FERC approved two orders Thursday that commissioners said will make the energy market enforcement process more transparent to market participants and consumers.
“I believe our actions today strike the appropriate balance between the need to keep preliminary investigations nonpublic and the need for transparency,” said Chairman Jon Wellinghoff.
In the first order the Federal Energy Regulatory Commission (FERC) authorized the secretary of the Commission to issue a “Staff’s Preliminary Notice of Violations” after the subject of an investigation has had an opportunity to respond to a preliminary findings letter.
Issuing such a public notice “may come at some cost to the subject company,” according to Commissioner Marc Spitzer. But Spitzer said he supported the decision because “public disclosure of staff’s preliminary findings promotes transparency and amounts to good government, because it provides the regulated community and the public at large with information regarding those activities enforcement staff believes are violative of Commission policies, rules, and orders.”
In a second order, FERC formalized a process by which the Office of Enforcement will provide exculpatory evidence to subjects of its investigations and respondents in administrative enforcement proceedings.
William Hederman, a senior vice president at Concept Capital’s Washington Research Group, said the actions reflect a major improvement in the professionalism of the Enforcement Office’s director. Before becoming an analyst, Hederman was the founding director of FERC’s Office of Market Oversight and Investigations, now the Office of Enforcement.
“Not only do these reforms directly reduce the risks and uncertainty to which companies operating under FERC jurisdiction will face, they also reduce the uncertainty that these companies face due to the fog of confusion that past enforcement practices had created for companies trying in good faith to obey the Commission’s regulations but encountering resistance to efforts to get clarification about what, exactly, the regulations meant,” Hederman said.
Enforcement staff on Thursday issued its 2009 Report on Enforcement, an annual statistical report summarizing its activities. Approximately 70% of investigations opened in fiscal 2009 involved allegations of market manipulation, according to the report.
While there were 31 self reports of violations in 2007, that number more than doubled in 2008 and increased again to 122 in 2009, according to the report.
“What we see is that companies realize the importance of compliance with Commission requirements and companies that are subject to these requirements are putting a great deal more effort into developing internal compliance protocols and programs, more training for their employees, etc.,” said FERC staffer Ted Gerarden. “The results of that are that more things come to their attention that they may have overlooked before. And companies are being much more proactive about contacting Enforcement and telling us about these things.”
Enforcement staff also completed 33 audits of public utilities and natural gas pipeline and storage companies, which generated 112 recommendations for corrective action and included $2.8 million in monetary recoveries from accounting and billing adjustments.
Looking forward, enforcement staff will focus on matters involving fraud and market manipulation, serious violations of reliability standards, anti competitive conduct and conduct that threatens transparency in regulated markets, the report said. The Office of Enforcement will give high priority to cases involving harm to the public or significant gains to the violator or losses to the victims of the misconduct, it said.
The 2009 Report on Enforcement is available at www.ferc.gov.
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