Citing FERC’s glaring delinquency in this area, the General Accounting Office (GAO) last week called on the Commission to take regulatory action to bring its civil penalties that are covered under the Inflation Adjustment Act (IAA) more in line with inflation.

In a four-page report to Chairman Pat Wood last Monday, Victor S. Rezendes, managing director of strategic issues for the GAO, pointed out that the Commission has neglected to seek inflation adjustments to its civil penalties for a number of years. The GAO estimated that FERC has missed out on the opportunity to boost certain civil penalties by 15% to 16% since the early 1990s.

The 1990 IAA law was amended in 1996 by the Debt Collection Improvement Act, which requires federal agencies to adjust their civil penalties for inflation by regulation every four years.

FERC has four penalties that are covered by the IAA: 1) knowing violation of any provision, rule or order under the Natural Gas Act (maximum penalty is $5,000 per violation; last set or adjusted for inflation in 1978); 2) willful failure to comply with any order, rule or FERC regulation, or failure to submit any required document/information or to appear in response to FERC subpoena in relation to the Federal Power Act (maximum penalty of $1,000 per violation; last set or adjusted for inflation in 1935); 3) failure to comply with any rule, regulation, condition of a license, permit, or exemption under subchapter 12 of FPA (maximum penalty $10,000 per day; last set or adjusted for inflation in 1986); and 5) violation of section 824(j) on wheeling authority, orders requiring interconnection or wheeling, or section 825(m) on sales by exempt wholesale generators of FPA (maximum fine of $10,000 per day; last set or adjusted in 1992).

Because the Consumer Price Index (CPI) rose by more than 10% since three of the four civil penalties were last set or adjusted, “FERC should have published a regulation in the Federal Register by Oct. 23, 1996 increasing each of these three covered penalties by 10%,” the GAO’s Rezendes said. As for the FERC penalty that was last set or adjusted for inflation in 1992, “the CPI increased nearly 9% between June 1992 and June 1995. Therefore, FERC could have increased this penalty as well,” he noted.

The IAA also required the Commission to review its civil penalties by Oct. 23, 2000, and to make a second round of inflation adjustments, Rezendes said. “Because the CPI increased by about 6% during that period, FERC could have increased its penalty amounts again.”

The GAO provided the Commission with a draft of the report in late June. In response, Wood said “he was directing his staff to prepare a draft regulation that would adjust the agency’s civil penalties by 10% — the maximum allowed by the statute for a first-time adjustment.” In addition, he assured the GAO that FERC would seek periodic adjustments for inflation in the future, as required by law.

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