On July 19, 2018, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Proposed Rulemaking to revise Parts 45 and 46 of its regulations to clarify requirements for interlocking officers and directors (“Interlock NOPR”). FERC’s Interlock NOPR, though modest in scope, is an effort to implement a more pragmatic approach to certain interlock requirements. FERC also proposes changes to its regulations to reflect earlier statutory amendments. We intend to provide a further update should FERC take future action to modify its regulations to implement these proposals.
Congress included Section 305 in the Federal Power Act (“FPA”) to help prevent perceived abuses by utility holding companies, including potential conflicts of interest from the lack of arm’s length bargaining resulting from interlocking directorates and other practices of self-dealing. Section 305(b) of the FPA requires prior FERC authorization before individuals may concurrently serve as officers or directors of more than one public utility, or public utilities and firms that underwrite or participate in the marketing of public utility securities, or public utilities and companies supplying electrical equipment to such public utilities. FERC implemented these restrictions in Part 45 of its regulations, and Part 46 of FERC’s regulations further provides the annual filing requirements for individuals holding certain interlocking positions. See 18 C.F.R. pts. 45 and 46.
Timeliness of Interlock Applications
FERC’s current regulations reflect a bright-line view that any late-filed applications for otherwise proscribed interlocks or required interlock informational filings will be automatically denied, regardless of the case-specific circumstances for the untimely filing. See 18 C.F.R. §§ 45.3 and 45.9. In the Interlock NOPR, FERC proposes to relax its approach and consider the merits of late-filed applications and informational filings on a case-by-case basis. In support of its proposal, FERC reasons that it may not be in the public interest to deny late-filed applications and informational filings that are late only because of good faith errors and oversights, especially because such late-filed applications do not impede FERC’s ability to decide the case. FERC further notes that this type of late-filed application does not implicate the abuses that Congress sought to prevent in Section 305 of the FPA. FERC’s proposal envisions a more practical approach to late-filed applications and informational filings and could allow FERC to avoid harsh outcomes when circumstances warrant.
Interlocks with Public Utilities and Firms That Underwrite or Participate in Marketing of Public Utility Securities
FERC also proposes to amend its regulations to reflect a 1999 statutory amendment to Section 305(b) of the FPA that has been effective since that time but has not been incorporated into FERC’s regulations. Specifically, FERC proposes to amend its regulations to reflect that individuals holding interlocking positions between a public utility and any firm duly authorized to underwrite or participate in the marketing of public utility securities will not need FERC authorization in situations when:
the applicant does not take part in the public utility’s consideration or selection of the underwriter or marketer of the public utility’s securities;
the relevant bank, trust company, banking association, or firm does not engage in the underwriting of, or participate in the marketing of, securities of the public utility;
the relevant public utility selects underwriters by competitive procedures; or
the issuance of securities of the public utility has been approved by all Federal and State regulatory agencies having jurisdiction over the issuance.
Supplemental Applications and Notices of Change
In the Interlock NOPR, FERC further proposes to amend Sections 45.4 and 45.5 its regulations to clarify that supplemental applications and notices of change are not necessary when a person previously authorized to hold interlocks pursuant to 18 C.F.R. § 45.9(a) (automatically authorized affiliated public utility interlocks) assumes new or different positions. For example, under the proposed revision, a promotion within a holding company system would not trigger a notice of change filing as these types of changes are already reported in the annual Form No. 561 submission required pursuant to Part 46 of FERC’s regulations. The requirement to submit a notice of change when an individual no longer holds any reportable interlocking positions will remain intact, however, because no longer holding any interlocking positions would constitute a “material or substantial change.”
Recognition of Ever-Increasing Complexity of Corporate Structures
Noting the ever-increasing complexity of corporate structures, FERC proposes two specific revisions to its regulations targeting unique corporate structures. First, FERC proposes to revise 18 C.F.R. § 45.8(c)(1) to state that applicants under Part 45 do not need to list public utilities that do not have officers or directors in their applications. Further, FERC proposes to revise 18 C.F.R. § 45.9 to add the word “person” when defining the corporate relationships within the scope of the automatic authorizations addressed in that section. This proposal recognizes that public utilities may be owned by natural persons, in addition to corporate entities.
FERC issued the Interlock NOPR on July 19, 2018. A 60-day comment period will commence from the date of the Interlock NOPR’s publication in the Federal Register. Even if the Interlock NOPR does not generate extensive comments or controversy, the time frame for further FERC action to finalize its proposals in the Interlock NOPR is unclear, given the wide range of competing priorities faced by FERC.
 Revisions to Parts 45 and 46 of the Commission’s Regulations, 164 FERC ¶ 61,032 (2018). In addition to proposals addressed herein, FERC also proposes to remove certain definitions that were rendered obsolete with the repeal of the Public Utility Holding Company Act of 1935 and enactment of the Energy Policy Act of 2005. Id. at P 13.
 See Pub. L. No. 106-102, § 737, 113 Stat. 1338, 1479 (1999).