Client Alert
| January 28, 2010
FERC Proposes Credit Policy Changes for Centralized Energy Markets
On January 21, 2010, the Federal Energy Regulatory Commission ("FERC" or the "Commission") issued a Notice of Proposed Rulemaking, requesting comments regarding proposed reforms to credit practices in organized wholesale electric markets (the "NOPR"). Credit Reforms in Organized Wholesale Electric Markets, 130 FERC ¶ 61,055 (2010). Comments are due by March 29, 2010. Although the Commission has addressed credit policy issues before, the financial crisis and credit defaults in certain Regional Transmission Organization or Independent System Operator (collectively, "ISO") markets have brought credit policy issues to the fore. FERC recognizes that parties operating outside the organized markets typically use bilateral contracts and manage credit risk within the terms of those agreements, but also notes that the majority of transactions, based on quantity and volume, is in the organized wholesale electric markets. The Commission is particularly concerned about the potential for a large number of defaults in an ISO, because losses due to default in these markets are shared among market participants.
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