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FERC’s Implementation of PUHCA 2005

FERC’s Implementation of PUHCA 2005. Presented at 36 th Financial Forum Regulatory Climate: Changing Tides, or the Perfect Storm? Janice Garrison Nicholas Chief Accountant Office of Enforcement Federal Energy Regulatory Commission. Disclaimer.

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FERC’s Implementation of PUHCA 2005

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  1. FERC’s Implementation of PUHCA 2005 Presented at 36th Financial Forum Regulatory Climate: Changing Tides, or the Perfect Storm? Janice Garrison Nicholas Chief Accountant Office of Enforcement Federal Energy Regulatory Commission FERC

  2. Disclaimer The views and comments presented are mine alone and do not represent, nor are they to be interpreted to represent the views, comments, or positions of the Federal Energy Regulatory Commission. FERC

  3. Table of Contents • Overview of Key Provisions of Energy Policy Act of 2005 • Repeal of PUHCA 1935 & Enactment of PUHCA 2005 FERC

  4. Energy Policy Act of 2005 • Public Law 109-58 signed into law on August 8, 2005 • Amends FPA, PURPA, PUHCA, NGA, NGPA • Imposes deadlines for mandatory rulemakings, reports, studies and MOUs for FERC. • 8 mandatory rulemakings • 9 mandatory reports, studies or MOUs (some in conjunction with other agencies) • 7 discretionary rulemaking or generic action areas • 6 required consultations with other agencies (who have lead) on rulemakings or report • Mandatory action deadlines for FERC range from 60 days to 18 months after enactment. FERC

  5. Three Broad Categories of Reform Under EPAct 2005 • Enhanced electric and natural gas infrastructure • Support for wholesale competition in the electric industry • Electric and natural gas market transparency and consumer protection FERC

  6. Enhanced Infrastructure • Mandatory reliability rules for the electric transmission grid • Backstop federal siting authority for national interest electric transmission corridors • Transmission infrastructure rate reform • Advanced transmission technologies • Funding new interconnection and transmission upgrades FERC

  7. Enhanced Infrastructure (cont’d) • Clarification of FERC exclusive authority over onshore LNG terminals • New natural gas storage facilities • New procedures for NGA sections 3 and 7 authorizations FERC

  8. Wholesale Competition in the Electric Industry • Repeal of PUHCA 1935; additional books and records authority under PUHCA 2005; and enhanced FPA merger/corporate review authority • PURPA repeal of QF ownership restrictions and ability to terminate mandatory purchase obligation • “FERC-Lite”: open access by unregulated transmitting utilities FERC

  9. Wholesale Competition in the Electric Industry (cont’d) • Federal utility participation in Transmission Organizations • Native load service obligation/long-term transmission rights FERC

  10. Electric and Gas Market Transparency and Consumer Protection • Electric and gas market transparency • FPA prohibition on filing false information • Prohibitions on market manipulation in electric and gas markets FERC

  11. Electric and Gas Market Transparency and Consumer Protection (cont’d) • Increased civil and criminal penalty authority under the FPA, NGA, NGPA • Refund effective date for FPA section 206 investigations • FPA refund authority over “non-jurisdictional” sellers FERC

  12. New or Amended FPA Definitions • Electric utility • Transmitting Utility • Electric Cooperative • RTO • ISO • Transmission Organization • FPA section 201(f) entities FERC

  13. New NGA Definition • LNG Terminal FERC

  14. Other Provisions – Affecting Hydropower Licensing • Secretaries of Interior, Commerce and Agriculture “in consultation with FERC” to establish procedures for trial type expedited proceedings for mandatory conditions and fishways. • Hydro license applicants and any party can raise disputed issues in a single trial-type 90-day proceeding before the relevant resource agency. • Certify, for tax credit purposes, increase in hydropower production by efficiency improvements. FERC

  15. PUHCA 2005 • Primarily a “books and records access” statute • Retains definitions of PUHCA 1935 • Provides FERC and state access to books and records of holding companies and their associate members • Provides that certain holding companies or states may obtain FERC-authorized cost allocations for non-power goods or services provided by an associate company to public utility members in the holding company FERC

  16. Repeal of PUHCA 1935 & Enactment of PUHCA 2005 Order No. 667 (issued 12/8/06): • Unless otherwise exempted or granted a waiver under the new rules, all holding companies, including those previously exempted by the SEC under the 1935 law, will have until January 2007, to comply with the Commission’s record-retention and accounting requirements • Established procedures for exempt wholesale generator (EWG) and foreign utility company (FUCO) self-certification and permits declaratory order petitions for EWG and FUCO status • Adopted FERC Form No. 60, an annual report for service companies which replaced and streamlined SEC Form U-13-60 FERC

  17. Repeal of PUHCA 1935 & Enactment of PUHCA 2005 Order No. 667 (issued 12/8/06) • Streamlined process to exempt or waive requirements of PUHCA 2005 for the following persons and classes of transactions: • Passive investors • Commission-jurisdictional utilities that have no captive customers, and are not affiliated with any jurisdictional utility that has captive customers • Certain holding companies and affiliate transactions that will not affect jurisdictional rates • Rural electric cooperatives • Single-state holding companies • Holding companies that own 100 megawatts or less of generation used fundamentally for their own load or affiliated end-users • Investors in independent transmission-only companies • Other exemptions and waivers will be considered on a case-by-case basis FERC

  18. Repeal of PUHCA 1935 & Enactment of PUHCA 2005 Order No. 667 (issued 12/8/06): • Committed to hold a technical conference no later than one year from the effective date of PUHCA 2005 to assess whether additional actions are needed in order to effectively safeguard ratepayers. • Initiate a separate rulemaking to address how the Commission’s Uniform System of Accounts and record retention rules can be modified to adopt or integrate the relevant part of the SEC’s Uniform System of Accounts and record retention rules FERC

  19. Repeal of PUHCA 1935 & Enactment of PUHCA 2005 Rehearing of Order No. 667 (Order No. 667-A, issued 4/24/06): • Clarified definitions regarding EWGs,FUCOs and QFs and persons that are holding companies solely with respect to EWGs, QFs and FUCOs will receive an automatic exemption • Clarified provisions for exemptions for “non-traditional utilities” and local distribution companies • Clarified “single state holding company system” regulatory waiver applies where the holding company system derives no more than 13% of its “public-utility company” revenues from outside a single state • Holding companies with respect to QFs, EWGs and FUCOs do not need to file a notification of holding company status (FERC-65) or FERC 65-A (exemption notification) • Required service companies not filing FERC Form No. 60 to submit annually a narrative description of their functions (FERC-61) FERC

  20. Proposed Rule - Accounting, Reporting & Records Retention Under PUHCA 2005 NOPR issued 4/24/06 in Docket No. RM06-11-000, Financial Accounting, Reporting and Records Retention Requirements Under the Public Utility Holding Company Act of 2005: • 30 day comment period • Uniform System of Accounts for centralized service companies (new Part 367; adopts most definitions in Parts 101 and 201) • Records retention requirements for holding companies and service companies (new Part 368) • Revises Form 60, Annual Report for Centralized Service Companies and changes filing date to April 18 (new Part 369) • Electronic filing of Form 60 (new Part 369) • Directed staff to hold a technical conference on proposed rules (notice issued; scheduled for June 21, 2006) • Effective date of January 1, 2007 FERC

  21. Proposed Rule - Accounting, Reporting & Records Retention Under PUHCA 2005 Proposed regulations guided by three overarching objectives: • New accounting and records requirements should mirror the existing rules for public utilities and natural gas companies • New accounting requirements should allow for consolidation of service company financial information with that of associate companies • New accounting requirements should reflect the unique aspects of service company business operations FERC

  22. Proposed Rule - Accounting, Reporting & Records Retention Under PUHCA 2005 • The NOPR notes that there appears to be a regulatory gap in Commission jurisdiction over service companies that have only natural gas companies • NOPR seeks comments on • Whether there is a regulatory gap? • If so, is there a need to address the gap? • If so, how the Commission should address this gap under the Natural Gas Act? FERC

  23. Questions? Contact Information: janice.garrisonnicholas@ferc.gov (202) 502-6602 FERC

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