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2006 NASUCA Annual Meeting

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2006 NASUCA Annual Meeting

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    1. 2006 NASUCA Annual Meeting FERC ENFORCEMENT PROGRAM Presentation by Susan J. Court Director Office of Enforcement Federal Energy Regulatory Commission November 14, 2006

    2. Pre-EPAct v. Post-EPAct

    3. Pre-EPAct Enforcement Program - Statutory FPA Part I § 31(c) (16 U.S.C. § 823b (c)) (penalty authority) FPA Part III § 316A (16 U.S.C. §825o-1) (limited penalty authority over certain violations of Part II) (revised by Epact) NGA §§ 20 and 21 (15 U.S.C. §§717s, t) (criminal penalties but no civil penalty authority)(revised by Epact) NGPA § 504 (15 U.S.C. § 3414) (penalty authority)(revised by Epact).

    4. Pre-EPAct Enforcement Program -- Regulatory Coastal Oil & Gas Corp. v. FERC, 781 F.2 1249 (5th Cir. 1986) (holding illegal sales of gas may be subject to disgorgement but not penalties). 18 C.F.R. Part 1b, including Enforcement Hotline (18 C.F.R. §1b.21). Policy Statement on Natural Gas and Electric Price Indices, 104 FERC ¶ 61,121 (2003), clarified, 105 FERC ¶ 61,282 (2003), order regarding future monitoring, 109 FERC ¶ 61,184 (2004), further clarified, 112 FERC ¶ 61,040 (2005). Market Behavior Rules (modified after Epact -- see later citations). Policy Statement on Market Monitoring Units, 111 FERC ¶ 61,267 (2005)(specifying protocols for MMUs to make referrals to FERC for alleged tariff and Market Behavior Rules violations).

    5. Recent Pre-EPAct Enforcement Actions -- Gas Transcontinental Pipe Line Corp, et al., 102 FERC ¶ 61,302 (2003) ($20 million penalty under NGPA for undue preference for affiliates). Dominion Resources, Inc., et al., 108 FERC ¶ 61,110 (2004) ($4.5 million refund and $3.6 million penalty for release of non-public storage information to affiliates). American Electric Power Co., et al., 110 FERC ¶ 61,061 (2005) ($21 million penalty under NGPA for violation of Standards of Conduct and Market Behavior Rules). Coral Energy Resources, L.P., 110 FERC ¶ 61,205 (2005) ($3.5 million for inaccurate reporting of information to a Commission data request regarding company traders’ reporting prices to publications). The Williams Cos., et al., 111 FERC ¶ 61,392 (2005) ($3.6 million penalty and $4 million refund for violations of Standards of Conduct). CenterPoint Energy Gas Transmission Co., 111 FERC ¶ 61,492 (2005) ($270,000 penalty for disclosing non-public information to marketing affiliate).

    6. Recent Pre-EPAct Enforcement Actions -- Electric Cleco Corp., 104 FERC ¶ 61,125 (2003) ($2 million settlement regarding unauthorized power sales, transmission transactions, and operational arrangements among affiliates). Florida Power Corp., et al. (Progress Energy), 111 FERC ¶ 61,243 (2005) (settlement implementing 21 specific organizational changes and a credit back of $6.4 million to customers to resolve issues arising from audit regarding, inter alia, violation of company’s code of conduct). MidAmerican Energy Co., 112 FERC ¶ 61,346 (2005) (settlement arising from an audit of the company’s OATT, Standards of Conduct, OASIS, Code of Conduct, in which company agreed to build $ 9.2 million in unplanned transmission system upgrades and accelerate another $14.7 million in planned transmission improvements).

    7. Energy Policy Act of 2005 Pub. L. No. 109-58, 119 Stat. 594 (2005) Sections 316 and 1281 expanded FERC’s authority to facilitate transparency in gas and electric prices, and specifically directed FERC and the CFTC to conclude a memorandum of understanding to ensure that information requests to markets are properly coordinated to minimize duplicative information requests and to address the treatment of proprietary trading information. Sections 315 and 1283 expanded the FERC’s authority to police the use of any manipulative or deceptive device in connection with the gas and electric markets. Sections 314 and 1284 increased the criminal and civil penalties for violations of FERC gas and electric rules and regulations. The civil penalties, for example, went from $10,000 to $1 million for each day a violation continues. These sections also extended penalty authority over violations of all of Federal Power Act Part II and all of the Natural Gas Act.

    8. Post-EPAct FERC Actions Overview To assist the Commission in enforcing its statutes, regulations, and policies (codification of enforcement rules) To assist the Commission in obtaining adequate information to enforce its statutes, rules, regulations, and policies (access to information) To provide greater due process to companies and the individuals subject to Commission investigations and audits (greater due process) To provide greater clarity to companies and the general public in understanding the exercise of the agency’s prosecutorial discretion (greater clarity)

    9. Codification of Enforcement Rules Prohibition of Energy Market Manipulation, Order No. 670, RM06-3-000, 114 FERC ¶ 61,047 (Jan. 18, 2006), order on reh’g, 114 FERC ¶ 61,300 (March 22, 2006). Investigation of Terms and Conditions of Public Utility Market-Based Rate Authorizations, EL06-16-000, 114 FERC ¶ 61,165 (Feb. 16, 2006), order on reh’g, 115 FERC ¶ 61,053 (April 17, 2006) (electric). Note: clarifies that May 2005 policy statement on market monitors applies to potential violations of Order No. 670 and the now codified Market Behavior Rules 1, 3, 4, and 5. Conditions for Public Utility Market-Based Rate Authorization Holders, Order No. 674, RM06-13-000, 114 FERC ¶ 61,163 (Feb. 16, 2006)(electric). Amendments to Codes of Conduct for Unbundled Sales Service and for Persons Holding Blanket Marketing Certificates, Order No. 673, RM06-5-000, 114 FERC ¶ 61,166 (Feb. 16, 2006)(gas).

    10. Access to Information Memorandum of Understanding Between the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission Regarding Information Sharing and Treatment of Proprietary Trading and Other Information (Oct. 12, 2005). Revisions to Record Retention Requirements for Unbundled Sales Service, Persons Holding Blanket Marketing Certificates, and Public Utility Market-Based Rate Authorization Holders, RM06-14-000, Order No. 677, Final Rule, 71 Fed. Reg. 30,284 (May 26, 2006), FERC Stats. & Regs. ¶ 31,218.

    11. Greater Due Process Interpretive Order Regarding No-Action Letter Process, PL06-4-000, 113 FERC ¶ 61,174 (2005), as modified, 117 FERC ¶ 61,069 (2006). Procedures for Disposition of Contested Audit Matters, Order No. 675, RM06-2-000, 71 Fed. Reg. 9698 (February 27, 2006), FERC Stats. & Regs. ¶ 31,209, order on reh’g, Order No. 675-A, 71 Fed. Reg. 29,779 (May 24, 2006), FERC Stats. & Regs. ¶ 31,217(2006).

    12. More Clarity Enforcement of Statutes, Orders, Rules, and Regulations, Policy Statement on Enforcement, PL06-1-000, 113 FERC ¶ 61,068 (Oct. 20, 2005). Web Package: http://www.ferc.gov/legal/maj-ord-reg/land-docs/order2004/resources.asp

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