FERC has clarified that in-house attorneys who simply draft or redraft contracts without making decisions about the contract’s commercial terms are not considered “marketing function employees” and thus are not subject to the Independent Functioning Rule under the FERC Standards of Conduct for Transmission Providers by virtue of such drafting activity.  The Standards of Conduct require marketing function employees to work independently of transmission employees and to be shielded from access to non-public information pertaining to transmission.

FERC’s November 16 Order No. 717-B clarifies Order No. 717-A, which itself purported to clarify the Standards of Conduct but actually created confusion by instructing that “an employee in the legal, finance or regulatory division of a jurisdictional entity, whose intermittent day-to-day duties include the drafting and redrafting of non-price terms and conditions of, or exemptions to, umbrella agreements is a ‘marketing function employee.’”  This language implied that in-house attorneys and other professionals involved in drafting marketing contracts could run afoul of the Standards of Conduct if they support the transmission side of the business.  The Edison Electric Institute (“EEI”) and others sought expedited clarification or rehearing.

The Commission in Order No. 717-B characterized the above language as “overly broad” and clarified that “an employee making business decisions about non-price terms and conditions can be considered a ‘marketing function employee’ because that employee is actively and personally engaged in marketing functions.”  The Commission contrasted personal engagement in marketing functions with simply drafting or redrafting a marketing contract, including non-price terms and conditions, without making business decisions.

The Commission reiterated the principles it laid out in October 2008 in Order No. 717, which amended the Standards to address “areas where there is the greatest potential for abuse.”  Order No. 717 makes clear that attorneys rendering legal advice may consult with both transmission function and marketing function employees; risk-management employees may develop guidelines for both transmission function and marketing function employees; and regulatory personnel may present filings that cover both transmission and marketing issues.  The Commission also reiterated that the No-Conduit Rule—which prohibits the sharing of restricted transmission information with marketing affiliates and marketing function employees—still applies in these instances.

Order No. 717-A, as clarified in Order 717-B, took effect on November 23. EEI has sought further rehearing of Order No. 717-A and the Commission is expected to issue additional clarifications or an order on rehearing in the series.