[co-author: Juan Dawson]

On June 15, 2023, FERC issued Order No. 895, adopting new regulations permitting regional transmission organizations (“RTO”) and independent system operators (“ISO”) to share, amongst each other, credit-related information of their market participants, and requiring RTOs/ISOs to adopt tariff or similar rules for providing credit-related information sharing in order to better assess market participants’ credit risks.

FERC’s final rule: (1) permits RTOs/ISOs to share credit-related information about any market participant without obtaining prior consent or providing prior notice to said market participant; (2) permits an RTO/ISO to use credit-related information received from other RTOs/ISOs to the same extent as credit-related information received from its own market participants; and (3) requires any RTO/ISO that receives credit-related information from another RTO/ISO to treat that information as confidential, just as it would for credit-related information received from its own market participants.

Prior to this rule, the tariffs of RTOs/ISOs effectively restricted them from sharing credit-related information with each other. This final rule, however, concluded that these limitations hindered the ability of RTOs/ISOs to assess and mitigate credit risks in their markets and increased the risk of mutualized defaults. Ultimately, FERC found these restrictions to be unjust and unreasonable.

Currently, RTOs/ISOs assess market participants’ financial condition using credit-related information exclusively provided by current and prospective market participants. Such credit-related information is typically reviewed when a new generator is seeking interconnection rights, an entity first seeks membership to an RTO/ISO, when an existing entity is seeking to renew its membership with the RTO/ISO, or when the RTO/ISO is prompted such information, usually in response to a credit-related event. According to FERC, the final rule will improve RTOs/ISOs’ ability to accurately assess and mitigate credit risks in their markets. In turn, RTOs/ISOs will be able to minimize credit-related defaults and respond to credit events more quickly.

FERC’s Order No. 895 and its implementing regulations will take effect 60 days from publication in the federal register. As of June 23, 2023, Order No. 895 has not been released in the Federal Register.

A copy of FERC’s Order, issued in Docket No. RM22-13-000, can be found here.