Fraud and market manipulation, serious violations of the reliability standards, anticompetitive conduct, and conduct that threatens the transparency of regulated markets will continue to be the focus of FERC investigations and enforcement actions in 2012 according to the 2011 Annual Report on Enforcement.
The 2011 Report, issued November 17, 2011, describes the agency’s efforts in fiscal year (FY) 2011 to make its investigations more transparent through public notices of alleged violations and consistent implementation of penalty guidelines in settlements and adjudications.
The Enforcement Office (the Office) received 107 self-reports in FY 2011, up from 93 in FY 2010. In its 2010 Report the Office predicted that the leniency afforded to self reporters by the penalty guidelines would drive this increase. Enforcement staff closed 54 self-reports in 2011 after an initial review; 53 self-reports remain open. These self-reports came from a variety of market participants — regional transmission organizations (RTO) and independent system operators (ISO), natural gas companies, electric utilities and marketers. Most self-reports involved violations of tariff provisions, particularly open-access requirements. Other infractions involved filing requirements, behavioral rule and conduct violations, and natural gas pipeline shipper restrictions.
The 2011 Report provides insight into the kinds of findings that will persuade the Office not to pursue enforcement actions against self-reporters. Those findings include:
- the violation caused no harm to markets or parties or was isolated, inadvertent or unlikely to reoccur;
- the self-reporter took prompt remedial action or instituted measures to ensure future compliance;
- the self-reporter already paid penalties, refunds, or voluntarily disgorged profits; and
- the self-reporter had an adequate compliance program in place.
Enforcement staff opened slightly fewer non-self-reported investigations in FY 2011 (12 investigations and two inquiries) than it did in FY 2010 (15 investigations). The 2011 investigations were instigated on referrals from RTO/ISO market monitoring units, market oversight committees and program offices, and calls to the Office of Enforcement Hotline. While most investigations addressed alleged tariff violations, others targeted suspected market manipulation, false statements to FERC, hydropower license violations and standards of conduct violations.
Enforcement staff closed slightly more investigations in FY 2011 (19 investigations) than it did in FY 2010 (16 investigations and one inquiry). Nine of the 2011 investigations ended in settlements and five ended with no enforcement action. Factors persuading the Office not to pursue enforcement even when the investigation found a violation included finding the violator received no economic gain or caused no economic harm, and finding the violator committed to implement improved compliance and training programs.