On July 28, 2022, FERC proposed a new “duty of candor” rule that would broadly apply to “all entities communicating with the Commission or other specified organizations related to a matter subject to the jurisdiction of the Commission.” According to the Commission, the Notice of Proposed Rulemaking (“NOPR”) is intended to capture the types of communications that may not have been included in the Commission’s existing communication rules and policies, some of which have an existing duty of candor standard.

The NOPR explains that the Commission has previously adopted different duties of candor that applied to certain organizations, persons, and types of communications. The Commission argues in the NOPR that this approach has resulted in a patchwork of different standards and an incomplete process that is not sufficiently broad enough to ensure that the Commission’s decisions are based on accurate information. The Commission stated that the purpose of the NOPR is thus to ensure that, in carrying out its statutory responsibilities, it receives complete, honest, and accurate information, which will allow the Commission to make important policy and economic decisions affecting the fairness, competitiveness, and reliability of markets.

The proposed rule is based on an existing duty of candor regulation found in 18 C.F.R. § 35.41(b), which governs communications by sellers of electricity with market-based rate authority to the Commission, regional transmission organizations (“RTOs”), independent system operators (“ISOs”), and their market monitors and jurisdictional transmission providers. By comparison, the NOPR looks to broaden the requirement to ensure that communications with the Commission are accurate and truthful and do not include false or misleading information or omit material information. As with section 35.41(b), an entity would be shielded from violation of the proposed regulation if “the entity exercises due diligence to prevent such occurrences.” The proposed rule also would not impose a general affirmative duty to disclose but would apply to communications with the Commission, whether they are voluntary or required. Moreover, the Commission explains that it is not proposing to remove other duties of candor from its existing regulations.

The Commission seeks comment on the entirety of the proposed rule. Issues for comment include the need for such a rule, whether 18 C.F.R. § 35.41 is a reasonable model upon which to base the expanded rule, whether the NOPR properly identifies entities and organizations that the broader duty of candor should apply, whether there are categories of entities or individuals that should be exempted from the broader duty of candor, and the appropriate scope of communications to be covered by the expanded duty. Comments on the proposed rule are to be submitted within 60 days of publication of the NOPR in the Federal Register.

Commissioner Danly separately dissented arguing that the NOPR “expands the duty of candor well beyond current Commission practices.” According to Commissioner Danly, the power that this NOPR is proposing is so broad and standards so vague that, “it would be a simple proposition for the Commission to “find” that any factually untrue statement, regardless of context, violates the duty of candor, exposing the speaker to sanctions.” Finally, Commissioner Danly argues that because the NOPR is overly broad and vague it would encompass constitutionally protected speech and will rather chill speech and public participation due to the fear of being subject to sanctions.

The NOPR can be found here.