Energy Legal Blog

FERC, CFTC to Coordinate Requests and Share of Proprietary Information

In response to a directive in the recent Energy Policy Act of 2005 (EPAct 2005), on October 12 FERC and the Commodity Futures Trading Commission (CFTC) announced that the agencies' respective Chairs, Joseph T. Kelliher and Reuben Jeffery III, had entered into a memorandum of understanding (MOU) on the sharing of information and providing confidential treatment for proprietary energy trading data.  While the MOU makes clear that any sharing of information between the two agencies will not constitute a waiver of confidentiality, the MOU should lead to an increased flow of information between the two agencies, who frequently conduct investigations, and oversight and enforcement activities concerning many of the same energy markets and their participants.  Both agencies pursued investigations, often duplicative, into allegations of false reporting of natural gas and power wholesale prices to index publishers in 2000 and 2001.

In EPAct 2005 Congress instructed the two agencies to come to an understanding within six months in order to better ensure that their information requests to markets are "properly coordinated to minimize duplicative information requests" and "to address the treatment of proprietary trading information."  FERC was quick to point out that the agencies had completed the MOU four months ahead of schedule, before the winter heating season, when energy prices are typically stressed  and may require additional FERC and CFTC vigilance.  CFTC Chairman Jeffery expressed the belief that the MOU would lead to a "more effective and efficient working relationship with FERC" as both agencies actively work to assure price integrity in the natural gas and other energy markets.

The MOU lays out procedures the FERC and CFTC will use in obtaining industry information, providing that the CFTC will turn over to FERC any futures and options trading data or other market information that FERC requests, and conversely requiring FERC to turn over any information it has that the CFTC requests.  However, the MOU requires that both agencies must keep any data surrendered to the other confidential and non-public pursuant to their respective regulations.  In addition, FERC and the CFTC may only disclose information obtained from the other in certain circumstances.  FERC may disclose information received from the CFTC only in certain administrative or enforcement proceedings, and the CFTC may disclose FERC-obtained information only in actions or proceedings to which either CFTC or the United States is a party.

The MOU is likely to lead to heightened cooperation between FERC and the CFTC.  The two agencies agreed to coordinate their third-party notice requirements and to communicate with each other in order to avoid duplicative discovery where possible.  Importantly, the agencies also agreed to coordinate their oversight, investigative, and enforcement activities on a regular basis.  To facilitate this coordination, each agency's oversight and enforcement staff are authorized to share information concerning their ongoing investigations and oversight and enforcement proceedings. 

The MOU also addressed the treatment of proprietary information, and each agency agreed it would obtain the other's prior written permission before releasing such information.  FERC and the CFTC also agreed to notify each other whenever they received demands or requests to disclose information provided by the other, such as Freedom of Information Act requests, subpoenas, court orders, or informal requests.  However, under the MOU, the agencies are not required to keep aggregate data or data derived from proprietary information confidential.