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Principles & Code of Ethics

Code of Ethics for Electric Power Suppliers

Preamble

This Code of Ethics (Code) defines and reaffirms the values, principles and internal controls that electric power supply companies must follow in conducting their business activities. The Code is intended to complement the internal principles and practices of each individual company and to guide companies as they supply power, manage risk, provide market liquidity and report financial results. In that regard, it is anticipated that all EPSA Members have compliance programs tailored to the size, scope and regulatory requirements of their respective organizations.1 Compliance with the Code allows companies to assure their customers, investors, legislators, regulators, the public and other market participants that their business activities are, and will continue to be, conducted with integrity. In addition, assurance is given that unlawful and unethical reliability and trading practices are not tolerated, that public disclosures of trading information are accurate, and that companies will abide by these ethical standards and maintain sound reliability and trading practices.

Clear, consistent and well-constructed market rules also are necessary. Without good rules, the strongest commitment to ethical standards will not result in the market efficiencies needed to provide maximum benefit to consumers. Each company adopting this Code commits to work with regulators, policy makers and other market participants to develop such rules and standards, thereby strengthening the competitive wholesale electric markets necessary to power the economy and provide ongoing value to the market.

Above all, each electric power supply company adopting this Code reaffirms its commitment to excellence, professionalism and unwavering ethical conduct.

I. Ethical Standards

Core Value: Integrity

Conducting business activities with integrity is the essence of ethical conduct. Integrity means conducting business activities in an honorable and principled manner consistent with the Federal Energy Regulatory Commission’s (FERC) Anti-Manipulation Rules (Order 670) and Market Behavior Rules (CFR 18 Section 35.41), as well as the ethical standards and sound reliability and trading practices set forth herein.

Ethical Standards

Electric power suppliers will:

  1. Conduct their business in accordance with all applicable laws, regulations, tariffs and rules, and in good faith, and with a commitment to honest dealing.

  2. Not engage in fraudulent behavior.

  3. Honor the terms and conditions of their contracts.

  4. Engage only in transactions with legitimate business purposes, such as managing business risk or that otherwise have economic substance. In no event will companies engage in any transactions intended to boost revenues or volumes artificially, or intended to manipulate market prices.

  5. Not collude with other market participants to affect the price or supply of power, allocate territories, customers or products, or otherwise unlawfully restrain competition.

II. Sound Reliability Practices

Core Value: Adherence to Sound Reliability Practices and Principles

Market participants must help ensure the reliability of the electric power grid. Electric power generation facilities are required to comply with rules and regulations governing reliability, including the mandatory Reliability Standards (16 U.S.C. Section 824o(d)) developed and enforced by the electric reliability organization (ERO).

Sound Reliability Practices

Electric power supply companies will act in accordance with these standards of sound reliability practices:

  1. Companies will operate and maintain their electric power generating facilities in accordance with the mandatory Reliability Standards developed and enforced by the ERO.

  2. Companies will operate and schedule generating facilities, undertake maintenance, declare outages, and commit or otherwise bid supply in a manner that complies with the rules, regulations and guidelines of the applicable power market.

  3. Companies will offer products and services in accordance with RTO market rules, NERC standards, and other applicable rules and regulations. Companies may decide not to run their generating plants or bid and schedule such resources or other power supplies when such actions would risk jeopardizing public or employee health and safety or damaging their facilities, or as otherwise not inconsistent with applicable rules and regulations.

  4. Companies will cooperate with reliability entities in the implementation of system rules and reliability requirements, and manage the physical operation of generating facilities and the scheduling of power transactions in a manner that is consistent with the reliable operation of the transmission grid.

III. Sound Trading Practices

Core Value: Adherence to Sound Trading Practices and Principles

Electric power markets reflect the constantly changing dynamics of supply and demand. Efficient business operations in such an environment demand practices that can manage risk and discover market prices. Such practices must be consistent with those outlined in the FERC’s Anti-Manipulation Rules (Order 670) and Market Behavior Rules (CFR 18 Section 35.41), as well as the guiding Ethical Standards of this Code.

Sound Trading Practices

Electric power supply companies will act in accordance with these standards of sound trading practices:

  1. No creation of artificial congestion. Companies will not engage in transactions or schedule resources with the intent of creating congestion to manipulate prices or to jeopardize the security of dispatch operations.

  2. No non-performable ancillary services. Companies will not offer ancillary services to the market that they intend not to provide.

  3. No “wash” trades. Companies will not arrange and execute simultaneous offsetting buy and sell trades, i.e. with the same counterparty and price, commodity, location and quantity terms, with an intent to artificially affect reported revenues, trading volumes or prices.

  4. No misrepresentative trading. No trading will be conducted for the purpose of misrepresenting the financial condition of the organization.

  5. Risk management policies. Adopt, adhere to, and enforce risk management policies and procedures that are designed to ensure that power-trading activities are conducted in accordance with the substance of this Code.

IV. Information Disclosure and Documentation

Core Value: Candid and Complete Disclosure

Markets depend on trust in the accuracy of market information and transparency of market behavior and that the confidentiality of commercially sensitive information entrusted to each company will be maintained.

Information Disclosure and Documentation Standards

Electric power suppliers will:

  1. Provide market and transaction information to regulators and market monitors in compliance with all applicable rules and requirements, including, but not limited to, FERC’s Anti-Manipulation Rules (Order 670) and Market Behavior Rules (CFR 18 Section 35.41).

  2. When reporting financial results, do so in accordance with applicable accounting principles and in a manner that fairly presents the financial health of the company.

  3. Ensure that any information disclosed to the media, including market publications and publishers of surveys and price indices, is accurate and consistent.

  4. Maintain and adhere to internal procedures designed to ensure that all trades are properly documented in a timely fashion and that no trades are concealed or misrepresented.

  5. Maintain a document management and retention policy that complies with applicable laws and regulations.

V. Compliance

Core Value: Comprehensive Corporate Compliance

Each company subscribing to this Code will have a compliance program designed to ensure appropriate, timely and ongoing review of reliability and power trading practices, regulatory requirements, and compliance regarding the substance of this Code.

Compliance Standards

Electric power suppliers’ compliance programs will institute all steps required to ensure compliance with the substance of this Code. Such steps shall include, but may not necessarily be limited to:

  1. Promoting regulatory compliance at the highest level of management of the member company.

  2. Provide for proper training of personnel regarding the substance of this Code, applicable laws and regulations, other codes of conduct that are applicable to the operation of their business and their risk management policies.

  3. Maintain internal standards, policies, procedures and controls to promote compliance with the substance of this Code, and with other standards of sound operating and trading practices and market commitments, and provide for the periodic internal or external audit of such standards, policies, procedures and controls.

  4. Provide an environment that encourages employees within the trading organization to engage in safe and confidential discussions and to disclose to senior management any trading practices that might violate the substance of this Code.

  5. Establish clear lines of accountability for the company’s power trading practices, including provisions relating to the responsibilities of corporate officers, with appropriate oversight by the Board of Directors or other senior corporate management committee.



1 Note that pursuant to the EPSA Bylaws, Article III, Section 2 (c) regarding Qualifications for Membership the following is required: “All Board level members (i) shall comply with the then currently effective Code of Ethics [and Sound Trading Practices] for Electric Power Suppliers and (ii) must submit an annual written certification by a senior officer that ‘the company intends to comply with the Code of Ethics and has in place internal policies with procedures reasonably designed to assure compliance.’” Such certification must be submitted to EPSA no later than January 31 of the calendar year in effect.