FERC Filings
INFORMATION DISCLOSURE COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION
II.
The Amount and Type of Data the Commission is Requesting is Commercially Sensitive
ESPA does support the goal of the NOPR. However, the information the Commission is proposing be made publicly available is commercially sensitive and consistent with the trade secrets exemption to the Freedom of Information Act. Thus, competitive harm from its release outweighs any benefits of disclosure. Not only does quarterly disclosure of hourly sales in standardized markets pose a risk of competitive harm, disclosure of negotiated contracts runs directly counter to the Commission’s oft-stated goals of fostering robust competitive wholesale electricity markets. In an efficient, competitive marketplace, the information contained in negotiated bilateral contracts -- if it were not otherwise required to be provided to FERC -- would be held as strictly confidential by the parties to which it pertains, pursuant to specific confidentiality arrangements. Negotiated contracts contain cost and pricing data that reflect the contracting parties’ unique and complex risk-sharing arrangements, addressing both market risks and party-specific risks.
The reason that parties strive so hard to maintain the confidentiality of their transactions is that firms invest both intellectual and financial capital to develop software, data, analytical techniques, algorithms, market information, and business strategies that are reflected in their negotiated contracts. In both regulated and unregulated industries, contract information is generally held confidential to protect the parties’ costly investment in the development of such transaction-specific risk-sharing arrangements. If made publicly available, such information, which can disclose parties’ positions to the market, can be used by competitors to gain an unfair advantage in competitive bidding, contract negotiations and market strategy, chilling the market activity needed for robust competition.
Moreover, widespread public access to the data contemplated by the NOPR will provide unwarranted and unprecedented public disclosure of competitive parties’ market positions, including their net short and long position in the market. This, in turn, could allow other parties to use that information to their own competitive advantage, using the information required to be disclosed to undercut or to take advantage of another party’s market position or to force a customer into a less desirable transaction. Over time, parties would be required, in effect, to disclose critical and proprietary information and strategies to other competitors. No party would stand for such a situation, and would thereby reduce its activities accordingly.
Competition today is based on innovation, efficiency, risk management and customer service. The widespread publication of such information will shift the focus on competition away from getting the best and innovative products to the market and onto developing sophisticated software programs to “scrub” data from information posted by competitors. The resulting damage to liquidity and the integrity of the competitive wholesale market would be difficult to overcome.
In addition, disclosure of negotiated contract terms will eliminate competitive firms’ incentives to develop innovative, efficiency-enhancing contract provisions, as using standard-format contract terms will be less likely to reflect sensitive information about specific firms’ business and market strategies developed in response to market risks and party-specific risks.
Disclosure of negotiated contract information will also force greater use of more generic and shorter-term transactions, which are unlikely to provide sufficient transaction-specific risk-sharing mechanisms to ensure efficient and competitive trading of bulk power. This will have a negative impact on longer-term strategic planning, not only for power sellers, but also for end-use customers who themselves may need to budget for reasonably predictable power costs. In addition, parties subject to these filing requirements may find themselves compromising the confidentiality expected by third parties.
The Commission should revise the NOPR to eliminate the public disclosure of commercially sensitive data. As such, in the Final Rule, the Commission must ensure that it receives the information it needs to comply with Section 205, while protecting commercially sensitive information that will harm the market if released. The Commission could permit information to be reported confidentially or in an aggregated form by customer or region. Alternatively, the Commission staff could receive the information quarterly and post summary data by region. Individual web sites could show only a customer list, without specific price data included. The price data could also be sent electronically separately to the FERC staff for their aggregation at the regional level.