On December 17, 2015, FERC issued a Notice of Proposed Rulemaking (NOPR) containing proposed revisions to its market-based rate (MBR) regulations regarding the ownership information that sellers seeking to obtain or retain MBR authority must provide. In the NOPR, FERC proposes to amend its MBR regulations to narrow the ownership information required for an assessment of horizontal or vertical market power under the MBR regulations. Additionally, FERC proposes amendments to its MBR regulations to clarify the types of ownership changes that must be reported via a notice of change in status. The NOPR indicated that these proposed revisions are intended to complement the amendments to the MBR regulations recently made in Order No. 816 (see October 19, 2015 edition of the WER). 

FERC proposes to amend its MBR regulations to require sellers seeking to obtain or retain MBR authority to identify two categories of upstream owners. First, a seller must identify and describe the furthest upstream owner in its ownership chain, which FERC proposes to define as the “ultimate affiliate owner(s).” Second, a seller must identify and describe all affiliate owners that have a franchised service territory or MBR authority, or that directly own or control generation, transmission, intrastate natural gas transportation, storage or distribution facilities, physical coal supply sources or ownership of or control over who may access transportation of coal supplies. Those affiliate owners that do not fall within these two categories need not be identified by the seller when describing its ownership structure.

Regarding passive owners, FERC proposes amendments to its MBR regulations to require that sellers affirm that these owners own a separate class of securities, have limited consent rights, do not exercise day-to-day control over the company, and cannot remove the manager without cause.

With regard to reporting ownership changes through a notice of change in status, FERC proposes amendments to its MBR regulations to clarify that the change in status filing obligation would be triggered by: (1) any change in the seller’s ultimate affiliate owner(s), or (2) the introduction of any new affiliate owner of the seller that has a franchised service territory or that directly owns or controls generation (if there is a 100 MW or more net increase); owns, operators, or controls transmission; or that directly owns or controls generation, transmission, intrastate natural gas transportation, storage or distribution facilities, physical coal supply sources or ownership of or control over who may access transportation of coal supplies.

Comments on these proposed revisions are due 60 days following publication of the NOPR in the Federal Register. A copy of the NOPR can be found here.