The Federal Energy Regulatory Commission’s (FERC) Office of Enforcement (OE) issued its 13th annual Report on Enforcement. The intent of the report is to discuss the OE’s activities over the last fiscal year. “The report discusses the activities performed by OE’s Divisions of Investigations, Audits and Accounting, Analytics and Surveillance, and Market Oversight during the last fiscal year.”
The report goes over the ” audits, market reports, litigation filings, and settlements” from the year, which were approved by FERC. It also covers “non-public activities, including summaries of closed investigations and self-reports that were closed without further action by the Division of Investigations.” This is the first time the report has included “illustrative examples of the market monitor referrals received by OE that staff reviewed and closed without opening an investigation.”
They did not include the names of “the companies and individuals whose conduct was under review in these matters” to keep everything confidential.
The Division of Audits and Accounting
“Illustrative compliance alerts that cover nearly a dozen distinct areas where there have been consistent concerns or noncompliance of significant impact” were included by the Division of Audits and Accounting. That section of the report also “includes citations to docket numbers relevant to the recurring, problematic compliance issues discussed in the alerts,” this was a new inclusion to the report. “Additionally, a representative sample of audits completed in FY2019 summarizes staff’s recommendations for corrective action and provides context for audits that resulted in refunds and recoveries.”
“The Division of Audits and Accounting completed 11 audits of public utility and natural gas companies covering a wide array of topics.” They resulted in 286 recommendations for corrective action and 76 findings of noncompliance; $161.2 million was given in refunds and recoveries. They also ” acted through the Chief Accountant’s delegated authority on 120 accounting filings requesting approval of a proposed accounting treatment or financial reporting matter.” They also “advised and acted on 433 proceedings” at FERC, which covered various accounting matters. In many of the cases they worked on, they “served in an advisory role, identifying and analyzing the accounting implications of those requests.”
The Division of Analytics and Surveillance
“The Division of Analytics and Surveillance provides a comprehensive review of its surveillance program and describes how it analyzed transactional and market data in FY2019 to detect potential manipulation, anticompetitive behavior, and other anomalous activities in the energy markets.” There are also ” greater and new details about DAS’s processes and practices related to reviewing market monitor referrals and data management.”
The DAS “continued monitoring for market manipulation and other anomalous activities in the markets… Natural gas surveillance screens produced approximately 7,629 screen trips which were reviewed by DAS staff, resulting in 20 additional in-depth inquiries into specific trading behavior.” There were 83 electric surveillance screens run and reviewed by the DAS, in addition to “monthly, hourly and intra-hour sub-screens, and reports for over 37,000 hub and pricing nodes within the six ISO/RTOs.” The surveillance identified 23 instances that needed further analysis. They “made a total of six surveillance-related referrals to the Division of Investigations” over the last fiscal year. They also worked with the DOI on about 45 investigations “involving allegations of manipulation in the Commission-jurisdictional natural gas and electricity markets, or violations of tariff provisions.” As part of these efforts, the DAS “(1) provided analytical and data-based assessments of market activity related to ongoing investigations; (2) supported DOI in its fact-finding; and (3) calculated the amount of unjust profits and market harm resulting from alleged violations to assist with determining a civil penalty recommendation under the Commission’s Penalty Guidelines.”
The Division of Energy Market Oversight
There is a summary of the Division of Energy Market Oversight’s “recent Market Reports and Assessments and describes other measures to monitor and analyze the nation’s wholesale natural gas and electric power markets.” It also describes their ” role in the administration of certain Commission filing requirements and certain public outreach conducted by the division last fiscal year.” This section also ” identifies which Commission Program Office is now responsible for each of the functions previously performed by Market Oversight following the September 2019 realignment, which moved Market Oversight’s functions to other Commission offices and OE divisions to improve organizational efficiency and centralize management expertise.”
The four areas OE has made their priority for enforcement are: “(1) fraud and market manipulation; (2) serious violations of the Reliability Standards; (3) anticompetitive conduct; and (4) conduct that threatens transparency in regulated markets.” They note that this is the same as the previous year.
The Division of Energy Market Oversight also continued monitoring “the jurisdictional markets to identify market trends, and also continued its efforts to enhance its analytical capabilities related to the ongoing eForms refresh project.” They issued their annual “State of the Markets Report and seasonal Market and Reliability Assessments, which reviewed trends and events in natural gas and power markets, including trends in prices, supply, and demand.” It also reviewed the development of ” pipeline infrastructure and the rapid increase in the LNG export industry.”
The Division of Investigations
FERC approved two settlements with Enforcement, totaling over $14 million, “$7.4 million in civil penalties and disgorgement of another $7 million.” The DOI “opened 12 new investigations and brought 14 pending investigations to closure with no action.” These ” included matters in which staff found no violation, or staff found that there was not enough evidence to conclude that a violation had occurred.” There were some matters where they “found a violation but exercised its discretion to not pursue a sanction and closed the investigation.” They also “closed 130 self-reports without further action, closed 10 MMU referrals without opening full investigations, and resolved 148 calls made to the Commission’s Enforcement Hotline.” They are also still litigating three cases in federal court on behalf of FERC.