18 CFR Part 35 - Credit Reforms in Organized Wholesale Electric Markets

• Date: November 15, 2010
• Source: www.ferc.gov

Pursuant to section 206 of the Federal Power Act, the Federal Energy Regulatory Commission amends its regulations to improve the management of risk and the subsequent use of credit in the organized wholesale electric markets. Each Regional Transmission Organization (RTO) and Independent System Operator (ISO) will be required to submit a compliance filing including tariff revisions to comply with the amended regulations or to demonstrate that its existing tariff already satisfies the regulations. This Final Rule adopts reforms to credit policies used in organized wholesale electric power markets.
 
Background: The Commission has long been actively interested in the credit practices of the wholesale electric markets. In crafting the pro forma Open Access Transmission Tariff (OATT) in Order No. 888, the Commission directed that each transmission provider’s tariff include reasonable creditworthiness standards. However, in response to the credit downgrades in the energy industry of 2001-2002, and the resulting severe contraction in the credit markets, the Commission held a technical conference in which it received significant testimony that it should take action regarding credit practices in the organized electricity markets.
 
The Need for Credit Reform in the Organized Wholesale Electric Markets: Sound credit practices are necessary to prevent a disruption in the system, and it is not acceptable to wait until after a disruption to implement the necessary standards. The Commission acknowledges the short-term costs of compliance with the credit practices required in this Final Rule but finds that they are outweighed by the stability that those credit practices provide to the markets and their participants. Therefore, in compliance filings to be submitted providing tariff revisions to comply with the Final Rule, ISOs and RTOs should apply these standards to market participants.
 

Effective Date: This Final Rule will become effective on [insert date 30 days after publication in the FEDERAL REGISTER]
 

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