# Communication of Operational Information between Natural Gas Pipelines and Electric Transmission Operators > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2013-28078 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** November 22, 2013 - **Citation:** 78 FR 70164 ## Text DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Parts 38 and 284 [Docket No. RM13-17-000; Order No. 787] Communication of Operational Information between Natural Gas Pipelines and Electric Transmission Operators AGENCY: Federal Energy Regulatory Commission. ACTION: Final rule. SUMMARY: In this Final Rule, the Federal Energy Regulatory Commission (Commission) amends the Commission's regulations to provide explicit authority to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce to share non-public, operational information with each other for the purpose of promoting reliable service or operational planning on either the public utility's or pipeline's system. The revised regulations will help maintain the reliability of pipeline and public utility transmission service by permitting transmission operators to share information with each other that they deem necessary to promote the reliability and integrity of their systems. The Final Rule adopts the regulations proposed in the Notice of Proposed Rulemaking without modification. DATES: This rule is effective December 23, 2013. The incorporation by reference of certain publications in this rule is approved by the Director of the Federal Register as of December 23, 2013. FOR FURTHER INFORMATION CONTACT: Caroline Daly (Technical Information), Office of Energy, Policy & Innovation, 888 First Street NE., Washington, DC 20426, (202) 502-8931, caroline.daly@ferc.gov. Anna Fernandez (Legal Information), Office of the General Counsel, 888 First Street NE., Washington, DC 20426, (202) 502-6682, anna.fernandez@ferc.gov. SUPPLEMENTARY INFORMATION: Order No. 787 Table of Contents Paragraph Numbers I. Introduction 2. A. Background 2. B. NOPR 5. II. Discussion 7. A. Need For the Rule 18. 1. NOPR 18. 2. Comments 20. 3. Commission Determination 27. B. Scope of Information 33. 1. NOPR 33. 2. Comments 35. 3. Commission Determination 41. C. Entities Covered Under the Rule 46. 1. NOPR 46. 2. Comments 49. 3. Commission Determination 56. D. The No-Conduit Rule and Competitive Concerns 60. 1. NOPR 60. 2. Adequacy of No-Conduit Rule to Protect against Competitive Harm 65. 3. Exceptions to the No-Conduit Rule 90. III. Questions Posed by the Commission 100. A. Generator to Electric Transmission Operator Communications 100. 1. NOPR 100. 2. Comments 101. 3. Commission Determination 105. B. Three-Way Communication of Non-Public Operational Information 106. 1. NOPR 106. 2. Comments 107. 3. Commission Determination 115. C. Examples of Non-Public Operational Information 117. 1. NOPR 117. 2. Comments 119. 3. Commission Determination 123. IV. Clarification Regarding Table-Top Exercises 126. A. NOPR 126. B. Comments 127. C. Commission Determination 128. V. Miscellaneous 131. A. Monitoring, Existing Tariff Requirements, Document Destruction 131. 1. Comments 131. 2. Commission Determination 134. B. Costs of Information Sharing 137. 1. Comments 137. 2. Commission Determination 138. C. Implementation 139. 1. Comments 139. 2. Commission Determination 143. VI. Information Collection Statement 145. VII. Environmental Analysis 152. VIII. Regulatory Flexibility Act 153. IX. Document Availability 155. X. Effective Date and Congressional Notification 158. Order No. 787 Final Rule (Issued November 15, 2013) 1. In this Final Rule, the Federal Energy Regulatory Commission revises Parts 38 and 284 of the Commission's regulations to provide explicit authority to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce to share non-public, operational information with each other for the purpose of promoting reliable service or operational planning on either the public utility's or pipeline's system. 1 The revised regulations will help maintain the reliability of pipeline and public utility transmission service by permitting transmission operators to share information with each other that they deem necessary to promote the reliability and integrity of their systems. The Final Rule adopts the regulations proposed in the Notice of Proposed Rulemaking without modification. 2 1 In this Final Rule, the Commission refers to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce collectively as “transmission operators.” 2 Communication of Operational Information Between Natural Gas Pipelines and Electric Transmission Operators, 78 FR 44900 (July 25, 2013), FERC Stats. & Regs ¶ 32,699 (2013) (cross-referenced at 144 FERC ¶ 61,043 (2013) (NOPR)). I. Introduction A. Background 2. In recent years, reliance on natural gas as a fuel for electric generation has steadily increased. 3 This trend is expected to continue into the future, resulting in greater interdependence between the natural gas and electric industries. 4 Several events over the last few years, such as the Southwest Cold Weather Event, 5 demonstrate the crucial interaction between natural gas pipelines and electric transmission systems and the need for robust communication between these industry sectors to ensure that both systems operate safely and effectively for the benefit of their customers. 3 See, e.g., Energy Information Administration, Fuel Competition in Power Generation and Elasticities of Substitution (June 2012); Richard Smead, All Industry Segments Working for Success in Growing Gas-Fired Generation (Nov. 15, 2012); ISO-NE., Addressing Gas Dependence at 3 (July 2012) (reliance on natural gas-fired electricity in the region increased from five percent in 1990 to 51 percent in 2011). 4 See, e.g., North American Electric Reliability Corporation, 2013 Special Reliability Assessment: Accommodating an Increased Dependence on Natural Gas for Electric Power; Phase II: A Vulnerability and Scenario Assessment for the North American Bulk Power System at 1 (May 2013) (“Over the past decade, natural gas-fired generation rose significantly from 17 percent to 25 percent of U.S. power generation and is now the largest fuel source for generation capacity. Gas use is expected to continue to increase in the future, both in absolute terms and as a share of total power generation and capacity.”), available at http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_PhaseII_FINAL.pdf; Energy Information Administration, Annual Energy Outlook 2013 Early Release Overview (2013) (showing electric generation from natural gas rising from 13 percent in 1993 to 30 percent in 2040), available at http://www.eia.gov/forecasts/aeo/er/early_elecgen.cfm; The New England State Committee on Electricity, Natural Gas Infrastructure and Electric Generation: A Review of Issues Facing New England (Dec. 14, 2012), available at http://www.nescoe.com/uploads/Phase_I_Report_12-17-2012_Final.pdf. 5 See FERC/NERC, Report on Outages and Curtailments During the Southwest Cold Weather Event of February 1-5, 2011 (2011), available at http://www.ferc.gov/legal/staff-reports/08-16-11-report.pdf. 3. Since February 2012, the Commission has requested comment and conducted multiple technical conferences on various aspects of gas-electric interdependence and coordination in order to better understand the interface between the electric and natural gas pipeline industries and identify areas for improved coordination. 6 In this proceeding, the Commission addresses one aspect of gas-electric interdependence and coordination: communication and information-sharing between the natural gas and electric industries. 6 The NOPR contains a detailed description of the Commission's various actions on gas-electric coordination and will not be repeated here. 4. On December 7, 2012, the Commission issued a Notice of Request for Comments and Technical Conference regarding information sharing and communication issues between the natural gas and electricity industries. 7 In response, natural gas and electric industry participants described a variety of actions that are currently being taken to improve communications and information sharing between the two industries. While several entities acknowledged that system reliability and contingency planning could be further enhanced by the sharing of non-public, operational information directly between transmission operators, several transmission operators pointed out that there is general reluctance to share such information because of concerns that doing so could be a violation of current laws, regulations or tariffs, including the Commission's prohibition on undue discrimination. Accordingly, multiple industry participants requested that, in order to facilitate the exchange of information between transmission operators, the Commission should more clearly identify the types of operational information that may be shared between transmission operators and clarify that the sharing of such information does not violate the prohibition against undue discrimination. While electric generators generally did not oppose the sharing of such information, they, together with other entities, expressed concern about the communication of generator-specific information between an electric transmission operator and an interstate natural gas pipeline operator without the generator's knowledge. Some entities also expressed concern regarding the potential harm to industry participants from the improper use of commercially sensitive information. 8 7 Coordination between Natural Gas and Electricity Markets, Docket No. AD12-12-000 (Dec. 7, 2012) (Notice of Request for Comments and Technical Conference) ( http://www.ferc.gov/EventCalendar/Files/20121207134434-AD12-12-000TC1.pdf ); 77 FR 74180 (Dec. 13, 2012) ( http://www.gpo.gov/fdsys/pkg/FR-2012-12-13/pdf/2012-30063.pdf ). 8 A summary of these views was presented in the NOPR, and will not be repeated in detail here. See NOPR, FERC Stats. & Regs. ¶ 32,699 at PP 7-9 (cross-referenced at 144 FERC ¶ 61,043). B. NOPR 5. On July 18, 2013, the Commission issued the NOPR, in which it proposed to revise Parts 38 and 284 of its regulations to provide explicit authority to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce to share non-public, operational information with each other for the purpose of promoting reliable service or operational planning on either the public utility's or pipeline's system. As a protection against the disclosure of non-public, operational information, the Commission also proposed a No-Conduit Rule that prohibits subsequent disclosure of that information to a marketing function employee or to a third party. 6. Comments on the NOPR were due on August 26, 2013. Thirty-three parties filed comments. NGSA filed reply comments on September 30, 2013. Comments were received from Regional Transmission Organizations and Independent System Operators (RTOs/ISOs), electric utilities, interstate natural gas pipelines, LDCs, state regulators, generators, and other parties. Of these, 30 supported or did not oppose the NOPR 9 and three opposed it. 10 In general, most commenters support the proposed rule to help promote the reliability and efficiency of the natural gas and electric systems by eliminating legal uncertainty regarding the ability of interstate natural gas pipelines and electric transmission operators to exchange non-public, operational information. Some commenters request that the Commission modify or clarify the proposal in a number of respects. 9 American Electric Power Service Corporation (AEP), American Gas Association (AGA), American Public Power Association (APPA), Boardwalk Pipeline Partners, LP (Boardwalk Pipelines), California Independent Operator (CAISO), Duke Energy Corporation (Duke), Edison Electric Institute (EEI), Electric Power Supply Association (EPSA), Electricity Consumers Resource Council (ELCON), Enable Interstate Pipelines (Enable), International Transmission Company (ITC), Interstate Natural Gas Association of America (INGAA), ISO New England Inc. (ISO-NE), ISO/RTO Council (IRC), Massachusetts Municipal Wholesale Electric Company (MMWEC), Midcontinent Independent System Operator (MISO), National Rural Electric Cooperative Association (NRECA), Natural Gas Supply Association (NGSA), New England Natural Gas Industry (NE Gas Industry), New England Power Generators Association Inc. (NEPGA), New England States Committee on Electricity (NESCOE), New York ISO (NYISO), New York Public Service Commission (NYPSC), New York Transmission Owners (NYTOs), North American Electric Reliability Corporation (NERC), Pacific Gas and Electric Company (PG&E), Process Gas Consumers (PGC), Public Utilities Commission of Ohio (PUCO), Tennessee Valley Authority (TVA), Washington Gas Light Company (Washington Gas). 10 American Public Gas Association (APGA), Consumers Energy Company (Consumers Energy), and New Jersey Board of Public Utilities (NJBPU). II. Discussion 7. In this Final Rule, the Commission is adopting the NOPR as proposed. The Commission is modifying Parts 38 and 284 of the Commission's regulations to provide explicit authority to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce to share non-public, operational information with each other for the purpose of promoting reliable service or operational planning on either the pipeline's or public utility's system. The Commission also is adopting a No-Conduit Rule to provide additional protections against undue discrimination and ensure that the non-public, operational information shared under the rule remains confidential. 8. Communications between transmission operators serve a valuable and necessary purpose to help ensure reliability on both systems. With the increasing reliance on natural gas as a fuel for electric generation, ensuring robust communications between the transmission operators in the electric and natural gas industries is valuable to the ability of both systems to operate reliably and effectively. Electric transmission operators are continuously and near instantaneously balancing supply and demand to ensure the system remains in equilibrium. 11 In contrast, due to the physical characteristics of interstate natural gas pipelines, the pipelines require advance nominations to ensure they have sufficient line pack and storage available to meet scheduled daily load of all their customers, including the gas-fired generators, which may constitute significant load for a pipeline and which generally rely on a just-in-time natural gas supply and pipeline delivery. While pipeline line pack and storage provide some operational flexibility to pipelines to accommodate load swings throughout the day, short term swings in demand by gas-fired electric generators resulting from redispatch by electric transmission operators may be difficult to manage, particularly during times of coincident peak loads on interstate natural gas pipelines and electric transmission systems, such as during unusual cold weather events when end-use customers may rely on both natural gas and electricity. Communication between interstate natural gas pipelines and electric transmission operators can be invaluable to help ensure that electric transmission operators maintain grid reliability and that interstate natural gas pipelines can meet contractual and operational obligations to all of their shippers. 11 Electric transmission systems currently have limited electric storage capabilities. 9. Currently, interstate natural gas pipelines and electric transmission operators share non-public information with other transportation or transmission operators. For example, interstate natural gas pipeline operators routinely exchange nomination and scheduling information with other interstate natural gas pipeline operators and with upstream and downstream entities to confirm transportation nomination requests and to coordinate flows between the parties. 12 Transmitting electric utilities similarly coordinate the sharing of non-public interchange schedule information on a routine basis through mechanisms such as, for example, e-Tags. 13 This coordination helps ensure the safe and reliable transmission of electric power across a region. 12 The nomination process initiates the flow of gas with the natural gas transportation service provider. The natural gas transportation service provider then confirms the flow of natural gas with the corresponding upstream and downstream entities. Once the natural gas quantities are confirmed, the natural gas transportation service provider sends the scheduled quantities information to the shipper. See 18 CFR 284.12(a)(1)(1), NAESB Nomination Standard 1.3.2 (establishing the standards governing pipeline confirmations with upstream and downstream parties). 13 e-Tags are used by applicable Balancing Authorities, Reliability Coordinators, Interchange Authorities, Transmission Service Providers, Purchasing-Selling Entities, Generator-Providing Entities, and Load-Serving Entities to coordinate interchange schedules. See, e.g., NAESB Wholesale Electric Quadrant (WEQ) Business Practice Standards (Coordinate Interchange) requirement 004-2 (“Until other means are adopted by NAESB, the primary method of submitting the RFI [Request for Interchange] shall be an e-Tag communicated to and managed by the Sink BA's [Balancing Authority] registered e-Tag authority service using protocols compliant with the Version 1.8.1 Electronic Tagging Functional Specification.”) and applicability section (“The Coordinate Interchange Business Practice Standards apply to BA [Balancing Authority], RC [Reliability Coordinator], IA [Interchange Authority], Transmission Service Provider, PSE [Purchasing-Selling Entity], GPE [Generator-Providing Entity], Load-Serving Entity [LSE], and any TPSE [a PSE whose transmission approval rights are cited].”) NAESB WEQ Business Practice Standards (Version 003), published July 31, 2012. 10. In Order No. 698, the Commission recognized the need for inter-industry communications by adopting industry-developed standards requiring the exchange of operational information between the natural gas and electric industries. 14 These standards require a generator and its directly connected natural gas pipeline(s) to “establish procedures to communicate material changes in circumstances that may impact hourly flow rates.” 15 In addition, these standards ensure that interstate natural gas pipelines have relevant planning information to assist in maintaining the operational integrity and reliability of pipeline service, as well as to provide gas-fired generator operators with information as to whether hourly flow deviations can be honored. NAESB Wholesale Electric Quadrant (WEQ) Standard 011-1.6, also incorporated in the Commission's regulations, 16 requires that ISOs, RTOs, and other independent system operators establish written operational communication procedures with an appropriate interstate natural gas pipeline to be implemented when an extreme condition occurs. 14 Standards for Business Practices for Interstate Natural Gas Pipelines; Standards for Business Practices for Public Utilities, Order No. 698, FERC Stats. & Regs. ¶ 31,251 (2007), order on clarification and reh'g, Order No. 698-A, 121 FERC ¶ 61,264 (2007). In Order No. 698, the Commission incorporated by reference NAESB WGQ Standard 0.3.12 into its regulations and NAESB WEQ Standard 011. 15 NAESB WGQ Version 2.0 Business Practice Standard 0.3.12. See also Standards for Business Practices for Interstate Natural Gas Pipelines, Order No. 587-V, FERC Stats. & Regs. ¶ 31,332 (2012) (cross-referenced at 140 FERC ¶ 61,036) (2012), (incorporating by reference the Version 2.0 WGQ Business Practice Standards). See also 18 CFR 284.12(a) (2013). 16 18 CFR Part 38 (2013). 11. Sharing of operational information between interstate natural gas pipelines and electric transmission operators is akin to the sharing of operational information among interconnected parties. Both interstate natural gas pipelines and electric transmission operators could benefit from information regarding whether scheduled transactions on the others' systems will be carried out because of the potential effect on reliable service and operational planning. In many cases, gas-fired generators do not take natural gas at a uniform flow rate over a 24 hour period, and the electric transmission operator may find it valuable to know whether the interstate natural gas pipeline will be able to provide a non-uniform flow rate to meet the demands on the electric system. By the same token, it may be valuable to an interstate natural gas pipeline to know the demands that may be placed on its transportation system by gas-fired generators and whether such demands may cause a problem with its ability to deliver gas to other customers. Similarly, a disruption on an electric transmission line may force the electric transmission operator to shut down a gas-fired generator, which could cause increased gas pressure on an interstate natural gas pipeline forced to terminate gas deliveries to that generator. 12. Commenters participating in the Commission staff technical conferences, as well as comments to this rulemaking, expressed concern that, without further clarification of the ability of interstate natural gas pipelines and electric transmission operators to exchange information, necessary communications may not take place. Comments have focused on the applicability of both the statutory prohibitions on undue discrimination and the Standards of Conduct. Both interstate natural gas pipelines and electric transmission operators have stated that clarification of their ability to exchange non-public information would assist them in efficiently and reliably planning the operations of their respective systems and addressing emergencies. The Commission provides the requested clarification in this Final Rule. Sharing of information valuable to reliable operations between transmission operations is not the type of preferential treatment the Federal Power Act (FPA) and Natural Gas Act (NGA) are intended to restrict. We find, as discussed below, that the FPA and NGA provisions regarding undue discrimination or unjust and unreasonable acts and practices do not prevent the exchange of information between operators of interstate natural gas pipeline transportation systems and electric transmission operators provided for in this Final Rule. 13. Both the FPA and the comparable provisions of the NGA prohibit undue discrimination or preference. 17 However, FPA section 205(b) and NGA section 4(b) do not forbid preferences, advantages and prejudices per se. 18 Rather, FPA section 205(b) and NGA section 4(b) prohibit “undue” preferences, advantages and prejudices. 19 A difference in treatment is not unduly discriminatory when the difference is justified. 20 In interpreting FPA section 205(b) and NGA section 4(b), the courts have held that transmission providers cannot treat similarly situated customers differently 21 and that the disparate treatment of two customer classes does not in and of itself result in an undue preference or advantage or in an unreasonable difference in service if the customer classes are not similarly situated. 22 Whether a preference is “undue” depends on the specific facts of the behavior and the circumstances to determine whether disparities exist and whether those disparities are rationally justified. 23 17 16 U.S.C. 824d(b) (2012); 15 U.S.C. 717c(b) (2012). 18 See, e.g., Cities of Bethany v. FERC, 727 F.2d 1131, 1139 (D.C. Cir.), cert. denied , 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d 229 (1984). 19 See, e.g., Boroughs of Chambersburg v. FERC, 580 F.2d 573, 577 (D.C. Cir. 1978). 20 See Metropolitan Edison Co. v. FERC , 595 F.2d 851, 857 (D.C. Cir. 1979). See also Transmission Agency of N. California v. FERC, 628 F.3d 538, 549 (D.C. Cir. 2010) (citing Ark. Elec. Energy Consumers v. FERC, 290 F.3d 362, 367 (D.C. Cir. 2002) and Elec. Consumers Res. Council v. FERC, 747 F.2d 1511, 1515 (D.C. Cir. 1984)). 21 See Transmission Agency of N. California v. FERC, 628 F.3d at 549 (citing Sacramento Mun. Util. Dist. v. FERC, 474 F.3d 797, 802 (D.C. Cir. 2007)). 22 See, e.g., Sw. Elec. Coop., Inc. v. FERC, 347 F.3d 975, 981 (D.C. Cir. 2003). See also Michigan Consolidated Gas Co. v. FPC, 203 F.2d 895, 901 (3d Cir. 1953) and Complex Consol. Edison Co. of New York, Inc. v. FERC, 165 F.3d 992, 1012 (D.C. Cir. 1999). 23 See St. Michaels Utilities Comm'n v. Fed. Power Comm'n, 377 F.2d 912, 915 (4th Cir. 1967). 14. We find that the sharing of non-public, operational information between public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce and interstate natural gas pipelines for the purpose of promoting reliable service or operational planning is reasonable and not unduly discriminatory or preferential. Undue discrimination provisions apply to ensure that similarly situated customers are not subject to disparate rates or terms and conditions of service. As noted above, transmission operators are not similarly situated to other customers because they require access to non-public scheduling and other types of information from a variety of sources to help them maintain the reliability and integrity of the transportation and transmission systems. In addition, interstate natural gas pipelines are generally not wholesale customers of electric transmission operators. Likewise, RTOs/ISOs are not shippers on pipelines. Thus, we find that it is appropriate and necessary, with adequate safeguards, to expressly permit the sharing of non-public, operational information between transmission operators. 24 24 The Commission recognizes that some vertically-integrated transmission operators may have marketing function employees or affiliates, such as generators or local distribution companies that handle gas transactions. The Commission addresses concerns infra with respect to potential access and misuse of information shared pursuant to this Final Rule in the subsection entitled Adequacy of No-Conduit Rule to Protect against Competitive Harm. 15. To protect against the potential for undue discrimination, the Commission is relying on existing safeguards as well as the adoption of a No-Conduit Rule. First, while non-public, operational information may be useful for planning, transmission operators cannot deviate from the terms of their tariffs, and cannot operate in an unduly discriminatory manner. 25 Transmission operators are also subject to the same limitations on sharing information with their marketing function employees as provided under the Standards of Conduct. 26 The Commission's Standards of Conduct were adopted with respect to one aspect of potentially undue discrimination which may occur through exchanges of information between transmission providers and their marketing functions in certain situations. 25 See, e.g., ISO New England Inc., 142 FERC ¶ 61,058, at P 23 (2013) (available capacity must be dispatched “consistent with the pipeline's tariff” and “[t]he pipelines are required to allocate available capacity on a not unduly discriminatory basis among the various requestors of capacity.”). 26 18 CFR 358.6 and 358.7 (2013). 16. Second, the No-Conduit Rule included in the Final Rule will serve as an additional safeguard to ensure that transmission operators comply with the prohibitions against undue discrimination or preference with respect to their marketing function employees and third parties. The No-Conduit Rule prohibits recipients of non-public, operational information pursuant to the Final Rule from subsequently disclosing that information to a third party or a marketing function employee, as that term is defined in section 358.3(d) of the Commission's regulations. As discussed below, adoption of this No-Conduit Rule addresses many of the concerns regarding the sharing of commercially sensitive, customer-specific information among transmission operators. 27 27 As discussed further below, this No-Conduit Rule applies only to the information the interstate natural gas pipeline and electric transmission operator exchange pursuant to this Final Rule. It does not otherwise affect the ability of interstate natural gas pipelines and local distribution companies (LDCs) to exchange operational information regarding actual or potential pipeline or distribution system operational conditions affecting the gas flow between these physically interconnected parties. Nor does it affect the ability of an electric transmission operator to share its own information with an LDC, if otherwise permitted under its tariff. This Final Rule also does not prohibit electric transmission operators from sharing non-public, operational information received from a pipeline pursuant to this rule with LDCs, if otherwise provided for in tariff provisions approved by the Commission. 17. Based on the potential need for the exchange of information to promote the reliability and operational integrity of the transmission and transportation systems the Commission regulates, and the protections against undue discrimination, the Commission finds that the exchange of non-public, operational information between transmission operators does not violate the statutory prohibitions on undue discrimination or preference as discussed herein. As discussed in more detail infra, to the extent that an electric transmission operator or interstate natural gas pipeline has a tariff provision which precludes a communication that would otherwise be authorized under the Final Rule, it will have to make a filing under section 205 of the FPA or section 4 of the NGA to revise that tariff provision to allow the exchanges of information permitted by this Final Rule. Below, the Commission will address the comments received on the NOPR. A. Need For the Rule 1. NOPR 18. In the NOPR, the Commission pointed out that, while several entities acknowledged that system reliability and contingency planning could be further enhanced by the sharing of non-public, operational information directly between transmission operators, several transmission operators pointed out that there is general reluctance to share such information because of concerns that doing so could be a violation of current laws, regulations or tariffs. 28 Accordingly, several entities, including interstate natural gas pipelines and electric transmission operators, requested that, in order to facilitate the exchange of information between transmission operators, the Commission should more clearly identify the types of operational information that may be shared between transmission operators and clarify that the sharing of such information does not violate the prohibition against undue discrimination. 28 NOPR, FERC Stats. & Regs. ¶ 32,699 at P 7 (cross-referenced at 144 FERC ¶ 61,043). 19. In an effort to provide certainty to the industry and remove barriers—real or perceived—to the sharing of non-public, operational information, the Commission proposed to revise its regulations to authorize expressly the exchange of non-public, operational information between electric transmission operators and interstate natural gas pipelines. In consideration of the concerns regarding the exchange of non-public operational information, the Commission also proposed to adopt a No-Conduit Rule which prohibits recipients of the non-public, operational information from subsequently disclosing or being a conduit for subsequently disclosing that information to third parties or marketing function employees. 2. Comments 20. The large majority of commenters generally support or do not oppose the NOPR. Many commenters generally agree that the rule is needed to provide certainty to interstate natural gas pipelines and electric transmission operators so that they may exchange information needed to promote reliable service and operational planning. They also generally support the proposed scope of information that may be shared under the rule, as well as the limitations on disclosures of such information via the No-Conduit Rule. 21. For example, NERC states that, based on its extensive study of both industries and stakeholder discussions with electric and natural gas operators, transmission operators could make better informed operating decisions, particularly during seasonal peak electric system conditions, if they have the ability to obtain information about interstate natural gas pipeline flows and pipeline system conditions. 29 NESCOE states that the implementation of these revisions in the near-term would provide regions like New England with certainty and flexibility to put in place what has the strong potential to be an effective and low cost reliability measure. 30 INGAA states that the proposed scope of information transmission operators may share under the proposed regulations is appropriate and provides sufficient flexibility and guidance. 31 29 NERC Comments at 5-6. 30 NESCOE Comments at 7. 31 INGAA Comments at 2. 22. Three commenters, APGA, Consumers Energy, and NJBPU, oppose the Commission's proposed rulemaking. 23. As a general matter, APGA believes that the proposed regulations in the NOPR open the door to the release of commercially sensitive, non-public information without adequate support for such action and without adequate guidelines for such release. 32 First, APGA contends that interstate natural gas pipelines have made clear that they do not need additional information to operate reliably and that they already make a significant amount of operational data available to the public on a non-discriminatory basis. 33 Second, APGA contends that most electric transmission operators are not experiencing reliability problems related to inadequate access to non-public, gas-related information and that much of the operational data electric transmission operators say they would like to have is already publicly available. 34 APGA contends that the other data electric transmission operators say they would like to have, such as confidential gas availability information indicating whether a specific generator can be dispatched reliably, is information that the interstate natural gas pipelines simply do not have. Third, APGA states that generators may be harmed by secret communications between transmission operators regarding whether a given generation facility may or may not have adequate gas supplies to operate because interstate natural gas pipelines do not have sufficient information to answer that question accurately. APGA argues that, given that the record fails to support a finding of a critical need for the exchange of non-public information to foster reliability and due to the importance of not permitting the sharing of confidential, non-public data absent a showing that such sharing would be beneficial, the NOPR should be abandoned. 35 32 APGA Comments at 1. 33 Id. at 4. 34 Id. at 4-5. 35 Id. at 7. 24. Instead, APGA argues that the Commission should conduct a case-by-case evaluation of what non-public information specific interstate natural gas pipelines and electric transmission operators may release and under what circumstances, rather than the sweeping rule proposed in the NOPR. 36 APGA also states that the real issue is the lack of interstate natural gas pipeline capacity to meet peak demand from electric generators resulting from electric generators' failure to subscribe to adequate firm transportation service. 37 36 Id. at 8 and 11. 37 Id. at 11 & n.28. 25. Similar to APGA, NJBPU is concerned about the potential for harm to industry participants, as well as the potential for improper use of non-public, operational information. 38 NJBPU does not believe that the Commission's proposed No-Conduit Rule adequately responds to the concerns of NJBPU and various others. NJBPU states that, while the proposed No-Conduit Rule may address subsequent disclosure to an affiliate or third party, it does not address the problem of abuse, gaming, and market manipulation by an initial recipient of non-public, operational information. 38 NJBPU Comments at 3. 26. Consumers Energy argues that the proposed rule would do little to help ensure reliable service. 39 Consumers Energy points out that there has never been an attempt to incent discussion by or between coal producers, rail or barge transporters under the guise of increasing electric transmission reliability. Consumers Energy asserts that transmission operators can and will address reliability through the use of tariffs and contracts. Consumers Energy believes contractually specified flow rates and nominations limitations have provided and can continue to provide the information that is necessary to ensure a continued high level of reliability of interstate natural gas pipelines and that this will, in turn, ensure a continued high level of reliability of the electric transmission grid. 40 Consumers Energy further contends that RTOs' resource adequacy-related tariff provisions adequately inform them as to the availability of resources under their dispatch. Lastly, Consumers Energy states that, rather than permitting the communication of non-public, operational information between transmission operators to ensure service reliability, the appropriate solution to the problem of ensuring service reliability in the face of increased reliance on natural gas as a fuel for electric generation is to recognize the true cost of such reliability. 41 This, Consumers Energy contends, will serve to increase investment in the interstate natural gas pipeline and LDC infrastructure that will be needed to serve this expanding load. 39 Consumers Energy Comments at 3. 40 Id. at 4. 41 Id. at 5. 3. Commission Determination 27. We conclude that we need to revise our existing regulations to provide greater certainty to electric transmission operators and interstate natural gas pipelines regarding the permissibility of sharing non-public, operational information, including customer-specific information, for the purpose of promoting reliable service or operational planning. As discussed above, the record and the operational realities of the two industries show that the exchange of non-public, operational information would be valuable to foster reliability. While interstate natural gas pipelines and electric transmission operators publicly post a significant amount of important information needed by interstate natural gas pipeline shippers and electric transmission customers, interstate natural gas pipelines and electric transmission operators need other operational information, including non-public information, in order to reliably manage the operations of these systems. Interstate natural gas pipelines already provide non-public operational information to other interconnected physical parties to ensure accurate scheduling of flows on their systems. Electric transmission operators similarly communicate non-public interchange scheduling information and other information among themselves and with Balancing Authorities. Permitting interstate natural gas pipelines and electric transmission operators to exchange non-public, operational information with each other will help them better plan for day-to-day operations as well as better manage their respective system needs during potential coincident peaks that may limit the flexibility of both systems. 28. Further, the adoption of a No-Conduit Rule, together with existing safeguards, reasonably addresses the concerns around the improper use of non-public, operational information. 42 42 As discussed earlier, interstate natural gas pipelines and electric transmission operators are not similarly situated to other customers since they (1) are not typically customers of each other; and (2) operate physical systems and require information about physically interconnected and interdependent systems in order to maintain efficient and reliable service to their customers. 29. We disagree with APGA's characterization that the proposed rule lacks value. The majority of commenters expressly support the rule and in many of their comments they affirm that the rule would promote reliable service. We are persuaded by these comments that argue that expressly permitting the sharing of non-public, operational information will promote reliable service and operational planning. For example, representatives and members of the interstate natural gas pipeline industry, including INGAA and Boardwalk Pipelines, are among the many commenters that expressly support the rule. Also, several entities, including electric transmission operators, have specifically identified non-public information that they would like to receive from or share with interstate natural gas pipelines under the rule because they believe it would promote reliable service or operational planning on both systems. Such information includes real-time pipeline flow information, generator service nominations and priority, and generator outage information. Improved reliability and operational planning amongst transmission operators will benefit both electric and natural gas industries as well as ultimate consumers. 30. We do not agree with Consumers Energy and APGA that this rule is unnecessary because the exchange of information can be achieved solely through the use of tariffs and contracts or through a case-by-case evaluation. As explained above, interstate natural gas pipelines and electric transmission operators may need a variety of information from each other depending on individual circumstances and may not be in a position to anticipate in advance exactly what information needs to be exchanged. Despite this need, these transmission operators have expressed concerns that the Commission's current regulations and uncertainty over their ability to share non-public, operational information acts as an impediment to exchange of this information. Adopting regulations that eliminate transmission operator concerns about such exchanges will provide the flexibility that they require. 31. APGA also suggests that the real issue is the lack of pipeline capacity resulting from generators' failure to subscribe to adequate firm transportation service. That does not diminish the need for transmission operators to be able to exchange non-public, operational information. No one disputes that the electric industry has become increasingly dependent on gas-fired generation and coordination is integral to promoting reliable service. Natural gas and electric coordination has many facets including communications, scheduling, and capacity release. 43 In this Final Rule, the Commission is focused solely on communications. 43 Coordination between Natural Gas and Electricity Markets, Docket No. AD12-12-000 (July 5, 2012) (Notice of Technical Conferences) ( available at http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=13023450); 77 FR 41184 (July 12, 2012) ( available at http://www.gpo.gov/fdsys/pkg/FR-2012-07-12/pdf/2012-16997.pdf ); Coordination between Natural Gas and Electricity Markets, Docket No. AD12-12-000 (Dec. 7, 2012) (Notice Of Request for Comments and Technical Conference) ( http://www.ferc.gov/EventCalendar/Files/20121207134434-AD12-12-000TC1.pdf ); 77 FR 74180 (Dec. 13, 2012) ( http://www.gpo.gov/fdsys/pkg/FR-2012-12-13/pdf/2012-30063.pdf ); Coordination between Natural Gas and Electricity Markets, Docket No. AD12-12-000 (Mar. 5, 2013) (Notice of Technical Conference). 32. The Commission also finds that existing safeguards, together with the adoption of a No-Conduit Rule, reasonably address APGA's and NJBPU's concerns regarding the improper use of non-public, operational information, whether by an initial recipient of non-public, operational information or in a subsequent disclosure. In addition, the Commission's regulations expressly preclude the type of abuse, gaming, and market manipulation that NJBPU warns against. 44 As we have noted, both interstate pipelines and electric transmission operators must comply with their tariffs and applicable Commission regulations when making capacity allocation and other operational determinations. 45 Moreover, under the Standards of Conduct and the No-Conduit Rule adopted in this proceeding, interstate natural gas pipelines and electric transmission operators cannot share this information with their marketing function employees. 46 Nor can they provide this information to third-parties. While any exchange of non-public information may pose some disclosure risks, we find that, on balance, the regulations adopted here, including the No-Conduit Rule, appropriately balance the significant benefits to be gained by robust information exchange among interdependent transmission operators against the potential risks from disclosure of non-public information. 44 The Commission would have jurisdiction to pursue violations of the Commission's Anti-Manipulation Rule, 18 CFR 1c (2013) if an entity (including a non-jurisdictional entity) uses a fraudulent scheme or makes a material misrepresentation that would operate as a fraud or deceit upon any entity or market; has the requisite scienter; and in connection with a transaction subject to the Commission's jurisdiction. 45 See ISO New England Inc., 142 FERC ¶ 61,058, at P 23 (2013) (available capacity must be dispatched “consistent with the pipeline's tariff” and “[t]he pipelines are required to allocate available capacity on a not unduly discriminatory basis among the various requestors of capacity.”) 46 See 18 CFR 358.6 and 358.7 (2013). B. Scope of Information 1. NOPR 33. In the NOPR, the Commission proposed to authorize public utilities providing transmission service and interstate natural gas pipelines to share non-public, operational information when such information is for the purpose of promoting reliable service or operational planning. The Commission stated that the term “non-public, operational information” is information that is not publicly posted, yet helps transmission operators to operate and maintain either a reliable pipeline system or a reliable electric transmission system on a day-to-day basis, as well as during emergency conditions or for operational planning. The NOPR stated that non-public, operational information may also include generator, pipeline, or transmission-specific information. In using the term “non-public, operational information,” the Commission intends that transmission operators would be permitted to share information dealing with actual, anticipated, or potential effects on the ability to provide electric and gas service based on the respective operator's experience and understanding of the operational capability and customer demands on their respective systems. 34. The NOPR sought comment on the scope of the non-public, operational information that transmission operators may share under the proposed regulations. 47 The Commission stated that the proposed regulations were structured to provide significant flexibility to individual transmission operators—who have the most insight and knowledge of their systems—to determine what non-public operational information, if any, would promote reliable service on their systems, without fear of violating the Commission's prohibitions on undue discrimination and undue preference or such an exchange being considered an unjust or unreasonable practice. 48 In proposing the regulations, the Commission stated its intent to remove barriers to the sharing of non-public, operational information, not just during emergencies, but also for day-to-day operations, planned outages, and scheduled maintenance. 49 47 NOPR, FERC Stats. & Regs. ¶ 32,699 at P 24 (cross-referenced at 144 FERC ¶ 61,043). 48 Id. P 11. 49 Id. P 10. 2. Comments 35. Several commenters express support for allowing transmission operators to determine the specific non-public, operational information to share, as opposed to the Commission providing a prescriptive, exhaustive list of information that may be shared. 50 In supporting the NOPR's proposed scope, these commenters state that the proposed rule would permit flexible communications that are appropriately suited to the differences in information needs of each region. For example, NEPGA states that the NOPR provides for an appropriate amount of deference by defining the categories and scope of information that may be shared without narrowly defining each type of information. 51 50 MMWEC Comments at 4; NEPGA Comments at 3; PG&E Comments at 4 and 5; TVA Comments at 2; NYTOs Comments at 7; MISO Comments at 3; INGAA Comments at 2 and 4; Enable Comments at 1; APPA Comments at 5; PUCO Comments at 6; NRECA Comments at 7; CAISO Comments at 3; and EEI Comments at 4 and 5. 51 NEPGA Comments at 3. 36. AGA agrees with the Commission that the proposed communications are important not only during emergencies or critical situations, but also when conditions, or emerging conditions, could lead to events on either system that have the potential to threaten the integrity or reliability of one or both of the systems. 52 NERC contends that the exchange and availability of real-time, day-ahead, and season-ahead gas flow information and data to transmission system operators will best address electric vulnerabilities related to natural gas fuel disruptions. 53 52 AGA Comments at 5. 53 NERC Comments at 6. 37. Beyond supporting the approach proposed in this rulemaking, some commenters warned of the dangers of trying to develop an exhaustive list of the permitted communications. For example, MMWEC expressed concern about the chilling effect on system operators that would result if the Commission issued a specific list of information permitted to be shared. MMWEC states that under such a proscriptive approach, operators would be wary of violating Commission rules by sharing information not specifically identified. 54 MMWEC further argues that it is better to encourage a broad range of information sharing rather than a restrictive approach considering the critical situation in New England. 55 PG&E notes that the use of a specific list of information may also impede communications should such a list exclude a key type of information. 56 54 MMWEC Comments at 4. 55 Id. 56 PG&E Comments at 5. 38. A few commenters, however, oppose the generality of the proposed scope of communications permitted in the NOPR and request greater specificity of the non-public, operational information that may be shared between transmission operators. 57 For example, NGSA contends that the lack of specific parameters on what information sharing is acceptable creates further uncertainty and concern for market participants. 58 NGSA argues that the scope of the NOPR, which allows the sharing of any information for the purpose of promoting reliable service and operational planning, is overly broad and could allow operators to share commercially sensitive information. 59 NGSA proposes that the Commission limit interstate natural gas pipeline and electric transmission operators' ability to share non-public information by setting parameters for what information is acceptable for operators to share. 60 NGSA contends that providing parameters for what information can be shared would reduce confusion and give industry greater confidence that commercially sensitive information was not being disclosed without companies' knowledge. NJBPU states that the Commission should provide clear and explicit limits as to what information should be kept confidential and what information may be disclosed. 61 57 AEP Comments at 4; NGSA Comments at 6-9; and NJBPU Comments at 3. 58 NGSA Comments at 6. 59 Id. at 7. 60 Id. at 8. 61 NJBPU Comments at 3. 39. Consumers Energy is concerned that because the proposed rule does not provide a specific list of non-public, operational information that can be shared, the proposal raises the potential for compliance issues related to interpreting what information may and may not permissibly be shared. 62 Consumers Energy is also concerned with the potential consequences for unknowingly receiving information that could not permissibly be shared and the consequences of taking action, or failing to act, based on the receipt of such information. 62 Consumers Energy Comments at 5. 40. In addition, some commenters believe that the sharing of non-public, operational information should be limited to emergencies. In particular, ELCON urges the Commission to emphasize that the central purpose of information sharing between interstate natural gas pipelines and electric transmission operators is to address system reliability and information sharing and, therefore, should focus on unusual non-routine circumstances and not on normal day-to-day operations. 63 ELCON states that outages, potential delivery restrictions, or curtailments that could occur during extreme weather events are examples of such unusual circumstances that would warrant the information sharing between operators. NE Gas Industry states that the proposed communications are critical in emergency situations of imminent reliability concerns when the communications can have the most immediate and positive impact, but should not be relied upon by the RTOs/ISOs on a day-to-day basis in ensuring the reliability of the natural gas-fired generators in their service territories. 64 63 ELCON Comments at 2. 64 NE Gas Industry Comments at 8. 3. Commission Determination 41. The Commission adopts the NOPR proposal to provide explicit authority to transmission operators to share non-public, operational information with each other for the purpose of promoting reliable service or operational planning on either the public utility or interstate natural gas pipeline's system. In adopting the NOPR proposal, the Commission is intentionally permitting the communication of a broad range of non-public, operational information to provide flexibility to individual transmission operators, who have the most insight and knowledge of their systems, to share that information which they deem necessary to promote reliable service on their system. The Commission is not persuaded by the requests of NGSA, AEP, and NJBPU that the Commission specify the communications that transmission operators may share under the rule. As described above, the exchange of non-public, operational information between transmission operators would be to promote the reliability and operational integrity of both the electric transmission and pipeline systems. Given the wide variety of non-public operational information that may be needed for this purpose both now and in the future, it is not practicable to develop a specific and exhaustive list defining the permissible communications. 65 The Commission finds that the inclusion of such a list in the regulations would unreasonably limit the flexibility of transmission operators to determine what information they need based upon the individual circumstances of their systems. 65 Below in section III.C we address comments regarding the examples of non-public operational information included in the NOPR. 42. In addition, the Commission recognizes that the informational needs of system operators vary by region and, therefore, a specific and exhaustive list of permissive communications that may be relevant in one region may not address the communications and operational needs of transmission operators in another region. The Commission also recognizes that the informational needs of transmission operators may evolve over time as the generation mix in regions change and as transmission operators develop further insight into, and gain additional experience with, gas and electric coordination issues. In response to Consumers Energy's concern about what information may permissibly be shared, to the extent that a transmission operator is uncertain as to what information may and may not permissibly be shared, the Commission's compliance help desk is available to industry for informal guidance. 66 66 The Compliance Help Desk is available for persons seeking technical assistance involving compliance with the statutes, rules, regulations, and tariffs administered by the Commission. See http://www.ferc.gov/contact-us/compliance-help-desk/compliance-help-desk.asp . 43. The Commission reaffirms its intention, as stated in the NOPR, to remove barriers to the sharing of non-public, operational information between transmission operators not just during emergencies, but also for day-to-day operations, planned outages, and scheduled maintenance. The communication of non-public, operational information permitted under this Final Rule will be applicable in all operational situations, that is, during both emergency and non-emergency situations. While communications permitted under the rule will be especially valuable in emergency situations, transmission operators should feel confident in their ability to engage in robust communications with each other, subject to the No-Conduit Rule, whenever necessary to promote reliable service, including on a day-to-day basis. 44. The Commission disagrees with ELCON that information sharing permitted under the rule should focus on unusual, non-routine circumstances such as outages during extreme weather events. The Commission's intent in providing explicit authority to transmission operators to share non-public, operational information with each other is to provide certainty. In part, the rule is designed to permit exchanges of information that may limit or prevent extreme weather events from having the impacts about which ELCON is concerned. It could create further confusion or complexity to require transmission operators to decipher whether system conditions have risen to the level of unusual or non-routine before they engage in communications that promote reliable service or operational planning. Therefore, the Commission declines to limit communications or to create a new definition of what constitutes an emergency for the purpose of expressly authorizing communications under this rule. 45. In order to maintain reliability, it will be important for transmission operators to coordinate planned outages and scheduled maintenance on both natural gas and electric systems so that any potential challenges may be identified more quickly, thus allowing more time to develop reliable solutions. The Commission is encouraged by the ongoing efforts regions are undertaking to improve coordination of scheduled maintenance and planned outages, and is hopeful that this Final Rule will allow for greater collaboration between the industries. The Commission re-emphasizes that communications for both electric transmission operators and interstate natural gas pipelines are voluntary, and encourages regions to develop the communications processes or protocols appropriately tailored to the needs of transmission operators in each individual region. C. Entities Covered Under the Rule 1. NOPR 46. In the NOPR, the Commission proposed to provide explicit authority to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce to share non-public, operational information with each other for the purpose of promoting reliable service or operational planning on either the public utility's or pipeline's system. 47. The NOPR recognized the existing exchanges of information among pipelines and among electric transmission operators that promote reliable service or operational planning. It also noted that, while the Commission regulates interstate service provided by intrastate pipelines, Hinshaw pipelines, and LDCs, the companies themselves are subject to state regulation and may exchange information subject to any state regulations that govern their operations. 48. It was also noted in the NOPR that communications between transmission operators and generators are not covered by the proposed rule, but that transmission operators may always discuss generator-specific information with the relevant generator. 2. Comments 49. AGA and Duke urge the Commission to clarify that public utilities and interstate natural gas pipelines may share non-public, operational information with intrastate pipelines and LDCs for the purpose of promoting reliable service or operational planning. 67 In its reply comments, NGSA states that, to the extent that LDCs, intrastate pipelines, gatherers and generators are allowed to communicate with interstate natural gas pipelines and electric transmission operators, the Commission should require that the No-Conduit Rule be extended to them as a measure of protection for any non-public information that may have been inadvertently conveyed. Applying the No-Conduit Rule to all entities that are allowed to communicate under the proposed rule, NGSA asserts, could help protect commercially sensitive information. 68 67 AGA Comments at 5-6, 8; Duke Comments at 3. 68 NGSA Reply Comments at 4-5. 50. The NYTOs urge the Commission to make clear in the Final Rule that transmission operators may share non-public, operational information with LDCs on a confidential basis. 69 While the NYISO is aware that state regulations govern the operations of intrastate pipelines, Hinshaw pipelines, and LDCs, 70 the NYISO states that receiving information from intrastate and LDC pipelines would be helpful and urges the Commission to encourage the same shared communication between these entities and transmission operators. 71 The NYTOs state that, like transmission operators, LDCs are not similarly situated to other customers because they require access to non-public information from a variety of sources to assist in ensuring the reliability and integrity of their systems. 72 Further, the NYTOs state that LDCs are not generally customers of electric system operators and RTOs/ISOs are not customers of LDCs. The NYTOs state that, while LDCs are shippers on interstate natural gas pipelines, for the purposes of maintaining reliability and operational planning, LDCs' actions are more akin to a system operator than a gas customer—especially when evaluating fuel security risks for gas-fired generation located behind their city-gates. 69 NYTOs Comments at 6. 70 NYISO Comments at 3. 71 Id. at 2-3. NYISO asserts that the majority of New York Control Area gas-fired generators are located behind an LDC, as opposed to directly connected to the interstate pipelines. 72 NYTOs Comments at 6. 51. AGA asserts that LDC employees directly responsible for operating the local gas system need access to such non-public, operational information to assist in ensuring the integrity of their system. Moreover, AGA believes that such communications are not currently prohibited under the NGA or the Commission's Standards of Conduct. 73 73 AGA Comments at 6. 52. Further, AGA states that the Commission's proposed revisions are unclear with respect to LDCs. 74 AGA states that proposed sections 38.2 and 284.12 refer to pipelines covered by section 284.12(b)(4) of the Commission's regulations as entities authorized to receive non-public, operational information for the purposes of promoting reliable service or operational planning. AGA states that it is unclear whether the term “pipelines” in that context is limited to interstate natural gas companies subject to the Commission's jurisdiction under section 1(b) of the NGA or includes any pipeline providing service under the Commission's Part 284 regulations implementing the Natural Gas Policy Act of 1978. AGA states that, if the former, LDCs would not be considered pipelines authorized to receive non-public, operational information and, if the latter, an LDC would only be considered a pipeline authorized to receive non-public, operational information to the extent the LDC provides interstate transportation or storage service under Part 284, Subpart C or G. AGA states that LDCs in their traditional role as bundled retail sales or gas service providers would not be considered “pipelines” under the Commission's proposal. 75 AGA, therefore, recommends that the Commission clarify that public utilities and interstate natural gas pipelines may share non-public, operational information with LDCs for the purpose of promoting reliable service or operational planning. 76 74 Id. at 7. 75 Id. at 7-8. 76 Id. at 8. 53. As a separate issue, AGA is also concerned that “the interpretation that `pipelines' under proposed sections 38.2 and 284.12(b)(4) would include an intrastate or Hinshaw pipeline providing interstate transportation or storage service under Part 284, Subpart C or G, may impose new obligations on LDCs contrary to the Commission's permissive approach in this proceeding.” 77 AGA states that, currently, the Commission's Standards of Conduct apply to interstate natural gas pipelines and impose no regulatory obligations directly on LDCs. AGA further states that, if an intrastate or Hinshaw pipeline were to be considered a “pipeline” subject to revised section 284.12(b)(4), questions arise regarding whether and how it must comply with the proposed No-Conduit Rules, which prohibit disclosure to marketing function employees as defined in section 358.3(d). In light of the potential ambiguity, AGA urges the Commission to “reiterate its intent not to impose new regulatory obligations in this proceeding and clarify that an intrastate or Hinshaw pipeline providing interstate service under Part 284 of the Commission's regulations is not a `pipeline' for purposes of proposed section 284.12(b)(4).” 78 77 Id. 78 Id. 54. EEI and Duke Energy request confirmation that otherwise permissible communications will not be impacted by the NOPR. 79 Specifically, EEI requests that the Final Rule include regulatory text that expressly states that its scope does not and is not intended to prohibit otherwise permissible communication between market participants. 80 EEI states that this would include, for example, communications between: public utilities and their customers; interstate natural gas pipelines and their customers; interstate natural gas pipelines and LDCs; and LDCs and generators, as there are many generation units that are served by LDCs behind the city gate. 79 Duke Comments at 2; EEI Comments at 3. 80 EEI Comments at 3-4. 55. Similarly, Duke Energy requests that the Commission clarify that communication between interstate natural gas pipelines and LDCs, and LDCs and generators (served behind the city gate), as well as communications among the pipelines, transmission operators, generators being served by the interstate natural gas pipeline and transmission operator, and other non-marketing employees of the transmission operator, are not prohibited, provided that the Standards of Conduct No-Conduit Rule is followed and non-public transmission or customer information is not shared with marketing function employees. 81 81 Duke Comments at 2. 3. Commission Determination 56. In this Final Rule, the Commission adopts proposed sections 38.2 and 284.12(b)(4) as proposed in the NOPR. The Commission finds that the nature and scope of non-public, operational information that may expressly be shared under the rule, including commercially sensitive, customer-specific information, warrants limiting the blanket authorization of the exchange of such information granted herein to interstate natural gas pipelines and public utilities that own, operate, or control facilities used for the transmission of electric energy in interstate commerce subject to the Commission's jurisdiction. 82 As discussed below, we decline to authorize in this Final Rule the disclosure of non-public, operational information, which may include commercially sensitive, customer specific information, to LDCs, intrastate pipelines, or gatherers. However, we clarify that the No-Conduit Rule adopted in this Final Rule only applies to the non-public, operational information an electric transmission operator provides to the interstate pipeline pursuant to this rule or vice versa. Therefore, the No-Conduit Rule adopted in this Final Rule does not otherwise affect the ability of interstate natural gas pipelines to exchange operational information among themselves or with LDCs regarding actual or potential pipeline or distribution system operational conditions affecting the gas flow between these physically interconnected parties. Nor does it affect the ability of an electric transmission operator to share its own information with an LDC, if otherwise permitted under its tariff. Similarly, the No-Conduit Rule does not otherwise affect the ability of interstate natural gas pipelines and intrastate natural gas pipelines and gatherers to exchange operational information regarding operational conditions affecting the gas flows between these physically interconnected parties. Moreover, this Final Rule does not prohibit electric transmission operators from sharing non-public, operational information received from a pipeline pursuant to this Final Rule with LDCs, if the information sharing and appropriate safeguards to prevent inappropriate use or disclosure of shared information is separately authorized by the Commission, for example pursuant to a FPA section 205 tariff filing by an ISO or RTO. 82 Wholesale Competition in Regions with Organized Electric Markets, Order No. 719, FERC Stats. & Regs. ¶ 31,281 at P 423 (2008) (cross-referenced at 125 FERC ¶ 61,071 (2008)) (Commission determined that it was necessary to retain the practice of masking the identity of participants when releasing offer and bid data). 57. We recognize that LDCs and other parties do have a significant role to play in maintaining reliability of both interstate natural gas pipeline transportation systems and electric transmission systems, as the commenters point out, particularly since many electric generators take service from LDCs, rather than directly from interstate pipelines. However, because the Commission generally does not have jurisdiction over LDCs, and because the scope of the authorized non-public, operational information exchange between interstate natural gas pipelines and electric transmission operators under this Final Rule is broad, we are reluctant to authorize blanket authority for interstate natural gas pipelines or electric transmission operators to pass such information to non-jurisdictional LDCs. Instead, we prefer to proceed on a case-by-case basis with respect to electric transmission operators sharing non-public, operational information received from a pipeline pursuant to this Final Rule with LDCs. Electric transmission operators that see the need for such communication given the circumstances on their systems may develop tariff provisions that establish acceptable procedures for the handling and protection from inappropriate disclosure or use of such information. 83 83 For example, such tariff conditions might require the LDC to enter into a non-disclosure agreement (NDA). 58. For example, in a recent, unprotested tariff filing by the California Independent System Operator (CAISO), 84 CAISO amended its tariff to specifically authorize the CAISO to share, under a non-disclosure agreement, outage information with natural gas transmission and distribution utilities operating interstate and/or intrastate natural gas pipelines that serve natural gas-fired generation resources within the CAISO Balancing Authority Area, with or without notice to the affected market participant. The information CAISO may share includes, but is not limited to, the identity of individual natural gas-fired generation resources that are needed to support reliability of the CAISO Balancing Authority Area in the event of a natural gas shortage, natural gas pipeline testing and maintenance, or other curtailment of natural gas supplies. If they believe it necessary or appropriate, other electric transmission operators may make similar FPA section 205 tariff filings to facilitate greater sharing of non-public, operational information received from a pipeline pursuant to this Final Rule with entities such as LDCs. We encourage those electric transmission operators that are concerned about generators that are located behind an LDC to consider developing such tariff revisions. 84 Cal. Indep. Sys. Operator Corp., Docket No. ER12-278-000 (Dec. 8, 2011) (delegated letter order). 59. AGA requests clarification as to the whether the term pipeline includes intrastate pipelines. The Commission clarifies that the term “pipeline” in section 284.12(b)(4) adopted in this Final Rule refers to interstate natural gas pipelines that transport gas under subparts B or G of Part 284. 85 Section 284.12(b)(4) is a new subsection of existing section 284.12(b). The first sentence of that section makes clear that the word “pipeline” as used throughout section 284.12(b) refers only to “an interstate pipeline that transports gas under subparts B or G of this part.” Thus, an intrastate or Hinshaw pipeline providing interstate service under Part 284 of the Commission's regulations is not a “pipeline” for purposes of section 284.12(b)(4). 85 See 18 CFR 284.12(b) (2013). D. The No-Conduit Rule and Competitive Concerns 1. NOPR 60. In the NOPR, the Commission proposed to adopt a No-Conduit Rule that would prohibit all public utilities and interstate natural gas pipelines, as well as their employees, contractors, consultants, or agents, from disclosing, or using anyone as a conduit for the disclosure of, non-public, operational information they receive under this rule to a third party or to its marketing function employees, as that term is defined in section 358.3 of the Commission's regulations. The Commission stated that the No-Conduit Rule, in addition to protections already in place, would ensure that any non-public, operational information shared under the proposed regulations remains confidential and is shared among transmission operators in a manner that is consistent with the prohibition on undue discrimination. 86 86 NOPR, FERC Stats. & Regs. ¶ 32,699 at P 26 (cross-referenced at144 FERC ¶ 61,043). 61. In describing the need for the No-Conduit Rule, the Commission explained that the existing No-Conduit Rule under the Standards of Conduct would not sufficiently limit the disclosure of the information received under this proposed rule. 87 Therefore, the Commission proposed a No-Conduit Rule tailored to the entities and information covered by the proposed rule and extends the disclosure prohibition to non-affiliates. 87 Id. P 26 & n. 50. 62. The Commission also noted the concerns expressed by some entities that generator-specific, non-public information provided to a pipeline by an electric transmission operator could provide the pipeline with a competitive advantage over the generator in pricing transportation services. 88 The Commission found no need to propose additional protections regarding interstate natural gas pipeline transportation. The Commission reasoned that interstate pipelines are required to allocate service, on a not unduly discriminatory basis, based on their tariffs, at a rate not exceeding the just and reasonable rate on file. The Commission also explained that pipelines are not required to discount services, and if they choose to discount, are permitted to obtain information from any source to demonstrate that the shipper requesting the discount has competitive alternatives. 89 88 Id. P 27. 89 Id. 63. The Commission stated that unauthorized disclosure of any non-public, operational information may subject the entity or individual making the prohibited disclosure to the enforcement provisions of the FPA and NGA, including potential civil penalties. 90 90 Id. P 26 & n. 52 (citing section 22 of the NGA, 15 U.S.C. 717t2-1 (2012), and section 316A of the FPA, 16 U.S.C. 825o-1 (2012)). 64. Thirteen commenters filed in support of the proposed No-Conduit Rule. 91 Arguing that the No-Conduit Rule was either too strict or not strict enough, several commenters proposed modifications to or requested clarifications of the No-Conduit Rule. Those comments are discussed below. 91 AEP Comments at 5-6; CAISO Comments at 5; Duke Energy Comments at 3; ELCON Comments at 3; EPSA Comments at 7; MISO Comments at 2; MMWEC Comments at 5; NESCOE Comments at 4,6; NRECA Comments at 5; NYTOs Comments at 1; PG&E Comments at 2-3; PUCO Comments at 5; TVA Comments at 3. 2. Adequacy of No-Conduit Rule To Protect Against Competitive Harm a. Comments 65. Several commenters are concerned that the proposed No-Conduit Rule is inadequate to prevent the misuse of non-public, operational information exchanged between electric transmission operators and pipelines and protect against competitive harm to generators, natural gas marketers, and others. These commenters recommend that the Commission adopt various modifications to the No-Conduit Rule or place additional limits on the information which transmission operators may share, as discussed below. 92 92 AEP Comments at 6; APGA Comments at 2-3; Duke Comments at 3; NGSA Comments at 2-3; and PUCO Comments at 7. 66. EPSA and NGSA seek clarification that the No-Conduit Rule covers non-operational interstate natural gas pipeline employees that market transportation capacity. 93 NGSA states that giving access to non-public, operational information to pipeline capacity marketing employees that negotiate shipper discounts could be problematic. 94 NGSA states that, for example, a pipeline capacity marketing employee could decide not to discount interruptible capacity because they have prior knowledge of a transmission operator's intent to ramp up gas-fired generators, increasing demand on the pipeline. Or, the pipeline capacity marketing employee could use knowledge of upcoming generator outages to lower interruptible prices for a period to compete with capacity releases. NGSA states that, while the Commission correctly notes that its non-discrimination rules already forbid any discriminatory behavior, it still would seem prudent to limit access to non-public, operational information for pipeline transportation capacity sellers. 95 93 EPSA Comments at 4; NGSA Comments at 4-6. 94 NGSA Comments at 4. 95 Id. at 5. 67. Washington Gas is concerned that the NOPR does not explain how information can or cannot be shared within a public utility that receives non-public operating information. 96 Washington Gas contends that if the generator employees only serve the function of purchasing gas—rather than selling energy at wholesale—they may not come within the definition of “marketing function employees” because the currently effective Standards of Conduct do not consider gas purchasing to be a marketing function activity. Washington Gas argues, if non-public information is shared within a public utility, it would create a preference for public utility-owned generation over independent generators because independent generators would be “third parties” prohibited from information sharing. Washington Gas concludes that, if the Commission relies on a No-Conduit Rule to protect information from reaching beyond transmission function employees, the Commission should provide detailed examples of exactly how the No-Conduit Rule will be implemented to protect the fairness of the market and assure that no shipper is afforded an undue preference. 97 96 Washington Gas Comments at 10. 97 Id. at 11. 68. Washington Gas claims that the best way to resolve the tension between information sharing and market fairness is to continue to make critical operating information public. Washington Gas contends that certain of the examples of “non-public, operational information” listed in the NOPR should never be considered non-public, operational information. 98 Rather, Washington Gas contends, this information should be considered public information to be promptly posted. Washington Gas believes that the only information properly shared on a non-public basis would be transaction-specific information. 99 Accordingly, Washington Gas urges the Commission to clarify that all pipeline facility outage and maintenance information needs to be made public and posted on the pipeline's internet Web site and to establish clear instructions as to what exact information must be posted and what can be shared voluntarily in a non-public way. 100 98 Id. at 3. 99 Id. at 4. 100 Id. at 3-4. 69. Similar to Washington Gas, AGA states that it assumes that the Commission would continue to require interstate pipelines to provide all shippers with equal access to information regarding system conditions, maintenance schedules and outages, and available capacity so as not to create competitive advantages for certain shippers. 101 101 AGA Comments at 5 & n. 14. 70. PUCO supports the proposed No-Conduit Rule, but contends that proposed section 38.2 should be modified to include additional language to require that no non-public information be shared with any person or company affiliate except to ensure the reliable and efficient operations of the pipeline, transmission grid, and the delivery of generation service. 102 102 PUCO Comments at 5. 71. Duke Energy notes that there are a number of small public utilities who currently have waivers of the requirement to abide by the Standards of Conduct or are otherwise not subject to the Standards of Conduct. Duke Energy requests that the Commission address its concern that these entities could receive commercially sensitive and non-public transmission information under the NOPR which could potentially give them an unfair advantage. 103 103 Duke Energy Comments at 3. 72. To alleviate concerns of confidential information disclosure, TVA recommends that, in addition to the No-Conduit Rule, the Commission should encourage and support the execution of confidentiality agreements between electric transmission operators and natural gas pipelines relative to these discussions. 104 104 TVA Comments at 3-4. 73. ELCON proposes two modifications to the No-Conduit Rule. First, ELCON asserts that the Commission should require electric transmission operators and interstate natural gas pipelines to submit an annual filing with the Commission listing entities with whom they have entered into information sharing arrangements and further certify that they acknowledge and comply with the No-Conduit Rule. Second, ELCON argues that the Commission should require electric transmission operators and pipelines to maintain and implement a written compliance policy. 105 105 ELCON Comments at 3. 74. PUCO also maintains that the Commission should, via an expansion of the instant proceeding, arrive at the appropriate requisite sanctions for the inappropriate sharing of potentially commercially sensitive, non-public information in violation of the No-Conduit Rule. 106 106 PUCO Comments at 5. 75. Some commenters expressed concern about the scope of the non-public, operational information to be shared under the rule based on competitive concerns about the use of that information. NGSA is also concerned that the NOPR could allow transmission operators to share commercially sensitive information that could harm producers and marketers by revealing their positions in the market to outside parties. 107 NGSA states, for example, that a marketer's commercial strategy could be revealed if the confidential details of the scheduling priorities it has contracted with its clients were shared. 108 NGSA further contends that while it may be useful for utility operators to share information on overall pipeline capacity, sharing commercially sensitive information such as individual shipper nominations offers little insight into the reliability of deliveries and could cause significant harm to some market participants. 109 107 NGSA Comments at 7. 108 Id. 109 Id. 76. Along the same lines, PUCO argues that electric transmission operators should be required to furnish pipelines with aggregated, non-unit specific generation data to ensure against inadvertently providing pipelines with confidential or proprietary information that could result in a competitive advantage concerning the pricing of gas to that facility. 110 110 PUCO Comments at 7. b. Commission Determination 77. In this Final Rule, the Commission adopts the proposed No-Conduit Rule as set forth in sections 38.2(b) and 284.12(b)(4)(ii) of the NOPR, without modification. The No-Conduit Rule prohibits all public utilities and interstate natural gas pipelines, as well as their employees, contractors, consultants, or agents, from disclosing, or using anyone as a conduit for the disclosure of, non-public, operational information they receive under this rule to a third party or to its marketing function employees, as that term is defined in § 358.3 of the Commission's regulations. The Commission concludes that the No-Conduit Rule, as proposed, is necessary to ensure that any non-public, operational information shared under the regulations in this Final Rule remains confidential and is shared among transmission operators in a manner that is consistent with the prohibition on undue discrimination. As several commenters, including generators, pointed out, the No-Conduit Rule addresses many of the concerns over the sharing of commercially sensitive, customer-specific information among transmission operators. 78. At this time, we do not see the need to expand the No-Conduit Rule to explicitly prohibit disclosures to other employees or entities. We believe that, through this Final Rule and other Commission rules and regulations, we have adequate safeguards in place. In response to the comments received, we take this opportunity to explain the Commission's requirements associated with the sharing of information and remind industry of the information already made available by the Commission's regulations. 79. Washington Gas, NGSA, and EPSA assert that certain employees may fall outside the Standards of Conduct definition of “marketing function employees” and therefore may receive information under this Final Rule, and be in a position to use that information to provide an undue preference. 80. First, Washington Gas expresses concern that the proposed rule does not explain how non-public, operational information received by a public utility can or cannot be shared within that public utility, including with employees that fall outside the definition of “marketing function employee,” in particular, public utility employees that purchase gas. In Order Nos. 717 and 717-A, the Commission restricted its affiliate rule to cover only those employees that participate in electric sales markets and eliminated or rejected proposals that would have expanded the rule to cover other employees. 111 The Commission explained: 111 See Standards of Conduct for Transmission Providers, Order No. 717, FERC Stats. & Regs. ¶ 31,280 at PP 77, 103 (cross-referenced at 125 FERC ¶ 61,064 (2008)); Order No. 717-A, FERC Stats. & Regs. ¶ 31,297 at P 35 (cross-referenced at 129 FERC ¶ 61,043 (2009)). The Commission agrees that restricting the definition of marketing functions to include only sales, rather than purchases, more closely matches the statutory prohibitions against undue preferences. Furthermore, the removal of purchases from the definition of marketing functions frees companies to conduct the informational exchanges necessary to engage in integrated resource planning . . . . 112 112 Order No. 717, FERC Stats. & Regs ¶ 31,280 at P 77 (cross-referenced at 129 FERC ¶ 61,043 (footnotes omitted). See also Order No. 717-A, FERC Stats. & Regs. ¶ 31,297 at P 35 (cross-referenced at 129 FERC ¶ 61,043) (explaining that restricting the definition of marketing function to include only sales more closely matches the statutory prohibitions against undue preference. Specifically, sections 205 and 206 of the Federal Power Act prohibit undue preference or advantage to any person with respect to “any transmission or sale subject to the jurisdiction of the Commission. . . .” Similarly, sections 4 and 5 of the Natural Gas Act prohibit undue preference with respect to “any transportation or sale of natural gas subject to the jurisdiction of the Commission.). For similar reasons, the Final Rule is limited and therefore we find it is not appropriate to expand the No-Conduit Rule adopted here to include employees who are not “marketing function employees,” such as gas purchasing employees. 81. In addition, Washington Gas has not provided sufficient reason to expand the No-Conduit Rule to gas purchasing employees or other employees of the public utility who are not marketing function employees. In this Final Rule the Commission's intent is to remove barriers to the sharing of non-public, operational information between transmission operators for the purpose of promoting reliable service and operational planning. While certain gas purchasing employees may fall outside the definition of marketing function employees, within a vertically integrated utility, it may be necessary for an electric transmission operator, based on information received by an interstate natural gas pipeline, to inform its gas purchasers that it needs additional natural gas at another generating unit. Restricting such internal disclosure may limit the effectiveness of any such communication in responding to operational problems. 82. Moreover, under section 284.13(d) of the Commission regulations, 113 pipelines are already required to post important capacity and outage information at each scheduling opportunity. This includes “equal and timely access to information relevant to the availability of all transportation services whenever capacity is scheduled, including, but not limited to, the availability of capacity at receipt points, on the mainline, at delivery points, and in storage fields; whether the capacity is available directly from the pipeline or through capacity release; the total design capacity of each point or segment on the system; the amount scheduled at each point or segment whenever capacity is scheduled; and all planned and actual service outages or reductions in service capacity.” Washington Gas has not provided sufficient justification that, given the extent of these posting requirements, the potential risks it identifies associated with permitting the exchange of non-public, operational information between transmission operators, outweighs the efficiency and reliability benefits of permitting such communications. 113 18 CFR 284.13(d) (2013). 83. While non-public, operational information falls outside of the posting requirements, we are not convinced such information needs to be disclosed to all shippers. For example, certain information may be relevant only to the operations of the public utility and may not need to be disclosed to all shippers. 84. We also deny EPSA's and NGSA's requests to expand the No-Conduit Rule to prohibit disclosures to interstate natural gas pipeline employees who market pipeline capacity, as well as PUCO's request to require electric transmission operators to furnish pipelines aggregated, non-unit specific generation data to ensure against providing pipelines with confidential or proprietary information that could result in a competitive advantage concerning the pricing of gas to that facility. The Commission agrees with NGSA that “marketing function employees,” as that termed is defined in the Standard of Conduct, does not include employees that market transportation capacity. However, EPSA and NGSA have not shown that employees who market pipeline capacity can use non-public, operational information shared under this Final Rule to provide an undue preference or unduly discriminate in a manner inconsistent with the Commission's policies or regulations. NGSA's specific concern is that employees who market transportation capacity could use non-public, operational information shared under this rule to discriminate in their allocation or pricing of capacity. In response, we note that interstate natural pipelines are required by the NGA and their tariffs to allocate service on a not unduly discriminatory basis at a rate not exceeding the just and reasonable rate on file. Further, the Commission does not require pipelines to discount services below the pipeline's maximum tariff rate, which the Commission has found just and reasonable. If a pipeline chooses to provide selective discounts based on the elasticity of demand of its customers, 114 the pipeline needs to obtain information to demonstrate that a shipper requesting a discount does have competitive alternatives justifying the discount in order to ensure that it treats all similarly situated customers on a comparable basis. 115 114 See Associated Gas Distributors v. FERC, 824 F.2d 981 (D.C. Cir. 1987) (permitting selective discounting only when justified by competitive alternatives and elastic demand conditions); Williston Basin Interstate Pipeline Co., 85 FERC ¶ 61,247 (1998) (finding that a pipeline does not necessarily have to offer the same discount to all customers at a point when the pipeline knows, if some customers at the point have elastic demand, while others have inelastic demand). 115 See, e.g., Panhandle Eastern Pipe Line Co., Opinion No. 395, 71 FERC ¶ 61,228, at 61,867 (1995) (Commission cited to pipeline's policy of requiring documentation from its customers detailing the competitive circumstances justifying their need for a discount, such as potentially sensitive information concerning the end use customer for whom the gas will be transported, and competitive energy supplies, including the customer's source and cost of alternative natural gas supplies or the type and cost of alternative fuels); Panhandle Eastern Pipe Line Co., Opinion No. 404, 74 FERC ¶ 61,109, at 61,405 (1996). 85. We also deny PUCO's request to expand the No-Conduit Rule to require that non-public, operational information not be shared with any person or company affiliate except to ensure the reliable and efficient operations of the pipeline, transmission grid, and the delivery of generation service. As we explain elsewhere in this Final Rule, the Commission is concerned that adding further qualifiers to the definition of operational information will restrict the flexibility of transmission operators to determine what information it must share to promote reliable service and engage in effective operational planning. Moreover, adding further qualifiers is unnecessary, given our conclusion that the existing safeguards (e.g., the Standards of Conduct, prohibition against undue discrimination or preference, prohibition on market manipulation) together with the third-party limitation in the No-Conduit Rule we are putting in place are sufficient to protect against unnecessary disclosure. 86. TVA proposes that, in addition to the No-Conduit Rule, the Commission require confidentiality agreements, while ELCON proposes that the Commission also require annual filings and written compliance procedures. Under this Final Rule, communication and sharing of non-public, operational information is voluntary. While the Commission will not embed such a requirement in its regulations, we note that CAISO and ISO-NE have both adopted such practices, and this Final Rule does not prescribe the mechanics of how voluntary sharing will be conducted. To the extent a transmission operator has a need for additional or changed information sharing procedures such as confidentiality agreements, the Commission will evaluate such requests on a case-by-case basis. With respect to PUCO's comments regarding sanctions, the Commission reiterates that unauthorized disclosure of any non-public, operational information may subject the entity or individual making the prohibited disclosure to the enforcement provisions of the FPA and NGA, including potential civil penalties. 116 The Commission declines to further delineate the specific sanctions that might apply in the event of an unauthorized disclosure, as any sanctions would need to be tailored to the facts and circumstances of the disclosure at issue. 116 See Section 22 of the NGA, 15 U.S.C. 717t2-1 (2012), and section 316A of the FPA, 16 U.S.C. 825o-1 (2012). 87. Duke argues that some small public utilities that currently have waivers of the requirement to abide by the Standards of Conduct could be given an unfair advantage if they receive commercially sensitive and non-public transmission information under the Final Rule. The Commission clarifies that existing waivers from the Standards of Conduct do not automatically apply to the No-Conduit Rule adopted in this Final Rule. That is, an existing waiver of the Standards of Conduct does not waive the No-Conduit Rule adopted here. In this Final Rule, the Commission is expressly authorizing the exchange of non-public, operational information that could include commercially sensitive, customer-specific information. The No-Conduit Rule was developed to address concerns that broadly sharing this kind of information with marketing function employees or third parties could cause competitive harm. Given that the information covered by this rule is potentially commercially sensitive, the Commission finds that a determination as to whether a waiver of the No-Conduit Rule adopted here is appropriate is best made on an individual basis, pursuant to a filing under FPA section 205 or NGA section 4. 88. In response to comments raising general concerns about the competitive impact of the use of non-public, operational information exchanged under this rule, the Commission finds that the No-Conduit Rule is sufficient to address these concerns. For example, NGSA asserts that a natural gas marketer's commercial strategy could be revealed if the confidential details of the scheduling priorities it has contracted with its clients are revealed. While the Commission recognizes that a natural gas marketer's scheduling priorities for its downstream clients are commercially sensitive, the No-Conduit Rule should ensure that the electric transmission operators, with whom pipelines may share such information, do not disclose that information to third party participants in the natural gas sales market. NGSA has not explained how a pipeline's sharing of a natural gas marketer's nominations with an electric transmission operator would cause competitive harm to the natural gas marketer, so long as the electric transmission operator complies with the No-Conduit Rule. 89. The Commission similarly is not persuaded by PUCO's concern that an electric transmission operator's sharing of confidential unit-specific generator information with interstate pipeline providers could result in “a competitive advantage concerning the pricing of gas to that facility.” 117 Interstate natural gas pipelines only provide unbundled transportation service and do not sell gas except for incidental sales required for the conduct of their transportation service. As discussed above, there are protections already in place to prevent undue discrimination or preference in the pipeline's sale of transportation service. 118 Given the protections already in place, we see no need to propose additional protections regarding pipeline transportation at this time. 117 PUCO Comments at 7. 118 See, e.g., 18 CFR 284.286 (2013). 3. Exceptions to the No-Conduit Rule a. Comments 90. Several parties contend that the No-Conduit Rule is too restrictive and recommend that the Commission adopt various modifications, as discussed below. For example, NE Gas Industry and INGAA request that the proposed No-Conduit Rule be modified in the Final Rule to include an exception to allow sharing of non-public, operational information between all relevant industry participants in an emergency. 119 INGAA, for example, states that there should be no limit on sharing of non-public, operational information between transmission operators during an emergency, including communications between third parties, subject to a record of the exchange as soon as practicable after the fact. 120 NE Gas Industry and INGAA propose that communications in such emergencies could include RTOs and ISOs, interstate natural gas pipelines, generators of all fuel types, LDCs, liquefied natural gas suppliers, producers, marketers, asset managers, and other relevant participants in the energy industry. 121 Alternatively, NE Gas Industry requests that the Commission clarify that the No-Conduit Rule does not prohibit such larger group discussions and apart from the Final Rule, pipelines and public utilities are permitted to share non-public, operational information with all relevant entities as necessary to mitigate or solve an emergency that threatens the reliability of electric or natural gas service. 119 NE Gas Industry at 3-4, INGAA Comments at 7. NE Gas Industry states that existing focus groups and joint industry task forces in New England can serve as the mechanisms to facilitate such open communication in times of emergency. 120 INGAA Comments at 7. 121 NE Gas Industry Comments at 5; INGAA Comments at 7. 91. In its reply comments, NGSA states that the Commission should deny requests to suspend the communications rules during emergencies or clearly define what constitutes an emergency. 122 NGSA is concerned that identifying what situations constitute an emergency can be subjective. NGSA states that at a minimum, the Commission should strictly maintain the No-Conduit Rule, restricting communications to operational (i.e. non-marketing) employees, at all times, regardless of any relaxation of the associated communications rules. 122 NGSA Reply Comments at 5. 92. Enable contends that the Commission should adopt a modified version of the No-Conduit Rule that allows interstate pipelines to share non-public, operational information with non-marketing function employee third parties for the purpose of promoting reliable service and operational planning. 123 Enable asserts that the NOPR provides no rational basis for distinguishing between (A) “non-public, operational information” received from electric public utilities through this new regime, which interstate natural gas pipelines are barred from disclosing to anyone, and (B) general “non-public, operational information,” which pipelines may share with non-marketing function employees for operational reasons. 124 Enable asserts that currently, interstate pipelines receive non-public, operational information from a variety of sources and the NOPR sets forth no evidence that such information, when received from public utilities, would not be sufficiently protected by the current No-Conduit Rule as stated in the Standards of Conduct or by a less restrictive No-Conduit Rule. 125 Enable states that the NOPR gives interstate gas pipelines access to information from electric public utilities for the purpose of improving reliability, but at the same time bars those pipelines from sharing such information with third parties with whom they would normally share operational information for that purpose (e.g., interconnected intrastate and gathering lines). 126 123 Enable Comments at 9-10. 124 Id. at 6. 125 Id. 126 Id. 93. Enable also contends that the NOPR's No-Conduit Rule creates two classifications of “non-public, operational information” and different rules regarding interstate pipelines' sharing of each, thereby imposing significant administrative burdens and compliance challenges on the pipelines. 127 Enable states that under the current rules, interstate pipelines may exchange information with employees of their intrastate pipeline and gathering affiliates, provided those employees are not marketing function employees. Enable states that the proposed No-Conduit Rule creates an inconsistency and potential compliance difficulty because these employees of the non-jurisdictional affiliates would be allowed to receive some operational information but not the new category of non-public information received from electric public utilities. 128 Enable states that the proposed No-Conduit Rule renders impractical—if not impossible—interstate pipelines' otherwise-appropriate sharing of non-marketing function employees with affiliated intrastate pipelines and gatherers. 129 Additionally, Enable states that interstate pipelines will need to implement two separate compliance walls regarding operational information: one wall to prevent the disclosure of non-public transmission function information or customer information (directly or through a conduit) to the pipeline's marketing function employees; and another wall to prevent the disclosure of non-public, operational information received from public utilities to the pipeline's marketing function employees or to any third party (including the pipeline's own intrastate pipeline and gathering affiliates). 130 127 Id. at 7. 128 Id. 129 Id. at 8. 130 Id. 94. Enable maintains that the NOPR does not identify a need for the absolute prohibition against interstate pipelines' disclosure of operational information to non- marketing function employee third parties for the purpose of system reliability. 131 Enable argues that the NOPR points only to the theoretical threat of harmful disclosure of the electric public utility's non-public information and undue discrimination or preference and provides no explanation of how the potential danger of improper disclosure by interstate pipelines, unsupported by a record of abuse, justifies such a broad and burdensome prophylactic rule. 131 Id. at 9 (citing National Fuel Gas Supply Corp. v. FERC, 468 F.3d 831, 844 (D.C. Cir. 2006) (indicating that FERC must supply a factual basis for its administrative actions or, in the absence of such a basis, explain how potential dangers, unsupported by a record of abuse, justifies costly rules); 5 U.S.C. 553(c) (“After consideration of the relevant matter presented [through notice and comment], the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose.”); Motor Vehicle Mfrs. Ass'n of U.S, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 56 (1983) (requiring agency to explain reasons for decision); St. James Hosp. v. Heckler, 760 F.2d 1460, 1469 (7th Cir. 1985) (finding explanation for rule not adequately supported by evidence offered as justification)). 95. AGA and Duke Energy express concern that the proposed No-Conduit Rule could be interpreted to prohibit communications that are currently permitted under the Standards of Conduct. 132 Specifically, AGA and Duke maintain the rule should not prevent a public utility or interstate pipeline from disclosing non-public, operational information to a third-party LDC, especially where such information would promote reliable service or operational planning with regard to gas-fired generators located on an LDC's system. 132 AGA Comments at 7, Duke Energy Comments at 3. b. Commission Determination 96. As stated above, the Commission adopts the No-Conduit Rule as set forth in the NOPR, without modification. The non-public, operational information permitted to be shared under this Final Rule could include the exchange of confidential generator information, and as explained below, the scope of the information allowed to be shared under this Final Rule warrants the restrictions in the No-Conduit Rule, as proposed. 97. AGA, Duke Energy and Enable request exceptions to the third party restriction in the No-Conduit Rule. The Commission denies these requests. As stated earlier, the No-Conduit Rule does not prohibit transmission operators from sharing their own operational information with other interconnecting entities involved in ensuring the reliability of system operations, such as LDCs, intrastate pipelines or gathering facilities. The No-Conduit Rule only applies to the subsequent disclosure of non-public, operational information, including commercially sensitive, customer-specific information, received by an interstate natural gas pipeline or electric transmission operator under the rule and does not otherwise affect the ability of an interstate natural gas pipeline or electric transmission operator to exchange operational information about its own system with its customers/stakeholders or members under the same rules and conditions as it currently does. Moreover, the information that may permissibly be shared under this rule is not limited to “transmission function” information covered under the Standards of Conduct. The scope of information that transmission operators may permissibly share under this rule is broader than transmission function information and, as a result therefore warrants the restriction on disclosure to third parties, as well as marketing function employees, via the No-Conduit Rule. 98. The Commission similarly denies NE Gas Industry's and INGAA's requests that, if the Commission does not eliminate the third-party prohibition, the Commission at least include an exception to permit sharing of non-public, operational information between all relevant industry participants during emergencies. We see little reason to create an emergency exception since, as we explained, the Final Rule does not otherwise affect the ability of an interstate natural gas pipeline or electric transmission operator to exchange operational information about its own system with its customers/stakeholders or members under the same rules and conditions as it is currently does, including during an emergency. In addition, the Commission clarifies that the proposed No-Conduit Rule does not prohibit, either during routine or emergency circumstances, electric transmission or interstate natural gas pipeline operators from jointly and simultaneously communicating non-public, operational transmission or transportation information (except for customer-specific information) with all market participants. Because such information is being shared contemporaneously with all market participants, it would not be considered non-public and its disclosure would not be unduly preferential or discriminatory. Undue discrimination concerns only arise when communications take place with some, but not all, market participants. 99. Enable is concerned that the proposed No-Conduit Rule creates a new compliance issue for pipeline companies that have operational personnel who are involved in operational planning for an interstate pipeline and affiliated gathering facilities or intrastate pipelines. While the No-Conduit Rule would prohibit such disclosures to the employees shared with the affiliated gathering facilities or intrastate pipeline, we do not find that a broad exemption for communication of the non-public, operational information is warranted. To the extent that interstate natural gas pipelines share operational employees with LDCs or other affiliates, which makes compliance with the No-Conduit Rule difficult, the interstate natural gas pipelines can seek a waiver of this Final Rule's No-Conduit Rule. III. Questions Posed by the Commission A. Generator to Electric Transmission Operator Communications 1. NOPR 100. In the NOPR, the Commission recognized that although the proposal applies only to communications between interstate natural gas pipelines and electric transmission operators, natural gas-fired generators may have relevant information regarding their own capabilities to acquire natural gas (or other fuels) not available to the interstate natural gas pipeline serving the generator. 133 Therefore, the Commission sought comments on whether additional regulations were needed to require a generator to inform its electric transmission operator of the possibility its natural gas service may be disrupted. As an example, the Commission asked whether a generator should be required, at the request of the electric transmission operator, to provide its electric transmission operator with information pertaining to any communications received from an interstate natural gas pipeline regarding potential failures by the generator to conform to flow rates or nominations. 133 NOPR, FERC Stats. & Regs. ¶ 32,699 at P 25 (cross-referenced at 144 FERC ¶ 61,043). 2. Comments 101. EEI, EPSA, MISO, MMWEC, NEPGA, NRECA, and PG&E believe that additional regulations requiring information sharing between generators and electric transmission operators are not necessary. 134 On the other hand, the IRC, ISO-NE., NYISO, and NYPSC support additional regulations requiring generators to share information regarding their fuel status with an electric transmission operator. 135 Likewise, in the absence of cooperative information sharing, APPA, MMWEC, NRECA and the NE Gas Industry believe that additional regulations should be implemented to ensure information sharing. 136 134 EEI Comments at 5-6; EPSA Comments at 4-5; MISO Comments at 4; MMWEC Comments at 4; NEPGA Comments at 4-5; NRECA Comments at 8; PG&E Comments at 5. 135 IRC Comments at 4, ISO-NE Comments at 8-9, NYISO Comments at 2; NYPSC Comments at 5. NYPSC states that if the Commission requires a generator to provide its electric transmission operator communications received from a natural gas pipeline, the NYPSC would also include communications from the LDC. NYPSC at 4-5. 136 APPA Comments at 7, NRECA Comments at 8, NE Gas Industry Comments at 9; MMWEC at 4. 102. Along the same lines, TVA and Ohio PUC believe that electric transmission operators should be allowed to require any critical information that may impact electric reliability. 137 137 TVA Comments at 3; Ohio PUC Comments at 7. 103. In support of such a requirement, NYISO states that, while it expects that its generators will react to fuel availability concerns by derating their capacity when circumstances dictate, additional detailed information, particularly during cold weather events, is desirable. 138 Similarly, ISO-NE states that although it often learns about gas interruptions only after a generator is offline, it understands that information regarding potential interruptions due to insufficient gas supply is available much earlier. 139 138 NYISO Comments at 4. 139 ISO-NE Comments at 8-9. 104. CAISO and EEI point out that some electric transmission operators already have the ability to work with their stakeholders and/or to file tariff changes that may be necessary to require generators to provide this information. 140 CAISO, EEI, EPSA, IRC, MISO, and NEPGA also point out that some electric transmission operators already require generators to share this type of information. 141 EEI, for example, states that PJM Interconnection L.L.C. (PJM) already requires capacity resources to report fuel data to enable PJM to assist the market in providing solutions in emergency situations. 142 NEPGA stated that, under the ISO-NE tariff, generators have an existing obligation to report to ISO-NE when they are unable to operate due to pipeline disruptions or otherwise. 143 Similarly, MISO states that in its markets, generator owners and/or operators are required to notify MISO of anticipated fuel supply disruptions. 144 CAISO states that its tariff currently requires generators to inform it of any change or potential change in the generators status, including any fuel supply concerns of which the generator is aware. 145 EPSA asserts that each transmission operator already has rules regarding communication between the transmission operator and generators which obligates generators to provide the type of information discussed in the NOPR. 146 IRC notes that providing electric transmission operators with timely information regarding a generator's fuel status is consistent with existing reliability standards. 147 CAISO states that, if the Commission adopts a regulation applicable to generators, it should apply that requirement across all fuel types. 148 140 EEI Comments at 5-6. 141 EEI Comments at 5-6, EPSA Comments at 4; NEPGA Comments at 4-5, MISO Comments at 4; CAISO Comments at 4. 142 EEI Comments at 5 (citing PJM Manual 13, Emergency Operations, Section 6.4 Fuel Limitation Reporting. Effective date June 1, 2013). 143 NEPGA Comments at 4. 144 MISO Comments at 4. 145 CAISO Comments at 4. 146 EPSA Comments at 5. 147 IRC Comments at n.7 (citing reliability standards EOP-001, EOP-004, IRO-010, and TOP-002). 148 CAISO Comments at 4. 3. Commission Determination 105. Based upon the comments received, the Commission finds that it is unnecessary in this proceeding to require a generator to notify its electric transmission operator that its natural gas service may be disrupted. However, to the extent they do not already exist, electric transmission operators may file tariff provisions pursuant to FPA section 205 to require generators to notify electric transmission operators of information they require to maintain reliable service, such as anticipated fuel supply disruptions. As noted by several commenters, some electric transmission operator tariffs require generators to notify electric transmission operators of anticipated fuel supply disruptions. While some entities would prefer that the Commission adopt generic regulations requiring the provision of this type of information from a generator to an electric transmission operator, those entities do not explain why current tariff requirements are, or new tariff requirements would be, inadequate. Consistent with the Final Rule, this approach would give electric transmission operators significant flexibility to determine what information they require from generators to promote reliable service on their systems. B. Three-Way Communication of Non-Public Operational Information 1. NOPR 106. In the NOPR, the Commission sought comments on whether the proposed rule should require transmission operators to include the customer as part of a three-way communication to the extent the non-public, operational information exchanged between transmission operators involves customer-specific information (such as information about individual generators) and if so, how such a requirement could be implemented. 149 149 NOPR, FERC Stats. & Regs. ¶ 32,699 at P 25 (cross-referenced at 144 FERC ¶ 61,043). 2. Comments 107. Commenters were split on this issue, with slightly more commenters opposed to requiring three-way communications when customer-specific information is shared. AEP, APPA, Duke, EEI, EPSA, MMWEC, NERC, NEGPA, and NRECA support requiring three-way communications, 150 while CAISO, INGAA, ISO-NE, IRC, MISO, NE Gas Industry, NYISO, NYTO, PG&E and Washington Gas oppose such a requirement. 151 150 AEP Comments at 5-6; APPA Comments at 6-7; Duke Comments at 4; EEI Comments at 6; EPSA Comments at 6-7; MMWEC Comments at 5; NERC Comments at 8; NEGPA Comments at 5-6; NRECA Comments at 5-6. 151 CAISO Comments at 4-5; INGAA Comments at 5; ISO-NE Comments at 9-10; IRC Comments at 5; MISO Comments at 4-5; NE Natural Gas Industry Comments at 9; NYISO Comments at 4; NYTO Comments at 8-9; PG&E Comments at 5-6, and Washington Gas Comments at 9. 108. Many of the commenters that support such a requirement contend that including the relevant customer or generator would prove more efficient, as well as en [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2013-28078. Public record. Not legal advice.