In what is quickly resembling a jurisdictional conundrum, the Federal Energy Regulatory Commission (“FERC”) has come out in opposition of a private right of action in the context of the country’s wholesale energy markets. This issue has its roots in an order issued by the U.S. Commodity Futures Trading Commission (“CFTC”) in April 2013. There, the CFTC granted certain exemptions from its regulatory authority to wholesale energy market entities, otherwise known as Regional Transmission Organizations or Independent System Operators (“RTOs”). Subsequently, the Court of Appeals for the Fifth Circuit interpreted the April 2013 order to include an exemption for RTOs from private rights of action, notwithstanding claims by the CFTC that no such exemption was ever granted. The CFTC now seeks to clarify its April 2013 order by amending that order to expressly allow private rights of action, which are derived from Section 22 of the Commodity Exchange Act, against RTOs. 81 Fed. Reg. 30,245 (May 16, 2016).
On June 15, 2016, a number of entities, including utilities, trade organizations, the RTOs and FERC staff, filed comments in the CFTC’s amendment proceeding opposing the proposed amendment. FERC staff argues that the RTOs are within FERC’s purview and that all aspects of the energy markets, including both physical and financial products, are rigorously monitored and regulated. FERC’s comments explain that Congress included certain provisions in the CEA to prevent overlapping jurisdiction and conflicting regulatory regimes. FERC notes that Congress granted it exclusive authority through the Federal Power Act (“FPA”) to enforce anti-market manipulation provisions with respect to the RTOs, and that the FPA expressly prohibits private rights of action. FERC’s comments also note that it has sufficient powers under the FPA to initiate complaint proceedings if consumers’ interests are threatened. In their comments, the RTOs argue that the FERC’s regulatory authority is well defined, thus obviating the need for private rights of action. The RTOs recommend that to the extent a potential manipulation event involves both the CFTC and FERC, that both may work jointly to address such situations. The RTOs also argue that actions brought by private litigants will have a disruptive effect on the established regulatory and enforcement regimes, thus fueling regulatory uncertainty. It is with much anticipation that these and other energy market participants wait for the CFTC’s final order and hope it can find a way to walk back its proposed amendment. This proceeding now has Congress’ attention, with the House Committee on Energy and Commerce requesting a briefing from the CFTC by July 15, 2016.