Portland, 16 October (Argus) — The California Independent System Operator (ISO) is floating a proposed rule change that would allow the ISO to answer a subpoena or data request from the Commodity Futures Trading Commission (CFTC) without first notifying the affected market participant.
The proposal stems from a quid pro quo arrangement the CFTC is offering the nation's ISOs and regional transmission organizations (RTOs) in which the federal regulator would agree to exempt certain ISO/RTO transactions from new rules regarding financial swap transactions in exchange for full subpoena power over ISO market information.
Current California ISO bylaws recognize the Federal Energy Regulatory Commission (FERC) as the sole agency empowered to subpoena information from the grid operator without the knowledge of the market participant being targeted for investigation. Market information held by the ISO is considered to be commercially sensitive.
The Dodd-Frank Wall Street Reform and Consumer Protection Act grants the CFTC broad authority to regulate swap transactions. But the definition of what technically constitutes a swap remains the subject of debate in the electricity sector, where the line between “financial” and “physical” power is blurred by the inherent nature of the commodity, which is simultaneously consumed at the time of production and cannot be readily stored.
Earlier this year, the California ISO, together with other grid operators, petitioned the CFTC to exempt their market transactions from CFTC oversight. In August, the CFTC responded with a compromise proposal.
The California ISO's proposed change would require amending the organization's “tariff” – the formal rules governing every aspect of the market's operation. All tariff amendments must receive FERC approval after being adopted by the ISO board of governors.
The ISO is soliciting comments on the proposal until 19 October and has scheduled a 22 October stakeholder call to discuss the issue. ISO staff plans to put the amendment before the board of governors during a regular meeting scheduled for 1-2 November.
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