Advocate Summary

Issue:  Affiliate Relationships
Advocate:  FERC – Office of the General Counsel – Deme Anas
Date of Interview: 7/30/02

[This is paraphrased – she had bronchitis and her voice was nearly gone so I didn’t tape. She referred often to the “Notice of Proposed Rule Making” as well as the staff paper written after the conference, both can be found in the file.]

Basic Background
These rules go back to 1985 that’s when the official rules were made which gave FERC oversight over the relationship between affiliated pipelines and marketers. Back in the 80s the debate was over whether there should be a rule or not. So now there is a rule and we have proposed to expand it so that it is more in line with today’s marketplace.  Times have changed, industry has changed so we think we should broaden our jurisdiction to be in line with those changes. 

Standards of conduct issued in electricity in ‘96 only govern electric utilities and their marketing affiliates the proposed rule will expand on that. The new rules would cover all entities and the information they are allowed to share with their affiliated entities.

The rule also requires the posting of a good amount of information on the companies’ websites, transparency is good for competition. 

Prior Activity on the Issue 
[The released the original rules in 1985]

Advocacy Activities Undertaken
In September 2001 we released a Notice of Proposed Rule Making, right now the regulations only cover relations between a pipeline and their marketing affiliates, these proposed regulations would expand and update the rules to include all the entities along the path, the producers, who pull the gas out of a well, the gathers, who collect the gas from the different producers, the refiners who do different things and take any impurities out, the pipeline that transmits the gas, and the LDCs – the local distribution companies, and the marketers – who don’t really have a physical structure anywhere along the chain, they buy the gas, from various points, either the producer, the collector or the refiner and they ship it along the pipeline, they are a customer of the pipeline. The rules will also cover electricity, the path is pretty much the same but instead of a producer you have a generator and instead of a pipeline you have the wires but the regulation of the different entities along the chain are essentially the same.

We’ve tried to neutralize the language so instead of the word pipeline or electric utility we use “transmission provider.” Some argue that the industries aren’t comparable and so should have separate rules. But given the number of mergers in the recent past and especially with, what we call the convergence, the converging of the two industries with the merging of gas and electric companies it makes more sense to have one set of rules that applies to everyone.  

So after the proposed rule making was released in September we received 150 comments. And we had a technical conference in May in which we had fifty panelists talk in session throughout the day. Then we received 100 more comments in response to the conference. Whenever we are going to make a new rule, we release a “Proposal for New Rulemaking” to the public so that we can get feedback on it, so we can get a sense of how it will effect the industry. The conference was open to all parties and 300 people came to see the discussion and we had an open mic and people used that. And the entire was available in live broadcast. We are very into transparency here at FERC. 

Future Advocacy Activities Planned
So now we are at the stage that we are analyzing the comments and will seek additional insight into the proposed rule.

Key Congressional Contact(s)/Champions
Not applicable.

Targets of Direct Lobbying
Not applicable.

Targets of Grassroots Lobbying
Not applicable.

Coalition Partners: Names/Participants
All of the unaffiliated companies, the independent marketers support FERC’s proposed rule because it will lead to a more competitive market.

Other Participants in the Issue Debate
You had the Independent Natural Gas Association of America, which are the pipelines, the American Gas Association, which is the LDCs I think, Electric Power Supply Association, which are the generators, EEI, Edison Electric Institute, IPA, and the National Association of Consumer Advocates and then there was the Federal Trade Commission, they were supportive of the proposed rule. The Department of Energy hasn’t played a roll, they haven’t filed any comments.
[She noted that in the appendix to the staff paper that followed the conference the entire list of conference participants is available – see miscellaneous]

Ubiquitous Argument(s) and Evidence
So now there is a rule and we have proposed to expand it so that it is more in line with today’s marketplace.  Times have changed, industry has changed so we think we should broaden our jurisdiction to be in line with those changes.

All of the unaffiliated companies support FERC’s proposed rule making because it will lead to a more competitive market.

All the corporations who have affiliates are opposed to expanded regulations, they say that it will be too costly – those companies that are more integrated would have to separate their affiliated entities out so that they are not communicating inappropriate information. But the question is does the cost outweigh the benefit of fair competition. 

The rule also requires the posting of a good amount of information on the companies’ websites, transparency is good for competition. 

Secondary Argument(s) and Evidence
None mentioned.

Targeted Arguments, Targets, and Evidence
None mentioned.

Nature of the Opposition
Ten years ago people in the industry didn’t want to have any rule at all, now they don’t want it expanded. 

The Ad Hoc Marketers oppose it, that is four or five companies that came together, they do that they get a couple companies together give themselves a name like the Ad Hoc Marketers and get themselves a lawyer. It’s essentially just to save on the legal costs because these comments can be fairly extensive, 30 or 40 pages and they focus very much on the details because the words in regulations like this can make all the difference. Some companies have filed under their subsidiaries as well, so one company will file a number of comments, it’s not good it’s not bad it just is. They can do that.  

Ubiquitous Argument(s) and Evidence Articulated by the Opposition 
All the corporations who have affiliates are opposed to expanded regulations, they say that it will be too costly – those companies that are more integrated would have to separate their affiliated entities out so that they are not communicating inappropriate information. 

Secondary Argument(s) and Evidence Articulated by the Opposition
They affiliated companies also say that the rules just aren’t necessary because there are no abuses now. 

There is something called “information disclosure prohibitions” that talk about what type of information anyone, any officials, including CEOs and CFOs, can share with others. Many of these companies are huge vertically integrated operations with a umbrella company, and then a holding company under that, and then the subsidiaries – and the marketing groups and the pipelines are at that third tier. And there are restrictions so that information, confidential consumer information and sensitive competition information etc. can’t be shared with entities at other levels. There are two other catch phrases, FERC’s big on the lingo; “automatic imputation” which has to do with if you are a shared employee between a pipeline and a marketing group, what info you can share, and “no conduit” which has to do with the information that is received. The vertically integrated companies feel that “automatic imputation” interferes with the CEO’s fiduciary role. That if a CEO is restricted from access to certain information then he won’t be able to perform his managerial role. 

Targeted Argument(s) and Evidence Articulated by the Opposition (and Targets)
None mentioned.

Described as a Partisan Issue
No.

Venue(s) of Activity
Federal Energy Regulatory Commission

Action Pending or Taken by Relevant Decision Makers
So now we are at the stage that we are analyzing the comments and will seek additional insight into the proposed rule.

There are usually five commissioners but right there are only four, one is leaving and there are two waiting for approval by the Senate, the head of the agency, we are an independent agency of the Department of Energy, the head is usually of the Presidents Party, the commissioner has his own position, but that isn’t the final decision because there are five of them and we will look at all the comments. 

Policy Objective(s) and Support for/Opposition to the Status Quo
Supportive of changing the status quo through the new proposed rule making which will update and expand FERC’s regulation of affiliate relationships in the electric and natural gas industries. 

Advocate’s Experience: Tenure in Current Job/Previous Experience
She has been at FERC since 1984.

Reliance on Research: In-House/External (Code for Organizational Advocates Only)

Number of Individuals Involved in Advocacy (Code for Organizational Advocates Only)

Units in Organization Involved in Public Affairs/Policy (Code for Organizational Advocates Only)

Advocate’s Outstanding Skills/Assets (Code for Organizational Advocates Only)

Type of Membership: None, Institutions, Individuals, Both (Code for Organizational Advocates Only)

Membership Size (Code for Organizational Advocates Only)

Organizational Age (Code for Organizational Advocates Only)

Miscellaneous
[She directed me to the FERRIS document retrieval system, on the FERC website the proposed rule making is available – a hard copy is also in the folder – as well as a staff paper of comments following the conference which lays out the participants and their positions and arguments – it can be found by searching on the Docket # and the date of the staff paper which is April 23, 2002]
[Also she said there is a summary publication of the rules for the two industries, Foster’s Electric and Fosters Gas – she said they can be found through FERRIS or RIMS, another document retrieval system]

[Note (091703) – name of FERRIS changed to eLibrary]