\ and were ``intended to be interpreted consistent with
analogous SEC precedent that is appropriate under the circumstances.''
\7\ Sections 1c.1(b) and 1c.2(b) of the proposed regulations stated
that nothing in these provisions should be construed to create a
private right of action. The Commission further noted, however, that
sections 1c.1(b) and 1c.2(b) were not intended to take away any other
right that may otherwise exist.
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    \5\ NOPR at 70 FR 61931.
    \6\ 17 CFR 240.10b-5 (2005).
    \7\ NOPR at 70 FR 61931. As explained in P 5, supra, the
regulations proposed to be placed in new sections 159.1 and 47.1
will be new sections 1c.1 and 1c.2, respectively.
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    3. Thirty parties filed comments and nine parties filed reply
comments.\8\ In response to the comments, and as discussed more fully
below, the Commission, among other things: clarifies the scope of
application of the final rule; addresses comments pertaining to
disclosure and sections 1c.1(a)(2)-(3) and 1c.2(a)(2)-(3) of the final
rule; discusses the elements of a violation of the final rule; notes
the relationship of the final rule to the Market Behavior Rules \9\ ;
and deals with a number of implementation issues, such as the
applicable statute of limitations, affirmative defenses and safe harbor
provisions, and procedural matters.
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    \8\ Entities filing intervening and reply comments are listed in
the Appendix to this final rule. The abbreviations for such
commenters are noted in the Appendix. The Commission has accepted
and considered all comments filed, including late-filed comments.
    \9\ Investigation of Terms and Conditions of Public Utility
Market-Based Rate Authorizations, 105 FERC ] 61,218 (2003), reh'g
denied, 107 FERC ] 61,175 (2004); Order No. 644, Amendment to
Blanket Sales Certificates, 68 FR 66323 (2003), FERC Stats. & Regs.
] 31,153 (2003), reh'g denied, 107 FERC ] 61,174 (2004). The Market
Behavior Rules are currently on appeal. Cinergy Marketing & Trading,
L.P. v. FERC, Nos. 04-1168 et al. (DC Cir., appeal filed April 28,
2004).
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    4. For the most part, the Commission finds it unnecessary to change
the wording of the proposed regulatory text, except in one respect:
substituting ``entity'' for ``person'' in sections 1c.1(a)(3) and
1c.2(a)(3) of the final rule. However, we do provide certain
clarifications requested by several commenters. In addition, we find
that some of the recommendations made by commenters are more
appropriately addressed in the proceeding initiated in Docket No. RM06-
5-000, proposing to repeal the codes of conduct for unbundled sales
service and for persons holding blanket marketing certificates, and in
Docket No. EL06-16-000, proposing to repeal the Market Behavior Rules,
which are currently included in all public utility sellers' market-
based rate tariffs and authorizations.\10\
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    \10\ Amendments to Codes of Conduct for Unbundled Sales Service
and for Persons Holding Blanket Marketing Certificates, 70 FR 72090
(2005), 113 FERC ] 61,189 (2005); Investigation of Terms and
Conditions of Public Utility Market-Based Rate Authorizations, 70 FR
71484 (2005), 113 FERC ] 61,190 (2005).
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    5. Without a rule prohibiting manipulative or deceptive conduct,
the language of EPAct 2005 sections 315 and 1283 does not, by itself,
make any particular act unlawful. As a result, this final rule serves
as the implementing provision designed to prohibit manipulation and
fraud in the markets the Commission is charged with regulating. The
final rule is not intended to regulate negligent practices or corporate
mismanagement, but rather to deter or punish fraud in wholesale energy
markets. In addition, to ease references to the final rule, we have
determined to place the new regulations in a new Part 1c of the
Commission's general regulations, rather than separately in new Parts
159 and 47 as proposed in the NOPR. The regulatory text of proposed
sections 159.1 and 47.1 as identified herein will be new sections 1c.1
and 1c.2, respectively.

II. Background

    6. On August 8, 2005, EPAct 2005 became law. Sections 315 and 1283
of EPAct 2005, amending the NGA and the FPA, respectively, are
virtually identical, and prohibit the use or employment of manipulative
or deceptive devices or contrivances in connection with the purchase or
sale of natural gas, electric energy, or transportation or transmission
services subject to the jurisdiction of the Commission. These anti-
manipulation sections of EPAct 2005 closely track the prohibited
conduct language in section 10(b) of the Securities Exchange Act of
1934,\11\ and specifically dictate that the terms ``manipulative or
deceptive device or contrivance'' are to be used ``as those terms are
used in section 10(b) of the Securities Exchange Act of 1934.''
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    \11\ Securities Exchange Act of 1934, 15 U.S.C. 78j(b) (2000)
(Exchange Act).
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    7. The SEC adopted Rule 10b-5,\12\ which implemented section 10(b)
of the Exchange Act. Since their promulgation, a significant body of
legal precedent concerning section 10(b) of the Exchange Act and Rule
10b-5 has developed. Consistent with the mandate that certain aspects
of the Commission's new authority be exercised in a manner consistent
with section 10(b) of the Exchange Act, consistent with Congress'
modeling sections 315 and 1283 of EPAct 2005 on section 10(b) of the
Exchange Act, and as proposed in the NOPR, the Commission has modeled
the final rule on Rule 10b-5. This approach will benefit entities
subject to the new rule because there is a substantial body of
precedent applying the comparable language of Rule 10b-5. In the course
of responding to various comments, we will discuss the appropriate
application of analogous securities law precedent that will inform the
interpretation of the final rule in the context of the NGA and FPA.
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    \12\ 17 CFR 240.10b-5 (2005).
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III. Discussion

    8. The 30 initial comments and nine reply comments on the NOPR are
from a diverse group of industry stakeholders. Overwhelmingly,
commenters are supportive of our efforts to implement well-developed,
clear and fair rules aimed at eliminating the potential for fraud in
wholesale energy transactions. The comments identify a number of
issues: (1) The scope of application of the Final Rule; (2) the
usefulness of securities law precedents to the energy industry; (3) the
disclosure implications of the Final Rule; (4) the elements that
comprise a violation of the Final Rule; (5) how the Final Rule will
interact with the Market Behavior Rules; and (6) a variety of
procedural matters, including the appropriate

statute of limitations to apply to the Final Rule. These issues and
others that were raised in comments are addressed in the sections that
follow.

A. Scope of Application of Regulations

1. Comments
    9. Several commenters express views on the appropriate scope of the
proposed anti-manipulation regulations.\13\ Commenters ask the
Commission to clarify the meaning of ``any entity'' and ``subject to
the jurisdiction of the Commission'' as these statutory terms apply to
the proposed regulations. For example, the Midwest ISO supports broad
application of the proposed regulations to any entity as opposed to
``limiting the application of the regulations to FERC jurisdictional
parties.'' \14\ Likewise, NASUCA reads the proposed regulations as
applying to all entities, ``not just jurisdictional market-based rate
sellers, natural gas pipelines, or holders of blanket certificate
authority.'' \15\ AGA asks the Commission to clarify that ``any
entity'' means that the proposed regulations extend beyond Order No.
644 regulation of jurisdictional market-based rate sellers, natural gas
pipelines, or holders of blanket certificate authority. This is
necessary, AGA asserts, to ensure the rules will have the ``intended
effective impact on the market place for natural gas sales.'' \16\
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    \13\ See, e.g., AGA at 4-5; APGA at 10; APPA at 3-4; AOPL at 2;
BP at 1-2; Cinergy at 8; EEI at 25-26; Indicated Market Participants
at 8; Midwest ISO at 4; NARUC Reply at 3-5; SCANA at 3; SUEZ at 6-
11.
    \14\ Midwest ISO at 4.
    \15\ NASUCA at 3.
    \16\ AGA at 4.
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    10. Two commenters specifically address whether the proposed
regulations apply to ``first sales'' \17\ of natural gas. APGA, noting
that first sales represent a substantial part of the wholesale natural
gas market, argues that the phrase ``subject to the jurisdiction of the
Commission'' in NGA section 4A must be read to apply only to ``the
purchase or sale of transportation services'' and not to the preceding
clause ``purchase or sale of natural gas.'' \18\ SUEZ, however, argues
that ``subject to the jurisdiction of the Commission'' applies to
purchases and sales as well as to transportation services. SUEZ
maintains that ``any entity'' does not include entities engaged in non-
jurisdictional transactions such as first sales, sales of LNG, or
retail sales, but is intended only to bring certain governmental
entities otherwise excluded from FPA jurisdiction under the umbrella of
the proposed regulations.\19\
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    \17\ ``First sales'' are certain wholesale sales of natural gas
removed from the Commission's jurisdiction by the Natural Gas Policy
Act of 1978 (NGPA) and the Wellhead Decontrol Act of 1989.
Accordingly, the only sales of natural gas that the Commission
currently has jurisdiction to regulate are sales for resale of
domestic gas by pipelines, local distribution companies (LDCs), or
their affiliates so long as they do not produce the gas that they
sell, and sales for resale of natural gas previously purchased and
sold by an interstate pipeline, LDC or retail customer. See Dan
Diego Gas and Electric Company, 101 FERC ] 61,161 at P 10 (2002);
Reporting of Natural Gas Sales to the California Market, 96 FERC &
61,119 at 61,463, reh'g denied, 97 FERC ] 61,029 (2001).
    \18\ APGA at 3-10.
    \19\ SUEZ at 10, referring to FPA section 201(f) entities.
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    11. APPA and NARUC also urge the Commission to construe the phrase
``subject to the Commission's jurisdiction'' to modify both the
purchase or sale of electric energy and the purchase or sale of
transmission services. By doing so, APPA and NARUC argue, the
Commission will make clear the regulation does not apply to retail
sales or purchases and thus will avoid overlap with state and local
jurisdiction.\20\ In reply comments, Cinergy argues that regardless of
the parsing of the statutory language, the manipulation authority falls
within the existing scope of the FPA and NGA, and that nothing in the
scope of these statutes suggests that retail sales are in any way
subject to the Commission's authority.\21\ Likewise, EEI argues that
the FPA is limited to wholesale markets, and that matters subject to
state regulation are excluded from the reach of the Commission.\22\
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    \20\ APPA at 4; NARUC Reply at 3.5.
    \21\ Cinergy Reply at 2-4.
    \22\ EEI Reply at 6.
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    12. NGSA asserts that EPAct 2005 does not open the door to
regulation of non-jurisdictional sales even if they are subject to the
anti-manipulation rules. NGSA acknowledges that the statutory
provisions expand the Commission's authority to prevent market
manipulation, but cautions that nothing in the statute grants the
Commission any rate or certificate jurisdiction over deregulated first
sales of natural gas.\23\
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    \23\ NGSA at 3.
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    13. Other commenters address the meaning of ``any entity'' in the
context of FPA sections 201(f) and 211A. PG&E argues that it is crucial
that the Commission's authority to prohibit manipulation extend to all
entities involved in the market. Noting the specific reference to
entities described in FPA section 201(f), PG&E states that the proposed
regulations should apply to all municipalities and other governmental
agencies.\24\ EEI also states that the proposed regulations must reach
entities described in FPA section 201(f), including unregulated
transmitting utilities under FPA section 211A. This is so, EEI argues,
because the authority to require comparable open access transmission
under FPA section 211A makes all transmission service provided by FPA
section 201(f) entities subject to the jurisdiction of the Commission
and thus subject to the proposed anti-manipulation rules.\25\ APPA
responds that under section 211A(c) certain entities are not subject to
the transmission service requirements (those selling less than
4,000,000 MWhs per year, or that do not own facilities necessary to
operate an interconnected transmission system, or that meet other
criteria that the Commission may adopt in the future). These entities,
APPA argues, are not subject to the jurisdiction of the Commission and
thus not subject to the proposed regulations.\26\ NRECA goes further,
asserting that while FPA section 201(f) governmental entities are
``potentially'' subject to the proposed anti-manipulation regulations,
the regulations can only apply to transactions that are otherwise
subject to the Commission's jurisdiction. Thus, NRECA argues that
neither party to a retail sale, to transmission service in intrastate
commerce, or to a sale of electricity or transmission service by a FPA
section 201(f) entity are subject to the proposed regulations.\27\
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    \24\ PG&E at 6.
    \25\ EEI at 25.
    \26\ APPA Reply at 5-6.
    \27\ NRECA Reply at 2-5.
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    14. AOPL seeks clarification that ``subject to the jurisdiction of
the Commission'' does not mean the Commission would subject oil
pipelines to claims of market manipulation in connection with
transportation and transmission services subject to the Commission's
jurisdiction under the Interstate Commerce Act (ICA).\28\
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    \28\ AOPL at 1-3.
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    15. Finally, Cinergy asks that the text of the proposed regulations
be modified to make explicit that the regulations pertain only to
market manipulation, noting that SEC Rule 10b-5 applies to a wide range
of activities beyond market manipulation.\29\
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    \29\ Cinergy at 8.
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2. Commission Determination
    16. As an initial matter, this Final Rule does not, and is not
intended to, expand the types of transactions subject to the
Commission's jurisdiction under the FPA, NGA, NGPA, or ICA. As now
explained, however, the new regulations do apply to ``any entity'' as
that is the scope of the final rule as directed by sections 315 and
1283 of EPAct 2005. If

any entity engages in manipulation and the conduct is found to be ``in
connection with'' a jurisdictional transaction, the entity is subject
to the Commission's anti-manipulation authority. Absent such nexus to a
jurisdictional transaction, however, fraud and manipulation in a non-
jurisdictional transaction (such as a first or retail sale) is not
subject to the new regulations.
    17. NGA section 4A and FPA section 222 make it unlawful for ``any
entity'' to use a manipulative or deceptive device or contrivance ``in
connection with'' the purchase or sale of natural gas or electric
energy or the purchase or sale of transportation or transmission
services ``subject to the jurisdiction of the Commission.'' \30\ The
answer to the scope of application of the final rule lies in a
reasonable reading of these terms in relation to each other.
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    \30\ The text of EPAct 2005 section 315, adding section 4A to
the NGA, is:
    It shall be unlawful for any entity, directly or indirectly, to
use or employ, in connection with the purchase or sale of natural
gas or the purchase or sale of transportation services subject to
the jurisdiction of the Commission, any manipulative or deceptive
device or contrivance (as those terms are used in section 10(b) of
the Securities Exchange Act of 1934 (15 U.S.C. 78j(b))) in
contravention of such rules and regulations as the Commission may
prescribe as necessary in the public interest or for the protection
of natural gas ratepayers. Nothing in this section shall be
construed to create a private right of action.
    The corresponding text of EPAct 2005 section 1283, adding
section 222 to the FPA, is:
    (a) In general.--It shall be unlawful for any entity (including
an entity described in section 201(f)), directly or indirectly, to
use or employ, in connection with the purchase or sale of electric
energy or the purchase or sale of transmission services subject to
the jurisdiction of the Commission, any manipulative or deceptive
device or contrivance (as those terms are used in section 10(b) of
the Securities Exchange Act of 1934 (15 U.S.C. 78j(b))), in
contravention of such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for
the protection of electric ratepayers.
    (b) No Private Right of Action.--Nothing in this section shall
be construed to create a private right of action.
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    18. ``Any entity'' is a deliberately inclusive term. Congress could
have used the existing defined terms in the NGA and FPA of ``person,''
``natural-gas company,'' or ``electric utility,'' but instead chose to
use a broader term without providing a specific definition.\31\ Thus,
the Commission interprets ``any entity'' to include any person or form
of organization, regardless of its legal status, function or
activities.\32\
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    \31\ See NGA sections 2(1) and 2(6); FPA sections 3(4) and
3(22). Congress did note that entities described in FPA section
201(f) are included in the meaning of entity. See FPA section
222(a).
    \32\ Because many entities that are engaged in wholesale natural
gas or electricity transactions or in interstate transportation or
transmission services, engage in both jurisdictional and non-
jurisdictional transactions, it is not enough to say, as SUEZ
suggests, that entities engaging in non-jurisdictional transactions
are not covered.
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    19. The second aspect of the analysis focuses on the transaction
involved. A transaction under NGA section 4A is ``the purchase or sale
of natural gas or the purchase or sale of transportation services
subject to the jurisdiction of the Commission.'' A transaction under
FPA section 222 is ``the purchase or sale of electric energy or the
purchase or sale of transmission services subject to the jurisdiction
of the Commission.'' The critical issue is whether the limiting phrase
of ``subject to the jurisdiction of the Commission'' applies to both
preceding phrases, that is, (1) the purchase or sale of the energy
commodity and (2) transportation services or transmission services, or
just to the transportation or transmission services. APGA argues that
the ``rule of the last antecedent'' means that it should only modify
the last phrase, that is, transportation services or transmission
services. But in the absence of definitive punctuation or other clearer
expression of intent to limit the jurisdiction requirement only to
transportation or transmission, the Commission must look for the
meaning which is the most reasonable under the circumstances.\33\
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    \33\ APGA at 4 (citing 2a N. Singer, Sutherland on Statutory
Construction Sec.  47:33 at 369 (6th rev. ed. 2000) and Barnhart v.
Thomas, 540 U.S. 20, 26 (1993)). The general rule is that a
qualifying phrase will normally apply to the provision or clause
immediately preceding it. However, ``where the sense of the entire
act requires that a qualifying word or phrase apply to several
preceding * * * sections, the word or phrase will not be restricted
to its immediate antecedent.'' Sutherland Sec.  47:33 at 372. The
case referred to by APGA also notes that the rule is ``not an
absolute'' and ``can assuredly be overcome by other indicia of
meaning.'' Barnhart v. Thomas, 540 U.S. at 26.
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    20. The Commission concludes that the phrase ``subject to the
jurisdiction of the Commission'' should be read as modifying both
preceding phrases, that is, ``the purchase or sale'' as well as
``transportation services'' (NGA) and ``transmission services'' (FPA).
Had Congress intended to expand the Commission's jurisdiction so
significantly as to give it anti-manipulation authority over such
transactions as first sales of imported natural gas, intrastate sales
of electric energy, retail sales of electric energy or energy sales by
governmental entities, we believe it would have done so explicitly.\34\
Further, in light of the close link between transportation or
transmission services and natural gas and electric commodity sales, we
do not believe that Congress would have expanded the Commission's
authority to cover all natural gas and electric commodity sales but not
all gas transportation and electric transmission. Accordingly, we
conclude that the most reasonable interpretation is that Congress did
not expand the Commission's traditional NGA and FPA subject matter
jurisdiction in sections 315 or 1283 of EPAct, but rather gave the
Commission broad jurisdiction over the entities that engage in certain
conduct affecting our subject matter jurisdiction.
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    \34\ Transactions not subject to the Commission's jurisdiction
include first sales, sales of imported natural gas, sales of
imported LNG, sales and transportation by NGA section 1(b)-(d)
entities (i.e., activities including production and gathering, local
distribution, ``Hinshaw'' pipelines, and vehicular natural gas), or
by NGA section 7(f) companies, retail sales of electric energy,
sales of electric energy in intrastate commerce, sales of electric
energy by governmental entities and certain electric power
cooperatives, and certain interstate transmission by governmental
entities.
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    21. Third, the phrase ``in connection with'' must be given meaning.
APGA says that interpreting ``subject to the jurisdiction of the
Commission'' as applying to sales effectively would exclude producers
and marketers from the reach of the final rule as these are the
dominant sellers of natural gas in wholesale markets. APGA argues this
interpretation implies that enactment of NGA section 4A serves no
purpose, as it does not increase the Commission's reach beyond the
rules already promulgated by Order No. 644.\35\ This is not the case,
however. As discussed below, any entity may be subject to the final
rule if its fraudulent or manipulative conduct is ``in connection
with'' a purchase or sale of natural gas, electric energy,
transportation service, or transmission service that is subject to the
Commission's jurisdiction.\36\ Thus,

the third aspect of the analysis is to consider whether the fraud is
``in connection with'' a jurisdictional transaction.
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    \35\ APGA at 6-8. APGA also points to EPAct 2005 section 318,
which adds a new section (d) to NGA section 20. Section 20(d)
authorizes the Commission to seek a court order barring an
individual found to have engaged in manipulation from future energy
transactions; there is a similar new provision in FPA section
314(d). Here, APGA argues, Congress used subparts to separate sales
from transportation service, and applied the ``subject to the
jurisdiction of the Commission'' only to the latter. This is not
dispositive. First, this is a separate section of the statute.
Second, the use of subparts does not conclusively mean that
``subject to the jurisdiction of the Commission'' cannot also modify
the first subpart. Third, the reading APGA urges still presents the
troublesome prospect that parties could assert that the anti-
manipulation authority now applies to retail sales or other
transactions otherwise expressly excluded from the Commission's
jurisdiction.
    \36\ AEP urges that the final rule identify the modalities
through which an entity is prohibited from manipulating a market,
noting that SEC Rule 10b-5 specifies that fraud or manipulation must
involve the ``use of any means or instrumentality of interstate
commerce or of the mails, of any facility of any national securities
exchange.'' AEP at 2. This is not necessary, as manipulation must be
in connection with jurisdictional transactions which, by definitions
in NGA section 1(b) and FPA section 201(b), are in interstate
commerce.
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    22. Section 10(b)'s ``in connection with'' requirement has been
construed broadly by the Supreme Court to encompass many circumstances
where securities transactions ``coincide'' with the overall scheme to
defraud.\37\ However, the Supreme Court was careful to state that
section 10(b) ``must not be construed so broadly as to convert every
common law fraud that happens to involve securities into a violation''
of section 10(b) and Rule 10b-5.\38\ Guided by this precedent, the
Commission views the ``in connection with'' element in the energy
context as encompassing situations in which there is a nexus between
the fraudulent conduct of an entity and a jurisdictional transaction.
We note that, unlike the SEC, which has broad jurisdiction over
securities transactions, our jurisdiction is limited to certain
wholesale transactions that remain within the ambit of the NGA, NGPA,
and FPA. At the same time, energy markets are made up of both
jurisdictional and non-jurisdictional transactions. We do not intend to
construe the Final Rule so broadly as to convert every common-law fraud
that happens to touch a jurisdictional transaction into a violation of
the final rule. Rather, in committing fraud, the entity must have
intended to affect, or have acted recklessly to affect, a
jurisdictional transaction.\39\ For example, any entity engaging in a
non-jurisdictional transaction through a Commission-regulated RTO/ISO
market, that acts with intent or with recklessness to affect the single
price auction clearing price (which sets the price of both non-
jurisdictional and jurisdictional transactions), would be engaging in
fraudulent conduct in connection with a jurisdictional transaction and,
therefore, would be in violation of the final rule.
---------------------------------------------------------------------------

    \37\ SEC v. Zandford, 535 U.S. 813, 825 (2002) (``[T]he SEC
complaint describes a fraudulent scheme in which the securities
transaction and breaches of fiduciary duty coincide. Those breaches
were therefore `in connection with' securities sales within the
meaning of [section] 10(b).''). See also Superintendent of Insurance
v. Bankers Life & Casualty Co., 404 U.S. 6, 12-13 (1971) (previously
the Supreme Court had stated that the requirement was met when there
was an ``injury as a result of deceptive practices touching [the]
sale of securities''); Head v. Head, 759 F.2d 1172, 1175 (4th Cir.
1985) (the nexus must be more than a de minimis ``touch,'' yet is
applied flexibly where there is fraud affecting securities
transactions).
    \38\ SEC v. Zandford, 535 U.S. at 820.
    \39\ See PP 52-53 infra for a discussion of the intent required
for a violation of the final rule.
---------------------------------------------------------------------------

    23. Turning to the comments that address the applicability of the
proposed regulations to FPA sections 201(f) and 211A,\40\ here too the
focus must be on the transaction and the entity's conduct to determine
whether a violation of the final rule occurred. Again, the Commission
emphasizes that if any entity engages in fraudulent conduct and that
conduct is in connection with a jurisdictional transaction, then the
final rule is applicable to that entity. It is, therefore, not
necessary for the Commission to determine in this context how sections
201(f) and 211A are to be applied generally.\41\
---------------------------------------------------------------------------

    \40\ See, e.g., APPA Reply at 5-6; EEI at 25; PG&E at 6; NRECA
Reply at 2-5.
    \41\ Section 211A permits the Commission to issue regulations to
implement the provisions of FPA section 211A. At this time, the
Commission has not proposed such regulations, but has included this
issue in the Notice of Inquiry issued in Preventing Undue
Discrimination and Preference in Transmission Service, 70 FR 55796
(2005), FERC Stats. & Regs. ] 35,553 (2005). Full delineation of the
scope of FPA section 211A should be developed through that
proceeding, not in the context of the anti-manipulation regulations.
---------------------------------------------------------------------------

    24. With respect to the request by AOPL for clarification on
whether ``subject to the jurisdiction of the Commission'' would cause
oil pipelines to be subject to claims of market manipulation in
connection with transportation services subject to the Commission's
jurisdiction under the ICA, the Commission points out that EPAct 2005
did not amend the ICA to include anti-manipulation provisions, and
therefore we do not read the authority granted under the NGA and FPA to
proscribe and penalize fraud or deceit as applying to oil pipeline
transportation under the ICA.
    25. As to Cinergy's request that the text of the final rule be
modified to make explicit that the regulations apply only to market
manipulation, we decline to do so. Cinergy's request would unduly
narrow the broad authority Congress granted in EPAct 2005. The language
of EPAct 2005 sections 315 and 1283 is modeled after section 10(b) of
the Exchange Act, which has been interpreted as a broad anti-fraud
``catch-all clause.'' \42\ SEC Rule 10b-5, on which the final rule is
patterned, does not expressly limit itself to manipulation, but uses
terms such as ``device, scheme, or artifice to defraud'' and ``fraud or
deceit.'' \43\ We will retain similar language in our final rule, which
will permit the Commission to police all forms of fraud and
manipulation that affect natural gas and electric energy transactions
and activities the Commission is charged with protecting.
---------------------------------------------------------------------------

    \42\ See Aaron v. SEC, 446 U.S. 680, 690 (1980); see also
Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 6-7 (1985)
(describing section 10(b) as a ``general prohibition of practices *
* * artificially affecting market activity in order to mislead
investors * * *.''); Affiliated Ute Citizens of Utah v. United
States, 406 U.S. 128, 151-53 (1972) (noting that the repeated use of
the word ``any'' in section 10(b) and SEC Rule 10b-5 denotes a
congressional intent to have the provisions apply to a wide range of
practices).
    \43\ 17 CFR 240.10b-5 (2005). SEC Rule 10b-5 is titled
``Employment of manipulative and deceptive devices.''
---------------------------------------------------------------------------

B. General Applicability of Securities Law Concepts

1. Comments
    26. Commenters are divided as to whether we should model the
proposed anti-manipulation regulations after SEC Rule 10b-5. Ameren,
Cinergy, EPSA, Indicated Market Participants, EEI, LG&E, NGSA, PNM and
Xcel argue that adoption of a rule patterned on SEC Rule 10b-5 is
problematic because the securities model is one of disclosure, designed
in large part to protect novice investors by eliminating disparities in
access to information, whereas the purpose of the FPA and NGA is to
ensure ``just and reasonable'' rates in wholesale energy markets. Many
of the commenters also argue that the participants in energy markets
are largely sophisticated, and unlike less-sophisticated participants
in the securities markets, do not need the protections of a disclosure
regime.\44\
---------------------------------------------------------------------------

    \44\ Ameren at 3-4; Cinergy at 6-7; EPSA at 5-8; Indicated
Market Participants at 10-13; EEI at 6-8; LG&E at 3-7; NGSA at 4-5;
PNM Reply at 4-5; Xcel at 3-6.
---------------------------------------------------------------------------

    27. AGA comments that it is unclear how the SEC's model of
disclosure will apply to natural gas market transactions, and ISDA and
PNM argue that the Commission should refrain from a wholesale adoption
of SEC case law as such an action would create uncertainty as to the
duties, standards and obligations owed by market participants because
of the different regulatory frameworks for energy and securities
markets.\45\ EPSA, PG&E and SUEZ call for further study and tailoring
of Rule 10b-5 to the energy industry because of the differences between
the operations of the securities markets and the energy markets.\46\
FirstEnergy argues that the

rules proposed in the NOPR are vague and overly broad.\47\
---------------------------------------------------------------------------

    \45\ AGA at 4; ISDA at 3-5; PNM Reply at 4-6. But not everyone
dismisses the importance of the regulations to sophisticated
parties. APPA shares SCE's observation that the degree of
``protection'' implied by relative levels of counterparty
sophistication must not be overstated, noting that even
sophisticated market participants may need protection against market
manipulations. APPA Reply at 3-4; SCE at 3-4.
    \46\ EPSA at 11; PG&E at 12; SUEZ at 14.
    \47\ FirstEnergy at 4-6.
---------------------------------------------------------------------------

    28. On the other hand, APGA, NARUC, NASCUA, NJBPU, and the States
support the Commission's decision to model the proposed regulations on
SEC Rule 10b-5.\48\ APPA, NARUC and NJBPU argue that Rule 10b-5 case
law will provide useful guidance as the Commission develops its own
body of precedent to follow.\49\ TDUS argues that the Commission's
proposed rule prohibiting market manipulation plainly implements, in a
straightforward manner, the express intent of EPAct 2005.\50\ TDUS
finds the arguments of Ameren and Xcel unpersuasive because parties as
sophisticated as they purport to be ought to have no problem complying
with a straightforward prohibition against making fraudulent
representations in their transactions.\51\ TDUS also argues that the
level of sophistication of the parties to a bilateral negotiation is
irrelevant because the Commission's anti-manipulation rules are not to
protect the contracting parties from each other, but to protect the
consumers who rely on the market for their energy supplies.\52\
---------------------------------------------------------------------------

    \48\ APGA at 4-5; NARUC at 4-5; NASCUA at 2-3; NJBPU at 2-3;
States at 2. APGA, NARUC, and the States argue that modeling the
final rule on SEC Rule 10b-5 is consistent with the express
congressional dictates of EPAct 2005.
    \49\ APPA Reply at 1-2; NARUC at 5; NJPBU at 3.
    \50\ TDUS at 2-3.
    \51\ Id. at 3.
    \52\ Id. at 3-4.
---------------------------------------------------------------------------

    29. APPA and INGAA support the Commission's reliance on section
10(b) of the Exchange Act and SEC Rule 10b-5, and the case law
interpreting the statute and rule, as providing guidance to the
Commission in administering its new EPAct 2005 anti-manipulation
authority.\53\ APPA and INGAA also recommend that the Commission take
into account pertinent differences between the regulatory regimes of
the Exchange Act and the NGA and NGPA, and depart from securities law
precedent when industry structure and common sense so dictate.\54\
---------------------------------------------------------------------------

    \53\ APPA Reply at 1-3; INGAA at 7.
    \54\ APPA Reply at 1; INGAA at 5.
---------------------------------------------------------------------------

2. Commission Determination
    30. As a general matter, the Commission does not believe that
modeling the Final Rule on SEC Rule 10b-5 is problematic or will create
uncertainty. This is not to say that commenters did not raise valid
concerns about how securities precedent will be applied in the energy
industry context. We intend to adapt analogous securities precedents as
appropriate to specific facts, circumstances, and situations that arise
in the energy industry. This is consistent with Congress' modeling of
EPAct 2005 sections 315 and 1283 on section 10(b) of the Exchange Act
and explicit references to section 10(b) in EPAct 2005 sections 315 and
1283, and will provide a level of substantial certainty with respect to
how the regulations will operate that the Commission is not typically
able to provide where a preexisting body of law and precedent is not
readily available. The Commission likewise finds that modeling the
final rule on SEC Rule 10b-5 provides clarity to affected parties
similar to the clarity provided by Congress. Thus, the Commission
rejects FirstEnergy's argument that the proposed regulations are vague
and overly broad. As previously stated, the Final Rule is modeled on
SEC Rule 10b-5, which is not vague or overly broad.\55\
---------------------------------------------------------------------------

    \55\ See, e.g., United States v. Persky, 520 F.2d 283 (2d Cir.
1975); accord Todd & Co. v. SEC, 557 F.2d 1008, 1013 (3d Cir. 1977).
---------------------------------------------------------------------------

    31. The Commission rejects EPSA's, PG&E's and SUEZ's calls for
further study and tailoring of Rule 10b-5 to the industry the
Commission regulates. Further study and tailoring would not improve the
final rule or industry understanding of its scope and applicability.
While the Commission generally agrees with commenters that a wholesale
overlay of the securities laws onto energy markets is overly
simplistic, we also believe it would be illogical to simply ignore
decades of useful guidance that securities law precedent can offer,
especially considering that Congress deliberately modeled EPAct 2005
sections 315 and 1283 on section 10(b) of the Exchange Act. Therefore,
the Commission intends to recognize, on a case-by-case basis, that the
roles of the Commission and the SEC are not identical in determining
whether it is appropriate to adopt securities precedents to specific
energy industry facts, circumstances, or situations.\56\
---------------------------------------------------------------------------

    \56\ For example, as explained in paragraph 36 supra, the
Commission is not adopting the disclosure regime of the SEC, and as
explained in paragraphs 52-53 infra, the element of scienter will
apply in the Final Rule just as it applies to SEC Rule 10b-5.
---------------------------------------------------------------------------

    32. The Commission recognizes that the SEC does not have a duty to
assure that the price of a security is just and reasonable, and that
our duty is not to protect purchasers through a regime of disclosure.
Despite these differences in mission, however, wholesale natural gas
and power markets, like securities markets, are susceptible to fraud
and market manipulation, regardless of the level of sophistication of
the market participants. Therefore, it is appropriate to model the
final rule on SEC Rule 10b-5 in an effort to prevent (and where
appropriate remedy) fraud and manipulation affecting the markets the
Commission is entrusted to protect, while providing a level of
certainty to market participants that is beyond that which the
Commission would be otherwise required to provide. However, as
discussed below, we provide several of the clarifications requested by
the commenters to address the differences between the SEC's regulation
of securities markets and our regulation of markets for natural gas and
electricity.

C. Disclosure

    33. Several commenters expressed concern over what they consider to
be disclosure implications of the proposed regulations.\57\ In
particular, commenters focused on two disclosure-related areas: Whether
the proposed anti-manipulation regulations create a new duty of
disclosure; and whether sections 1c.1(a)(2) and 1c.2(a)(2), and
particularly the references to ``omissions of material fact,'' impose
an undue burden on bilateral, arm's-length negotiations.
---------------------------------------------------------------------------

    \57\ See, e.g., Ameren at 4-6; AGA at 4; AEP at 2; Cinergy at 8-
9; Indicated Market Participants at 10-13, 23-28; EEI at 14-16; EPSA
at 5-11; FirstEnergy at 10-13; ISDA at 3-8; INGAA at 5-7, 10; LG&E
at 9; NGSA at 2, 5-6; PG&E at 7; Progress at 2-4; SCE at 3-4; SUEZ
at 12-14; Xcel at 2, 4-6.
---------------------------------------------------------------------------

1. Duty of Disclosure
a. Comments
    34. Commenters' view is that the proposed regulations should not
create an affirmative duty to disclose strategic or proprietary
information not otherwise required under the FPA, NGA, or Commission
orders, rules, or regulations.\58\ Ameren argues that there is no
evidence in EPAct 2005 that Congress intended to impose a general
obligation of disclosure in the energy markets.\59\ Ameren and LG&E
provide examples of a company purchasing power as a result of a forced
outage, and question whether, under the regulations, a party would have
to disclose information detrimental to its bargaining position.\60\ AEP
expresses similar concern that the regulations should not require
companies to disclose trade secrets, sensitive information, or forward
looking information developed by the company.\61\ AEP argues that the
proposed rules be clarified to

encompass only those instances where there is an affirmative duty to
disclose, such as a Commission-imposed disclosure or reporting
requirement.\62\ EPSA and Progress argue that the regulations should be
clarified so as not to result in broad disclosure obligations that
would be incompatible with the arm's-length transactions that the
Commission oversees.\63\ Similarly, INGAA and EEI argue that the
regulations should be revised to delete or limit any affirmative
obligation to disclose information to a counterparty, or to educate
another party in bilateral negotiations.\64\ In support of its
argument, INGAA cites SEC Regulation D, which exempts certain
securities offerings from the registration and disclosure requirements
of the securities laws because the investors in such offerings are
sophisticated.\65\ NGSA also states that the Commission should clarify
that it does not intend to incorporate by reference the disclosure
obligations applicable to issuers of securities.\66\
---------------------------------------------------------------------------

    \58\ See, e.g., Ameren at 4; EEI at 16; Indicated Market
Participants at 27.
    \59\ Ameren at 4.
    \60\ Id. at 5; LG&E at 8.
    \61\ AEP at 2.
    \62\ Id. at 3.
    \63\ EPSA at 1; Progress at 2-4.
    \64\ INGAA at 7; EEI at 16. See also ISDA Supplemental Reply at
2.
    \65\ INGAA at 5.
    \66\ NGSA at 2, 5-6.
---------------------------------------------------------------------------

b. Commission Determination
    35. The Commission declines to modify the proposed regulations in
this final rule. To avoid uncertainty, however, we clarify that the
final rule creates no new affirmative duty of disclosure. Commenters
are mistaken to the extent they believe section 10(b) of the Exchange
Act or SEC Rule 10b-5 imposes an independent affirmative obligation to
disclose. Well-settled case law interpreting section 10(b) and Rule
10b-5 makes clear that section 10(b) and Rule 10b-5 do not, by
themselves, create an affirmative duty to disclose absent a
relationship of trust and confidence (i.e., a fiduciary relationship)
or some other duty imposed elsewhere in the securities laws.\67\
Therefore, in the arm's-length, bilateral negotiations that are typical
in wholesale energy markets, absent some tariff requirement or
Commission directive mandating disclosure, the final rule imposes no
new affirmative duty of disclosure.
---------------------------------------------------------------------------

    \67\ See Basic Inc. v. Levinson, 485 U.S. 224, 239, n.17 (1988)
(``Silence, absent a duty to disclose, is not misleading under Rule
10b-5.'') citing Chiarella v. United States, 445 U.S. 222, 234
(1980) (``* * * a duty to disclose under [section] 10(b) does not
arise from the mere possession of nonpublic market information.
[T]he duty to disclose arises when [there exists] a relationship of
trust and confidence * * * .''); see also Gross v. Summa Four, 93
F.3d 987, 992 (1st Cir. 1996) (citing Chiarella, the court holds
that ``[b]y itself * * * Rule 10b-5[] does not create an affirmative
duty of disclosure. Indeed, a corporation does not commit securities
fraud merely by failing to disclose all nonpublic material
information in its possession.''); accord Castellano v. Young &
Rubicam, Inc., 257 F.3d 171, 179 (2d Cir. 2002); Ackerman v.
Schwartz, 947 F.2d 841, 848 (7th Cir. 1991).
---------------------------------------------------------------------------

    36. As there is no new affirmative duty of disclosure under the
final rule, commenters' concern over the disclosure implications of the
proposed regulations is misplaced. The final rule operates within the
regulatory framework of the FPA and NGA; the Commission is not adopting
the disclosure provisions of the securities laws \68\ or the purpose of
the securities laws, which is ``to protect investors by promoting full
disclosure of information thought necessary to informed investment
decisions.'' \69\ Rather, the final rule, like section 10(b) of the
Exchange Act and SEC Rule 10b-5, is an anti-fraud provision, not a
disclosure provision.\70\ Nothing in the final rule requires disclosure
of sensitive information that would only function to weaken an entity's
bargaining position in arm's-length, bilateral negotiations. Absent a
tariff requirement or Commission directive mandating disclosure, there
is no violation of the final rule simply because an entity chooses not
to disclose all non-public information in its possession.\71\
---------------------------------------------------------------------------

    \68\ See, e.g., 15 U.S.C. 78m (2000).
    \69\ SEC v. Ralston Purina Co., 346 U.S. 119, 123-5 (1953).
    \70\ See, e.g., International Brotherhood of Teamsters v.
Daniel, 439 U.S. 551, 565 n.18 (1979) (distinguishing between the
disclosure and antifraud provisions of the securities laws, the
court states that a waiver from disclosure requirements because an
investor is sophisticated does ``not provide shelter from the
criminal anti-fraud protection of Rule 10b-5 or other civil anti-
fraud provisions); Sonnenfeld v. City of Denver, 100 F.3d 744, 746
n.1 (10th Cir. 1996) (noting that securities exempted from
regulatory burdens are still subject to civil fraud causes of
action).
    \71\ See supra note 67.
---------------------------------------------------------------------------

    37. Similarly, the Commission clarifies that nothing in the final
rule changes the Commission's precedent on contract law. Private
contracts are fundamental to the functioning of the energy industry,
and the Commission expects parties to continue to rely on the contracts
they enter into. The Commission expects parties to continue to resolve
most contract disputes, including those based on claims of fraud in the
inducement, without the involvement of the Commission, relying on State
and Federal courts to apply contract law as appropriate.
2. Sections 1c.1(a)(2) and 1c.2(a)(2) and Omissions of Material Fact
a. Comments
    38. Commenters are divided as to whether the Commission should
modify or delete sections 1c.1(a)(2) and 1c.2(a)(2) of the final rule,
particularly with regard to sections 1c.1(a)(2) and 1c.2(a)(2)'s
references to omissions.\72\ Ameren, Cinergy, and Indicated Market
Participants argue that sections 1c.1(a)(2) and 1c.2(a)(2) should not
be adopted because the definition of market manipulation should not
include any general duty to disclose.\73\ More specifically, EEI and
EPSA argue that reference in sections 1c.1(a)(2) and 1c.2(a)(2) to
``omissions of material fact'' should be deleted as it would require
market participants to disclose sensitive information that would not
otherwise be exchanged among wholesale energy market participants
engaged in bilateral negotiations, which could result in harm to the
market participant's bargaining position.\74\ EEI also argues that
sections 1c.1(a)(2) and 1c.2(a)(2) should be modified to incorporate a
knowledge and intent standard.\75\
---------------------------------------------------------------------------

    \72\ Sections 1c.1(a)(2) and 1c.2(a)(2) read: ``to make any
untrue statement of a material fact or to omit to state a material
fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading * * *
.''
    \73\ Ameren at 6; Cinergy at 8; Indicated Market Participants at
28.
    \74\ EEI at 16; EPSA at 8.
    \75\ EEI at 16.
---------------------------------------------------------------------------

    39. FirstEnergy argues that sections 1c.1(a)(2) and 1c.2(a)(2) are
overly broad, and unnecessary to protect electric ratepayers because
participants in wholesale power sales transactions are sophisticated
and have the ability to evaluate the veracity of any information that
may be conveyed by other participants.\76\ Indicated Market
Participants argue that since the disclosure concepts of the securities
laws are not generally applicable to electric and gas markets, sections
1c.1(a)(2) and 1c.2(a)(2) should be deleted.\77\ Likewise, Xcel argues
that there is no need to require SEC-like disclosure in wholesale
energy markets, and it argues that the Commission should modify or
delete sections 1c.1(a)(2) and 1c.2(a)(2).\78\ While not asking for a
change in the regulations, INGAA requests that we clarify that ``mere
puffery'' is not actionable under the regulations.\79\
---------------------------------------------------------------------------

    \76\ FirstEnergy at 11.
    \77\ Indicated Market Participants at 27-28.
    \78\ Xcel at 2, 4-6.
    \79\ INGAA at 9.
---------------------------------------------------------------------------

    40. On the other hand, APGA, PNM and TDUS support the inclusion of

sections 1c.1(a)(2) and 1c.2(a)(2) without modification.\80\ APGA urges
the Commission to reject calls for the deletion or modification of
sections 1c.1(a)(2) and 1c.2(a)(2) because the vast bulk of natural gas
sales are not negotiated by sophisticated market participants, but are
determined by price indices that rely on full and accurate
reporting.\81\ PNM supports the inclusion of sections 1c.1(a)(2) and
1c.2(a)(2) noting that there may be rare instances where an omission of
material fact amounts to market manipulation, but also notes that the
Commission should make clear that the sections create no new duty of
disclosure.\82\
---------------------------------------------------------------------------

    \80\ APGA at 5; PNM at 9; TDUS at 3-4.
    \81\ APGA at 5.
    \82\ PNM at 9. As discussed above in paragraph 28, TDUS argues
that no dilution or alteration of the proposed rules is warranted,
regardless of the sophistication of the parties to a transaction.
TDUS at 3-4.
---------------------------------------------------------------------------

b. Commission Determination
    41. The Commission rejects proposals to modify or delete sections
1c.1(a)(2) and 1c.2(a)(2) of the regulations. As just discussed, the
final rule does not create an affirmative duty to disclose beyond any
existing requirements. It is important to note, however, that where an
entity voluntarily provides information or where the entity is required
by a tariff or a Commission statute, order, rule or regulation to
provide information, and the entity then misrepresents or omits a
material fact such that the information provided is materially
misleading, there can be a violation of the final rule if all of the
other elements of a violation are present.\83\ This does not mean,
however, that a material misrepresentation or omission that affects
only negotiations between two sophisticated parties will necessarily
result in an enforcement action by the Commission. Instead, the
Commission will decide whether to pursue enforcement action in such a
situation on a case-by-case basis, with due consideration of whether
such material misrepresentations or omissions occur in or have an
effect on jurisdictional transactions. Absent such an effect, as we
noted earlier, we generally will not apply the final rule to bilateral
contract negotiations.
---------------------------------------------------------------------------

    \83\ These include the requisite scienter, discussed infra, and
the conduct being in connection with a jurisdictional purchase or
sale or jurisdictional transportation or transmission, discussed
supra.
---------------------------------------------------------------------------

    42. With respect to other comments related to the application of
specific securities law precedent, as discussed earlier, the Commission
intends, on a case-by-case basis, to be guided by analogous securities
law precedent that is appropriate under the specific facts,
circumstances, and situations in the energy industry. For example, even
if some duty to provide information exists, the Commission agrees with
INGAA that ``mere puffery'' is not violation of sections 1c.1(a)(2) and
1c.2(a)(2).\84\
---------------------------------------------------------------------------

    \84\ See In re Advanta Corp. Sec. Litig., 180 F.3d 525, 538 (3rd
Cir. 1999) (noting that general expressions of optimism for the
future are immaterial and not actionable); Eisenstadt v. Centel
Corp., 113 F.3d 738, 745 (7th Cir. 1997) (``Everybody knows that
someone trying to sell something is going to look and talk on the
bright side. You don't sell a product by bad-mouthing it. And
everybody knows that auctions can be disappointing.'') (emphasis in
original); Raab v. General Physics Corp., 4 F.3d 286, 287 (4th Cir.
1996) (holding that predictions of future business prospects were
not specific guarantees necessary to make them material within the
meaning of section 10b); see also In re Northern Telecom Ltd.
Securities Litig., 116 F. Supp. 2d 446, 466 (S.D.N.Y 2000) (stating
that under section 10b and Rule 10b-5, actionable statements must be
sufficiently ``concrete'' or ``specific'' to be material, as opposed
to ``single, vague statement[s] that are essentially mere
puffery'').
---------------------------------------------------------------------------

D. Sections 1c.1(a)(3) and 1c.2(a)(3) and Intent

1. Comments
    43. Some commenters suggested the Commission delete sections
1c.1(a)(3) and 1c.2(a)(3) of the proposed regulations or revise them
explicitly to include the element of intent. For example, Ameren argues
that sections 1c.1(a)(3) and 1c.2(a)(3) are unnecessary in light of
sections 1c.1(a)(1) and 1c.2(a)(1).\85\ EEI argues that sections
1c.1(a)(3) and 1c.2(a)(3) should be deleted because the ``operates as a
fraud'' language could prohibit any deceptive act regardless of whether
scienter is present.\86\ Alternatively, EEI and FirstEnergy suggest
that sections 1c.1(a)(3) and 1c.2(a)(3) be revised. EEI urges that
sections 1c.1(a)(3) and 1c.2(a)(3) include elements of knowledge and
intent; FirstEnergy also asks that the phrase ``or would operate'' be
removed so it would be clear that actions not intended to defraud from
being subject to the regulations.\87\
---------------------------------------------------------------------------

    \85\ Ameren at 6-7.
    \86\ EEI at 13-14.
    \87\ Id. 14; FirstEnergy at 15.
---------------------------------------------------------------------------

    44. In contrast, TDUS argues that the Commission should reject
attempts to modify or delete sections 1c.1(a)(3) and 1c.2(a)(3) noting
that SEC Rule 10b-5 has remained intact since 1951, and no court or SEC
action has resulted in any change to Rule 10b-5.\88\ APGA also opposes
modification or deletion of sections 1c.1(a)(3) and 1c.2(a)(3), arguing
that intent is already an element of a violation of the proposed
regulations, and any elimination of sections 1c.1(a)(3) and 1c.2(a)(3)
could create uncertainty by distinguishing the final rule from SEC Rule
10b-5 so as to render analogous securities law precedent
inapplicable.\89\
---------------------------------------------------------------------------

    \88\ TDUS Reply at 8-9.
    \89\ APGA Reply at 5.
---------------------------------------------------------------------------

2. Commission Determination
    45. The Commission rejects proposals to modify or delete sections
1c.1(a)(3) and 1c.2(a)(3) beyond the substitution of ``entity'' in
place of ``person'' as discussed below in paragraph 76. Sections
1c.1(a)(3) and 1c.2(a)(3) are necessary; and as discussed below, there
can be no violation of the final rule, or any of its sections, absent a
showing of the requisite scienter. SEC Rule 10b-5 has an analogous
section that has remained unchanged since it was adopted in 1942, and
there is abundant securities law precedent that highlights the ongoing
relevance of that section.\90\ Therefore, as the final rule is modeled
on SEC Rule 10b-5 and the Commission intends to be guided, on a case-
by-case basis, by analogous securities law precedent that is
appropriate under the facts, circumstances, and situations presented in
the energy industry, it is prudent to retain sections 1c.1(a)(3) and
1c.2(a)(3) without modification.
---------------------------------------------------------------------------

    \90\ One measure of the paragraph's importance is the frequency
of use. There are numerous cases citing the ``operate as a fraud''
language of SEC Rule 10b-5, which suggest that it is not nugatory as
EEI argues in its comments. See, e.g., SEC v. Zandford, 535 U.S. at
819; SEC v. George, 426 F.3d 786, 792 (2005).
---------------------------------------------------------------------------

E. Elements of a Manipulation Claim

1. Comments
    46. Several commenters asked the Commission to clarify the elements
of manipulation under the Final Rule.\91\ INGAA recommends that the
Commission explicitly reference the essential elements of the SEC's
Rule 10b-5 cause of action that have been developed in the case law and
provide greater guidance as to their application in the context of the
natural gas markets.\92\ Specifically, INGAA argues the Commission
should clarify the definition of materiality, the requirement of
scienter, the requirement of deception, the existence of a pre-existing
duty to speak in a nondisclosure case, the absence of liability for
mere puffery and other limitations.\93\ Indicated Market Participants
and NGSA state that the Commission should set forth the following as
elements of a manipulation claim: Misrepresentation or omission of

a material fact; scienter, causation, reliance, and damages.\94\
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    \91\ See, e.g., Ameren at 6-7; AEP at 3; Cinergy at 7-8;
Indicated Market Participants at 9-10, 18; EEI at 12-14; FirstEnergy
at 7-10; INGAA at 7-11; LG&E at 3; NGSA at 2, 5-8; NiSource at 3, 5-
8; Progress at 2-3; SCE at 4.
    \92\ INGAA at 7-8.
    \93\ Id. at 11.
    \94\ Indicated Market Participants at 18; NGSA at 2, 5-7.
---------------------------------------------------------------------------

    47. EEI seeks clarification that fraud is a required element of the
final rule and its sections.\95\ AEP and EEI suggest that the
Commission should explicitly identify the intent standard based on the
scienter standard used in section 10(b), which is satisfied by a
showing of recklessness.\96\ EEI seeks clarification that liability
under the market manipulation rule requires a showing of ``extreme
recklessness'' or ``egregious disregard.'' \97\ Progress believes that
the final rule should be revised to exclude ``indirectly'' from
sections 1c.1(a) and 1c.2(a), and if the Commission is unwilling to do
so, it should explicitly incorporate an intent standard.\98\ In
contrast, TDUS argues that the Commission should not modify the
regulations to incorporate a specific standard of intent into the final
rule.\99\
---------------------------------------------------------------------------

    \95\ EEI at 4.
    \96\ Id. at 12; AEP at 3.
    \97\ EEI at 12.
    \98\ Progress at 2-3.
    \99\ TDUS at 5.
---------------------------------------------------------------------------

2. Commission Determination
    48. The Commission generally agrees that clarification of the
elements of a violation under the final rule would reduce regulatory
uncertainty and thereby assure greater compliance. It is unnecessary,
however, to modify the text of the final rule. Rather, we will clarify
the general requirements of a violation, guided by applicable
securities law precedent, specifically the precedent setting out the
elements the SEC must prove when it brings an enforcement action, as
INGAA noted in its comments.\100\ In enforcement actions under Rule
10b-5, the SEC must show that the defendant: (1) Made a material
misrepresentation or a material omission as to which he had a duty to
speak, or used a fraudulent device; (2) with scienter; and (3) in
connection with the purchase or sale of securities.\101\ The SEC does
not need to show reliance, loss causation or damages because ``the
Commission's duty is to enforce the remedial and preventive terms of
the statute in the public interest, and not merely to police those
whose plain violations have already caused demonstrable loss or
injury.'' \102\
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    \100\ INGAA at 10-11. See, e.g., SEC v. Monarch Funding Corp.,
192 F.3d 295, 308 (2d Cir. 1999) (setting out the elements of an
enforcement action under SEC Rule 10b-5). We reject the comments of
Indicated Market Participants and NGSA, which set forth the elements
of a private right of action under section 10(b) and Rule 10b-5.
While cases arising in the context of private litigation may be
instructive on certain points, the elements needed for a private
right of action are not the same as those required for
administrative enforcement applicable here.
    \101\ SEC v. Monarch Funding Corp., 192 F.3d at 308.
    \102\ See, e.g., SEC v. Credit Bancorp, Ltd., 195 F. Supp. 2d
475, 491 (S.D.N.Y. 2002) quoting Berko v. SEC, 316 F.2d 137, 143 (2d
Cir. 1963) citing SEC v. North American Research & Dev. Corp., 424
F.2d 63, 84 (2d Cir. 1970) (reliance not an element of a Rule 10b-5
claim in the context of an SEC proceeding). Similarly, in a criminal
prosecution for securities fraud, the government need not
demonstrate specific reliance by the investor in a securities fraud
prosecution. See United States v. Ashdown, 509 F.2d 793, 799 (5th
Cir. 1975). However, the government must show ``impact of the scheme
on the investor.'' See United States v. Schaefer, 299 F.2d 625, 629
(7th Cir. 1962). While reliance, loss causation and damages are not
necessary for a violation of the final rule, these elements will
inform the Commission's assessment of any disgorgement or civil
penalties that may be appropriate under the circumstances.
---------------------------------------------------------------------------

    49. These elements offer useful guidance as to how the Commission
will apply the final rule. The Commission will act in cases where an
entity: (1) Uses a fraudulent device, scheme or artifice, or makes a
material misrepresentation or a material omission as to which there is
a duty to speak under a Commission-filed tariff, Commission order, rule
or regulation, or engages in any act, practice, or course of business
that operates or would operate as a fraud or deceit upon any entity;
(2) with the requisite scienter; (3) in connection with the purchase or
sale of natural gas or electric energy or transportation of natural gas
or transmission of electric energy subject to the jurisdiction of the
Commission. In the paragraphs that follow, the Commission offers
clarification on each element.
    50. The final rule prohibits the use or employment of any device,
scheme, or artifice to defraud. The Commission defines fraud generally,
that is, to include any action, transaction, or conspiracy for the
purpose of impairing, obstructing or defeating a well-functioning
market.\103\ Fraud is a question of fact that is to be determined by
all the circumstances of a case.
---------------------------------------------------------------------------

    \103\ See e.g., Dennis v. United States, 384 U.S. 855, 861
(1966) (noting that fraud within the meaning of a statute need not
be confined to the common law definition of fraud: any false
statement, misrepresentation or deceit).
---------------------------------------------------------------------------

    51. If there is a duty to disclose under a Commission-filed tariff
or Commission directive, material misrepresentations and, under certain
conditions, material omissions, may violate the final rule. Guided by
securities law precedent, the Commission finds that a fact is material
if there is a substantial likelihood that a reasonable market
participant would consider it in making its decision to transact
because the material fact significantly altered the total mix of
information available.\104\ Of course, not every fact about a
transaction is material and, therefore, the materiality of a
misrepresented or omitted fact will be determined on a case-by-case
basis.\105\
---------------------------------------------------------------------------

    \104\ TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438
(1976) sets forth the ``total mix'' or ``substantial likelihood''
test of materiality: a substantial likelihood that the disclosure of
the omitted fact would have been viewed by a reasonable investor as
having significantly altered the total mix of information made
available. Accord Basic, Inc. v. Levinson, 485 U.S. 224, 231-2
(1988).
    \105\ Based on securities law precedent, the relevant time
period for determining materiality is at the time of the statement
or omission, and not in hindsight. See Ganino v. Citizens Utils.
Co., 228 F.3d 154, 165 (2d Cir. 2000).
---------------------------------------------------------------------------

    52. The Commission rejects as unnecessary commenters' requests to
incorporate a specific intent standard into the final rule. Congress
directed that the terms ``manipulative or deceptive device or
contrivance'' as they appear in sections 1283 and 315 of EPAct 2005 be
interpreted in accordance with section 10(b) of the Exchange Act.
According to the Supreme Court, ``[t]he words `manipulative or
deceptive' used in conjunction with `device or contrivance' strongly
suggest that Sec.  10 (b) was intended to proscribe knowing or
intentional misconduct * * * conduct designed to deceive or defraud
investors by controlling or artificially affecting the price of
securities.'' \106\ Based on the foregoing, any violation of the final
rule requires a showing of scienter.\107\
---------------------------------------------------------------------------

    \106\ Ernst & Ernst v. Hochfelder, 425 U.S. 185, 197 (1976)
(Hochfelder); accord Aaron v. SEC, 446 U.S. 680, 690 (1980) (Aaron).
    \107\ See Aaron, 446 U.S. at 690, 705 (stating that the words
``manipulative,'' ``device,'' and ``contrivance'' whether given
``their commonly accepted meaning or read as terms of art'' clearly
refers to ``knowing or intentional misconduct.'' In addition, the
Court said that ``Section 10(b) is described as a catchall
provision, but what it catches must be fraud.''); Hochfelder, 425
U.S. at 199 (noting that the words ``manipulative,'' ``device,'' and
``contrivance'' are ``terms that make unmistakable a congressional
intent to proscribe a type of conduct quite different from
negligence''). Despite section 10(b)'s use of the disjunctive ``or''
in ``manipulative or deceptive device or contrivance,'' the Supreme
Court has concluded that both require ``misrepresentation.''
---------------------------------------------------------------------------

    53. Commenters sought clarification on whether recklessness
satisfies the scienter element. The Supreme Court has not addressed
whether recklessness satisfies the scienter requirement it read into
section 10(b),\108\ but the Courts of

Appeals that have addressed the issue agree that recklessness satisfies
the section 10(b) scienter requirement.\109\ Similarly, the Commission
concludes that recklessness satisfies the scienter element of the final
rule.
---------------------------------------------------------------------------

    \108\ Hochfelder, 425 U.S. at 194 n.12 (``In certain areas of
the law recklessness is considered to be a form of intentional
conduct for purposes of imposing liability for some act. We need not
address here the question whether, in some circumstances, reckless
behavior is sufficient for civil liability under [section] 10(b) and
Rule 10b-5.''). Although the scienter requirement was first read
into section 10(b) in the context of a private right of action, in
Aaron the Supreme Court decided that a showing of scienter is also
required in SEC civil enforcement actions arising under section
10(b). Aaron, 446 U.S. at 695.
    \109\ Courts of appeal are in general agreement that that
recklessness in some form satisfies the scienter requirement of SEC
Rule 10b-5. For example, motive and opportunity to commit fraud or
conscious behavior sufficient to raise a strong inference of
recklessness is sufficient in the Second, Third, and Eighth
Circuits. See, e.g., Florida State Board of Administration v. Green
Tree Fin. Corp., 270 F.3d 645 (8th Cir. 2001); Novak v. Kasaks, 216
F.3d 300 (2d Cir. 2000); In re Advanta Corp. Securities Litig., 180
F.3d 525 (3d Cir. 1999). The First, Fifth, Sixth, Tenth and Eleventh
Circuits apply a ``severely reckless'' or action with ``conscious
disregard'' of the problem or risk standard. See, e.g., Nathenson v.
Zonagen, Inc., 267 F.3d 400 (5th Cir. 2001); City of Philadelphia v.
Fleming Companies, Inc., 264 F.3d 1245 (10th Cir. 2001); Grebel v.
FTP Software, Inc., 194 F.3d 185 (1st Cir. 1999); In re Comshare,
Inc. Securities Litig., 183 F.3d 543 (6th Cir. 1999); Bryant v.
Avardo Brands, Inc., 187 F.3d 1271 (11th Cir. 1999). In the Ninth
Circuit, a plaintiff must plead ``in great detail facts that
constitute strong circumstantial evidence of deliberately reckless
or conscious misconduct.'' See, e.g., In re Silicon Graphics
Securities Litig., 183 F.3d 970 (9th Cir. 1999) (adopting the
definition of recklessness as it appears in Sundstrand Corp. v. Sun
Chemical Corp., 553 F.2d 1033 (7th Cir. 1977), cert. denied, 434
U.S. 875 (1977)).
---------------------------------------------------------------------------

    54. For our discussion of the ``in connection with'' requirement,
see paragraphs 21 and 22, supra.

F. Interplay With Market Behavior Rules

1. Comments
    55. Several commenters raise concerns over the interplay between
the proposed regulations and the Market Behavior Rules.\110\ Some
commenters advocate that the Commission retain Market Behavior Rules,
either as they are currently written or with modification.\111\ Several
industry commenters request deletion of the foreseeability standard and
``legitimate business purpose'' criteria of Market Behavior Rule 2, and
incorporation of the scienter standard of the proposed regulations.
Certain commenters also find the specific prohibitions of Market
Behavior Rules 2(a) (wash trades), 2(b) (false information), 2(c)
(artificial congestion/relief), and 2(d) (collusion) useful because
those rules offer guidance and specificity about the prohibition of
certain defined transactions.
---------------------------------------------------------------------------

    \110\ See, e.g., Ameren at 8-9; AGA at 5; Cinergy at 5, 9; EEI
at 17-19; LG&E at 9; NARUC at 6; NASUCA at 4-5 (arguing for an
expansion of the Market Behavior Rules to reach all market
participants); PG&E at 4, 12-13; APPA Reply at 5; PNM Reply at 7-8;
EEI Reply at 4-6.
    \111\ We note that, as a result of the timing of the comment due
date in this proceeding, these comments were filed the same day as
the Commission issued its orders proposing repeal of the Market
Behavior Rules. See Amendments to Codes of Conduct for Unbundled
Sales Service and for Persons Holding Blanket Marketing
Certificates, 113 FERC ] 61,189 (2005); Investigation of Terms and
Conditions of Public Utility Market-Based Rate Authorizations, 113
FERC ] 61,190 (2005).
---------------------------------------------------------------------------

    56. APPA argues that the Commission should deal with the future of
the Market Behavior Rules in the Commission's separate FPA 206
proceeding and not as part of this proceeding.\112\ PNM, in contrast,
contends that adopting rules based on SEC Rule 10b-5 will be confusing,
and instead urges the Commission to amend the existing Market Behavior
Rules to incorporate the terms of EPAct 2005 sections 315 and 1283, and
not adopt the proposed regulations.\113\
---------------------------------------------------------------------------

    \112\ APPA Reply at 5.
    \113\ PNM Reply at 7-8.
---------------------------------------------------------------------------

    57. EEI urges the Commission to retain the time limits and specific
acts set forth in the Market Behavior Rules, and to state that
compliance with the behavior rules guidelines constitutes compliance
with the new rules.\114\ Similarly, EEI argues that whatever the
interaction between the Market Behavior Rules and the Final Rule, the
Commission should clarify that there will be no ``double jeopardy.''
\115\
---------------------------------------------------------------------------

    \114\ EEI Reply at 4-6.
    \115\ EEI at 21.
---------------------------------------------------------------------------

2. Commission Determination
    58. Both Market Behavior Rules 2 and 3 \116\ and this final rule
prohibit fraud and manipulative conduct. The Market Behavior Rules are
still in effect, although the Commission has indicated in the Market
Behavior Rules proceeding (Docket Nos. EL06-16-000 and RM06-5-000) that
the Market Behavior Rules may be revised or repealed after the anti-
manipulation regulations are made effective.\117\ If they are repealed,
the Commission intends to have a smooth transition from the Market
Behavior Rules to the final rule on manipulation, and there will be no
gap in our prohibition of manipulation as we complete the transition.
---------------------------------------------------------------------------

    \116\ The following analysis with regard to the Market Behavior
Rules also applies to sections 284.288(a) and 284.403(a) of the
Commission's codes of conduct with respect to certain sales of
natural gas. 18 CFR 284.288(a) and 284.403(a) (2005).
    \117\ See Investigation of Terms and Conditions of Public
Utility Market-Based Rate Authorizations, 70 FR 71484 (2005), 113
FERC ] 61,190 at P 13 (2005); Amendments to Codes of Conduct for
Unbundled Sales Service and for Persons Holding Blanket Marketing
Certificates, 70 FR 72090 (2005), 113 FERC ] 61,189 at P 11 (2005).
---------------------------------------------------------------------------

    59. As stated in the NOPR, the Commission will not seek duplicative
sanctions for the same conduct in the event that conduct violates both
the Market Behavior Rules and this final rule.\118\ With respect to the
specific prohibitions of Market Behavior Rule 2 (wash trades,
transactions predicated on submitting false information, transactions
creating and relieving artificial congestion, and collusion for the
purpose of market manipulation), these are examples of prohibited
manipulation, all of which are manipulative or deceptive devices or
contrivances, and are therefore prohibited activities under this Final
Rule, subject to punitive and remedial action.\119\ Further, as
discussed further below, the specific provision set forth in the Market
Behavior Rules for actions taken in conformity with the Commission-
approved market rules adopted by an ISO or RTO identify behaviors that
are presumptively not fraudulent and hence would not be violations of
this final rule.
---------------------------------------------------------------------------

    \118\ See Prohibition of Energy Market Manipulation, 113 FERC ]
61,067 at P 15 (2005).
    \119\ See 113 FERC ] 61,190 at P 18 (2005); 113 FERC ] 61,189 at
P 15 (2005).
---------------------------------------------------------------------------

    60. The issue of applying the time limits set forth in the Market
Behavior Rules to this final rule will be dealt with below.

G. Statute of Limitations

1. Comments
    61. Some commenters urged the Commission to adopt an explicit
statute of limitations period for the proposed rules.\120\ For example,
NiSource cites the Sarbanes-Oxley Act in support of its argument that
the Commission require actions under the final rule be commenced within
two years of discovery of a violation, but in no event more than five
years after occurrence of a violation.\121\ AEP cites a private rights
of action under SEC Rule 10b-5 in support of its argument for three-
year limitations period, and EEI argues the Commission should follow
the five-year statute of limitations contained in 28 U.S.C. 2462 and
adopt the 90-day provision of the Market Behavior Rules to require that
an action must be filed within 90 days after the end of the calendar
quarter in which the alleged violation of the final rule occurred or,
if later, 90 days after the complainant knew or should have known that
the alleged violation of the final rule occurred.\122\
---------------------------------------------------------------------------

    \120\ See, e.g., AEP at 3; EEI at 19-21; NGSA at 2, 5, 8;
NiSource at 9.
    \121\ NiSource at 3.
    \122\ AEP at 3; EEI at 19-20.
---------------------------------------------------------------------------

2. Commission Determination
    62. There is no explicit statute of limitations set forth in NGA
section 4A or in FPA section 222, and no statute of

limitations of general applicability appears in the NGA or FPA. The
Commission declines to designate a statute of limitations or otherwise
adopt an arbitrary time limitation on complaints or enforcement actions
that may arise under NGA section 4A and FPA section 222. We note,
however, that when a statutory provision under which civil penalties
may be imposed lacks its own statute of limitations, the general
statute of limitations for collection of civil penalties, 28 U.S.C.
2462, applies.\123\ Section 2462 in 28 U.S.C. imposes a five-year
limitations period on any ``action, suit, or proceeding for the
enforcement of any civil fine, penalty, or forfeiture, pecuniary or
otherwise.''\124\
---------------------------------------------------------------------------

    \123\ See, e.g., United States v. Godbout-Bandal, 232 F.3d 637,
639 (8th Cir. 2000).
    \124\ 28 U.S.C. 2462 (2000). The five-year limitation runs
``from the date the claim first accrued.'' Id. We intend that any
administrative action for violation of the final rule be commenced
within five years of the date of the fraudulent or deceptive
conduct.
---------------------------------------------------------------------------

    63. The Commission, therefore, rejects AEP's call for a three-year
limitations period because that period applies only in the context of
private rights of action under the securities laws, not to SEC
enforcement actions. For the same reason, we reject NiSource's argument
that a limitations period under the Sarbanes-Oxley Act should apply to
actions we may bring under our enforcement authority, and EEI's request
that the Commission apply to the final rule the 90-day action
limitation of the existing Market Behavior Rules. We will exercise
prosecutorial discretion in determining whether to pursue an alleged
violation based on all the facts presented, including the time elapsed
since the violation is alleged to have occurred, and will adhere to the
five-year statute of limitations where we seek civil penalties.

H. Safe Harbors and Affirmative Defenses

1. Comments
    64. Several commenters suggest that the Commission make explicit in
the language of proposed regulations certain safe harbors. For example,
they argue that the following should be deemed acceptable behavior:
Actions or transactions taken at the direction of an RTO or ISO
(similar to the affirmative defense in Market Behavior Rule 2),
compliance with Midwest ISO's market monitoring program, actions or
transactions with a ``legitimate business purpose,'' and legitimate
hedging activity.\125\
---------------------------------------------------------------------------

    \125\ See, e.g., AEP at 2; AGA at 5-6 (advocating a safe harbor
for ``inadvertent'' errors); Ameren at 7; DTE at 2-4; INGAA at 11;
LG&E at 3; NGSA at 2, 5, 8-9 (seeking clarification that the
proposed regulations do not modify or supersede the Commission's
policy statement on price reporting or the related safe harbor
provisions of that policy); NiSource at 7; and SCANA at 3-4.
---------------------------------------------------------------------------

    65. Some commenters urge the Commission to provide specific
examples of what would or would not constitute market
manipulation.\126\ NiSource argues that aiding and abetting, as opposed
to primary violations, and actions taken pursuant to Commission-
approved tariffs, state law, and Supreme Court precedent, as well as
minor errors, would not violate the proposed rules.\127\ Furthermore,
some commenters request a mechanism for obtaining guidance on whether
proposed conduct violates the anti-manipulation rules through a
procedure similar to the SEC's No-Action Letter process.\128\
---------------------------------------------------------------------------

    \126\ See, e.g., SCANA at 3-5 (arguing for an explicit safe
harbor for hedging transactions, and that any violation of the
``shipper must have title'' rule is a per se violation); NiSource at
7; and Indicated Market Participants at 20-22 (requesting specific
guidance, including a non-exclusive list, of what would and would
not be considered manipulative conduct, to aid in internal training
and compliance programs).
    \127\ NiSource at 6-9.
    \128\ See, e.g., First Energy at 15-16; INGAA at 11.
---------------------------------------------------------------------------

2. Commission Determination
    66. The Commission will address issues relating to the Market
Behavior Rules, and the affirmative defenses or safe harbors therein,
in the FPA section 206 proceeding and NGA NOPR related to the Market
Behavior Rules in Docket Nos. EL06-16-000 and RM06-5-000. As noted in
that proceeding, it is the Commission's intent to have a smooth
transition to the new anti-manipulation regulations but not to leave
gaps between the adoption of the final rule and any repeal or revision
of the Market Behavior Rules.
    67. In all events, however, it is not necessary to change the
wording of the final rule. The availability of safe harbor presumptions
of compliance and affirmative defenses will be the same as is currently
the case under the Market Behavior Rules. Thus, if a market participant
undertakes an action or transaction that is explicitly contemplated in
Commission-approved rules and regulations, we will presume that the
market participant is not in violation of the final rule. If a market
participant undertakes an action or transaction at the direction of an
ISO or RTO that is not approved by the Commission, the market
participant can assert this as a defense for the action taken.

I. Procedures for Handling Manipulation Claims

1. Comments
    68. Some commenters seek clarification on how claims of market
manipulation will be processed by the Commission. PG&E asks for
procedures that will permit involvement of affected market participants
in manipulation complaints, including intervention and full
participation by affected parties, and availability of all remedies,
including disgorgement or returning consumers to the condition they
would have been in, absent manipulation. Doing so, PG&E asserts, would
provide due process for those damaged by manipulation and would assure
that the Commission considers all relevant factors in resolving the
complaint.\129\ Cinergy, on the other hand, states that it expects that
complaints would be filed pursuant to NGA section 5 or FPA section 206,
and that the Commission should incorporate in the final rule procedural
requirements for filing complaints. Cinergy also seeks clarification on
whether the Commission intends to apply the proposed regulations
retroactively in any manner.\130\ At the same time, however, Cinergy
also argues that the Commission should explicitly urge parties first to
take concerns and potential complaints to the Office of Market
Oversight and Investigations Enforcement Hotline (Hotline). This,
Cinergy explains, would permit entities accused of manipulation to
present facts and evidence without suffering the potential harm within
industry and the investment community that could result from an
accusation of manipulation, and could lead to faster settlement
resolutions of manipulation claims.\131\
---------------------------------------------------------------------------

    \129\ PG&E at 14-15.
    \130\ Cinergy at 10.
    \131\ Id. at 10-12.
---------------------------------------------------------------------------

    69. EEI and INGAA also urge the Commission to address the formal
process and procedures to be used in resolving manipulation complaints,
including the burden of proof.\132\ INGAA and ISDA suggest the
Commission adopt a ``Wells submission'' process like that of the SEC in
which an entity\133\ is given, at the end of an investigation, notice
of the proposed charges and enforcement action that staff intends to
recommend to the SEC, and an opportunity to submit a written statement
and

materials to refute staff's recommendation.\134\
---------------------------------------------------------------------------

    \132\ EEI at 19-21; INGAA at 13.
    \133\ The ``Wells submission'' process is set forth in SEC
regulations, 17 CFR 202.5(c) (2005).
    \134\ INGAA at 12; ISDA Reply at 5.
---------------------------------------------------------------------------

2. Commission Determination
    70. Congress enacted the statutory prohibitions on market
manipulation as separate sections of the NGA and FPA, giving the
Commission anti-manipulation authority that is independent of other
provisions of the NGA and FPA, including NGA section 5 and FPA section
206. Accordingly, the Commission rejects Cinergy's suggestion that
complaints alleging manipulation necessarily would rely on NGA section
5 or FPA section 206.\135\ As to the procedures to be followed when a
complaint alleging manipulation is filed, the Commission will process
the filing under the procedures currently set forth in Rule 206 of the
Rules of Practice and Procedure.\136\ The Commission rejects as
unnecessary EEI's, INGAA's, and Cinergy's suggestions that we
incorporate procedures into the final rule. The requirements for filing
complaints are set out in Rule 206, and the process for handling
complaints, including the allocation of the burden of proof, is well-
defined through Commission case law. There is no need for a special or
separate set of procedures for complaints arising from our new anti-
manipulation authority.
---------------------------------------------------------------------------

    \135\ Even if a complaint were to involve NGA section 5 or FPA
section 206 in some manner, that does not mean that the Commission
would be limited only to prospective remedies, as Cinergy seems to
suggest. Certain violations are susceptible of remedies from the
time the violation occurred. See, e.g., Consolidated Gas
Transmission Corp., 771 F.2d 1536 (D.C. Cir. 1985) (retroactive
remedy available under NGA section 16).
    \136\ 18 CFR 385.206 (2005).
---------------------------------------------------------------------------

    71. Cinergy states that the industry needs to understand if there
is to be any retroactive application of the final rule. The regulations
adopted herein will become effective upon publication in the Federal
Register. There can be no violation of the final rule until it is
effective. The Market Behavior Rules, however, have been in effect
since December 2003, and will remain in effect pending the outcome of
the separate Docket Nos. EL06-16-000 and RM06-5-000 proceedings.
    72. To the extent Cinergy suggests that no retroactive remedies
should be used, the Commission reiterates that a complaint that alleges
market manipulation will proceed under NGA section 4A or FPA section
222, utilizing the procedural rules and mechanisms generally applicable
to NGA and FPA proceedings. We reject any suggestion that the
Commission cannot remedy manipulative conduct after it has occurred,
such as by ordering the disgorgement of profits and/or imposing a civil
penalty. Congress did not limit the Commission's jurisdiction under NGA
section 4A or FPA section 222 to prospective conduct and associated
remedies only. How the Commission addresses market manipulation will
depend on the facts presented, but we have significant discretion to
shape equitable remedies that achieve the purpose of Congress'
enactment of anti-manipulation provisions.\137\ In devising a remedy,
the Commission will exercise discretion to arrive at an appropriate
remedy \138\ and will explore all equitable considerations and
practical consequences of our action pursuant to our statutory
delegation.\139\
---------------------------------------------------------------------------

    \137\ ``[T]he Commission has broad authority to fashion
equitable remedies in a variety of settings.'' Columbia Gas
Transmission Corp. v. FERC, 750 F.2d 105, 109 (DC Cir. 1984) and
cases cited therein. The courts have noted that ``the breadth of
agency discretion is, if anything, at zenith when the action
assailed relates primarily * * * to the fashioning of policies,
remedies, and sanctions * * * to arrive at maximum effectuation of
Congressional objectives.'' Niagara Mohawk Corp. v. FPC, 379 F.2d
153, 159 (DC Cir. 1967).
    \138\ Gulf Oil Corp. v. FPC, 536 F.2d 588 (3rd Cir. 1977), cert.
denied, 434 U.S. 1062 (1978), reh'g denied, 435 U.S. 981 (1978).
    \139\ FPC v. Tennessee Gas Transmission Co., 371 U.S. 145
(1962); Continental Oil Co. v. FPC, 378 F.2d 510 (5th Cir. 1967).
---------------------------------------------------------------------------

    73. The Commission also declines to accept Cinergy's suggestion
that we explicitly urge parties first to bring concerns and potential
complaints to the Hotline.\140\ Aggrieved entities should be free to
choose the approach best suited to their circumstances, and if an
entity so chooses, the Hotline (or other informal contact with the
Commission's staff) is available for such matters.
---------------------------------------------------------------------------

    \140\ See 18 CFR 1b.21 (2005)
---------------------------------------------------------------------------

    74. Turning to INGAA's suggestion that the Commission adopt what is
referred to as a ``Wells submission'' to permit entities under
investigation to submit material to refute staff findings and
recommendations prior to Commission action, we find that no new process
need be adopted here. The Commission already has a regulation in place
that provides a company under investigation with an opportunity to
present its views,\141\ and staff's existing practice is to present the
company's views to the Commission as part of any report or
recommendation made by staff following an investigation.
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    \141\ See 18 CFR 1b.18 (2005).
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J. Miscellaneous Issues

1. Use of ``Entity'' in place of ``Person'' in sections 1c.1(a)(3) and
1c.2(a)(3)
a. Comments
    75. Two commenters express concern with the use of ``person'' in
proposed sections 47.1(a)(3) and 159.1(a)(3) and urge the Commission to
substitute ``entity'' for ``person.'' \142\ Specifically, APPA points
out that under proposed section 47.1(a)(3), it is unlawful ``to engage
in any act, practice, or course of business that operates or would
operate as a fraud or deceit upon any person'' (emphasis added) and
that the definition of ``person'' under the FPA excludes
municipalities. Thus, according to APPA, an entity that practices a
``fraud or deceit'' on a municipality could argue that proposed section
47.1(a)(3) does not apply because the victim is not a ``person'' under
the FPA.\143\ APGA makes a similar argument with respect to proposed
section 159.1(a)(3).\144\
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    \142\ See APGA at 10-11; APPA at 2-4.
    \143\ APPA at 2-3.
    \144\ APGA at 10.
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b. Commission Determination
    76. The Commission agrees with these commenters. It would be unfair
and unintended to prohibit fraudulent or manipulative behavior by any
entity, including municipalities, but then not cover fraud or deceit
when it is perpetrated against a municipality. Accordingly, the
Commission will substitute the word ``entity'' for ``person'' in
sections 1c.1(a)(3) and 1c.2(a)(3) of the final rule.\145\
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    \145\ As noted, the final rule will appear in 18 CFR 1c.1 and
1c.2 of the Commission's Rules of General Applicability, and the
language change will be in 18 CFR 1c.1(a)(3) and 1c.2(a)(3).
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2. Impact of New Regulations on the Policy Statement on Natural Gas and
Electric Price Indices
a. Comments
    77. NGSA requests that the Commission clarify that the new
regulations do not modify or supersede the Commission's Policy
Statement on Natural Gas and Electric Price Indices.\146\
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    \146\ NGSA at 8-9. See Policy Statement on Natural Gas and
Electric Price Indices, 104 FERC Sec.  61,121 (2003) (explaining the
conditions under which the Commission will give industry
participants safe harbor protection for good faith reporting of
transactions data to entities that develop price indices).
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b. Commission Determination
    78. The Commission clarifies that the new regulations are not
intended to modify or supersede the Commission's Policy Statement on
Natural Gas and

Electric Price Indices. That Policy Statement provided guidance on how
market participants should report price transaction information to
price index developers, and stated that if the Policy Statement
guidelines are followed, participants would not be penalized for
inadvertent errors. We continue to encourage market participants to
contribute to price formation and to utilize the guidelines of the
Policy Statement when reporting pricing information. We also note that
if an inadvertent error occurs, it would not involve the scienter
needed for application of the final rule.
3. Special Pleading
a. Comments
    79. AEP argues that the Commission should discourage general
allegations of fraud by requiring parties that bring an action under
the proposed rule to plead with ``sufficient particularity'' by
addressing eight items.\147\ Other commenters, however, argue that the
Commission should not adopt special pleading requirements beyond its
notice provisions and existing complaint procedures.\148\
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    \147\ AEP at 3-4. The eight items are: (1) What identifiable
acts or omissions occurred, what representations were made and why
they were not accurate but constituted a scheme or device to
defraud; (2) when and where each act occurred; (3) who participated,
that is, how each entity is related to the case; (4) what specific
documents contained what specific misrepresentations or material
omissions; (5) how a party relied on the other party's actions; (6)
whether the necessary element of scienter was present; (7) when the
purchase, sale, or transmission of electric energy or natural gas
occurred; and (8) what the offending party gained as a result of the
fraud.
    \148\ See, e.g., TDUS Reply at 9.
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b. Commission Determination
    80. Commenters' concerns regarding special pleading requirements
are clearly covered by Rule 206 of the Commission's Rules of Practice
and Procedure, which contains detailed requirements as to the
specificity required by parties filing complaints with the Commission.
For instance, under Rule 206(b)(1)-(2), a complaint must ``clearly
identify the action or inaction which is alleged to violate applicable
statutory or regulatory requirements,'' and must ``explain how the
action violates statutory or regulatory requirements.'' \149\
Similarly, in Order No. 663, the Commission sets forth the requirement
that issues must be listed with specificity in a separate section
entitled ``Statement of Issues.'' \150\
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    \149\ See Wisconsin Department of Natural Resources v. Wisconsin
River Power Company, 101 FERC Sec.  61,108 at P 5 (2002) (rejecting
complaint). See also Union Electric Company, d/b/a AmerenUE, 93 FERC
Sec.  61,158 at 61,529 (2000) (denying a request for a hearing,
citing Rule 206(b)(1), (2), and (8), and stating that ``[t]he
Commission's rules require a complaint not only to identify clearly
the action that is alleged to violate applicable statutory standards
or regulatory requirements, but to explain how the action violates
those standards or requirements, and to include all documents in the
complainant's possession that support the facts in the complaint'').
    \150\ See Revision of Rules of Practice and Procedure Regarding
Issue Identification, 70 FR 55723 (2005), FERC Stats. & Regs. Sec.
31,193 (2005).
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IV. Regulatory Flexibility Act Certification

    81. The Regulatory Flexibility Act of 1980 \151\ generally requires
a description and analysis of a final rule that will have significant
economic impact on a substantial number of small entities.\152\ The
Commission is not required to make such analyses if a rule would not
have such an effect.
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    \151\ 5 U.S.C. 601-612 (2000).
    \152\ The RFA definition of ``small entity'' refers to the
definition provided in the Small Business Act, which defines a
``small business concern'' as a business which is independently
owned and operated and which is not dominant in its field of
operation. 15 U.S.C. 632 (2000). The Small Business Size Standards
component of the North American Industry Classification System
defines a small electric utility as one that, including its
affiliates, is primarily engaged in the generation, transmission,
and/or distribution of electric energy for sale and whose total
electric output for the preceding fiscal years did not exceed 4
million MWh. 13 CFR 121.201 (Section 22, Utilities, North American
Industry Classification System, NAICS) (2004).
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    82. The Commission concludes that this final rule would not have
such an impact on small entities. This final rule prohibits all
entities, including small entities, from employing manipulative or
deceptive devices or contrivances in connection with energy markets
subject to the Commission's jurisdiction, and therefore may cause
entities, including potentially small entities, to increase costs in
order to comply. This prohibition, however, will improve market
transparency to the economic benefit of all entities, including small
entities. Therefore, the Commission certifies that this final rule will
not have a significant economic impact on a substantial number of small
entities. Therefore, no regulatory flexibility analysis is required.

V. Information Collection Statement

    83. This final rule implements the existing requirements as set
forth in sections 315 and 1283 of EPAct 2005 and does not include new
information requirements under the provisions of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

VI. Environmental Statement

    84. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\153\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in the exclusion are rules that are clarifying,
corrective, or procedural or that do not substantially change the
effect of the regulations being amended.\154\ Thus, we affirm the
finding we made in the NOPR that this final rule is procedural in
nature and therefore falls under this exception; consequently, no
environmental consideration would be necessary.
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    \153\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (1987), FERC Stats. & Regs. Sec.
30,783 (1987).
    \154\ 18 CFR 380.4(a)(2)(ii) (2005).
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VII. Document Availability

    85. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and

in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
    86. From the Commission's Home Page on the Internet, this
information is available in the eLibrary. The full text of this
document is available on eLibrary both in PDF and Microsoft Word format
for viewing, printing, and/or downloading. To access this document in
eLibrary, type the docket number excluding the last three digits of
this document in the docket number field.
    87. User assistance is available for eLibrary and the Commission's
Web site during normal business hours. For assistance, please contact
Online Support at 1-866-208-3676 (toll free) or<PHONE_NUMBER> (e-mail at
FERCOnlineSupport@FERC.gov), or the Public Reference Room at 202-502-

8371, TTY<PHONE_NUMBER> (e-mail at public.referenceroom@ferc.gov).

VIII. Effective Date and Congressional Notification

    88. This final rule will take effect upon publication in the
Federal Register. The Commission has determined, with the concurrence
of the Administrator of the Office of Information and Regulatory
Affairs of the Office of Management and Budget, that this rule is not a
major rule within

the meaning of section 251 of the Small Business Regulatory Enforcement
Fairness Act of 1996.\155\ The Commission will submit the final rule to
both houses of Congress and the Government Accountability Office.\156\
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    \155\ 5 U.S.C. 804(2) (2000).
    \156\ 5 U.S.C. 801(a)(1)(A) (2000).
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    89. A non-major rule goes into effect ``as otherwise provided by
law after submission to Congress.'' \157\ The effective date may be
sooner if the agency ``for good cause'' finds that ``notice and public
procedure thereon are impracticable, unnecessary, or contrary to the
public interest.'' \158\ The Administrative Procedure Act (APA) \159\
requires rulemakings to be published in the Federal Register. The APA
generally mandates that publication or service of a substantive rule
not be made less than 30 days before its effective date. This waiting
period is not required, however, if the agency finds ``good cause'' for
waiving the 30 day waiting period.\160\
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    \157\ 5 U.S.C. 801(a)(4) (2000).
    \158\ 5 U.S.C. 808(2) (2000).
    \159\ 5 U.S.C. 551, et seq. (2000).
    \160\ 5 U.S.C. 553(d)(3) (2000).
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    90. The Commission finds that ``good cause'' exists that makes
further notice and public procedure impracticable, unnecessary, or
contrary to the public interest. The Commission has balanced the
necessity for immediate implementation of this final rule against the
principles of fundamental fairness which require that all affected
persons be afforded reasonable time to prepare for the effective date
of this ruling. The Commission is of the view that the persistent high
energy prices in the wake of severe damage to the United States energy
infrastructure from the hurricanes of 2005, together with the potential
for severe price events in the event of cold winter weather during the
winter months of 2006, may present opportunities for energy price
manipulation. It would be contrary to the public interest to delay
regulations that implement Congressional intent to prohibit
manipulation in energy markets. Immediate adoption of the final rule
will protect natural gas and electricity markets from manipulative
conduct. Moreover, the public has had an opportunity to comment on the
proposed rules, and the final rule being adopted is substantively the
same as the rule that was proposed. Finally, the conduct proscribed by
the final rule is similar to the conduct already proscribed by the
Market Behavior Rules. Market participants should not have difficulty
preparing to comply with a rule that bars manipulation in energy
markets, particularly since many such participants are currently
subject to the existing Market Behavior Rule provisions prohibiting
manipulation. This final rule, therefore, will be made effective upon
publication in the Federal Register.

List of Subjects in 18 CFR Part 1c

    Electric utilities, Natural gas.

    By the Commission.
Magalie R. Salas,
Secretary.

0
In consideration of the foregoing, under the authority of EPAct 2005,
the Commission amends Chapter I, Title 18, Code of Federal Regulations,
by adding Part 1c to read as follows:

PART 1c--PROHIBITION OF ENERGY MARKET MANIPULATION

Sec.
1c.1 Prohibition of natural gas market manipulation.
1c.2 Prohibition of electric energy market manipulation.

    Authority: 15 U.S.C. 717-717z; 16 U.S.C. 791-825r, 2601-2645; 42
U.S.C. 7101-7352.

Sec.  1c.1  Prohibition of natural gas market manipulation.

    (a) It shall be unlawful for any entity, directly or indirectly, in
connection with the purchase or sale of natural gas or the purchase or
sale of transportation services subject to the jurisdiction of the
Commission,
    (1) To use or employ any device, scheme, or artifice to defraud,
    (2) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not
misleading, or
    (3) To engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon any entity.
    (b) Nothing in this section shall be construed to create a private
right of action.

Sec.  1c.2  Prohibition of electric energy market manipulation.

    (a) It shall be unlawful for any entity, directly or indirectly, in
connection with the purchase or sale of electric energy or the purchase
or sale of transmission services subject to the jurisdiction of the
Commission,
    (1) To use or employ any device, scheme, or artifice to defraud,
    (2) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not
misleading, or
    (3) To engage in any act, practice, or course of business that
operates or would operate as a fraud or deceit upon any entity.
    (b) Nothing in this section shall be construed to create a private
right of action.

    Note: The following Appendix will not be published in the Code
of Federal Regulations.

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

Ameren Services Co. (Ameren)
American Electric Power Service Corporation (AEP)
American Gas Association (AGA)
American Public Gas Association (APGA)
 * *
American Public Power Association (APPA) * *
Association of Oil Pipelines (AOPL)
BP Energy Co. (BP)
Cinergy Services, Inc. (Cinergy) * *
Constellation Energy Group, Inc., DTE Energy Company and Sempra
Energy (Indicated Market Participants)
DTE Energy Company (DTE)
Edison Electric Institute (EEI) * *
Electric Power Supply Association (EPSA)
FirstEnergy Service Co. (FirstEnergy)
International Swaps and Derivatives Association, Inc. (ISDA) * *
Interstate Natural Gas Association of America (INGAA)
LG&E Energy LLC (LG&E)
Midwest Independent Transmission System Operator, Inc. (Midwest ISO)
Missouri Public Service Commission
National Association of Regulatory Utility Commissioners (NARUC) * *
National Association of State Utility Consumer Advocates (NASUCA)
National Rural Electric Cooperative Association (NRECA) *
Natural Gas Supply Association (NGSA)
New Jersey Board of Public Utilities (NJBPU)
NiSource, Inc. (NiSource)
Pacific Gas and Electric Co. (PG&E)
PNM Resources, Inc. (PNM) *
Progress Energy Inc. (Progress)
SCANA Energy Marketing, Inc. (SCANA)
Southern California Edison Company (SCE)
States of Illinois, Iowa, Minnesota, Missouri and Wisconsin (States)
SUEZ Energy North America, Inc. (SUEZ)
Transmission Dependent Utility Systems (TDUS) *
Xcel Energy Services Inc. (Xcel)

* Entities filing reply comments only.
* * Entities filing reply comments in addition to initial comments.

[FR Doc. 06-716 Filed 1-25-06; 8:45 am]

BILLING CODE 6717-01-P