FERC Issues No Action Letter on AMAs

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FERC Issues No Action Letter on Asset Management Arrangements

On January 28, 2011, the Federal Energy Regulatory Commission (FERC) issued a letter stating that its staff will not recommend enforcement action in connection with asset management arrangements (AMA) described in a company?s November 30, 2010 letter request for a no action letter from FERC, which amended an earlier request in August. See CenterPoint Energy Gas Transmission Co., Docket No. NL 11-2 (January 28, 2011).

As background, under FERC Order No. 712 et seq., certain qualifying AMAs are not subject to the FERC?s prohibition on buy/sell transactions. The company sought confirmation that FERC staff will not recommend enforcement action for the company?s current actions with respect to the AMAs described in its letter request. Those actions include (1) not treating the local distribution company (LDC) employees involved in buy/sell transactions related to the AMAs as marketing function employees (MFEs); (2) applying certain Standards of Conduct to certain employees of the asset managers who are involved in buy/sell transactions with LDCs; (3) relying on certification from the asset managers that their employees engaged in marketing functions related to the LDC buy/sell transactions comply with Standards of Conduct training requirements; and (4) not treating the asset managers as marketing affiliates.

Based on the facts and representations regarding the AMAs in the company?s letter request, the no action letter states that FERC staff will not recommend enforcement action with respect to any of the four actions described above. The no action letter cautions that this could change if the asset managers resell gas acquired from the LDCs to anyone other than the LDCs. ?In that case, the affiliated LDCs? employees would no longer be engaged solely in the buy/sell transactions authorized by Order No. 712 to serve the LDCs? on-system requirements, and therefore the LDCs? employees could be acting as MFEs.? (footnote omitted) Further, this could result in having to treat the asset managers as marketing affiliates.

FERC?s no action letters are not binding on the FERC, but can offer guidance on important issues. While Order No. 712 and its provisions regarding AMAs can be helpful, this no action letter is a reminder that AMAs must be properly structured to take advantage of Order No. 712?s benefits.

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