United States: 2015 FERC Enforcement Report Confirms Increase In Enforcement And Audit Activity As FERC Faces Unprecedented Number Of Litigated Enforcement Matters

The Federal Energy Regulatory Commission's ("FERC") Office of Enforcement ("Enforcement") issued its 2015 Report on Enforcement ("Report") on November 19, 2015.  The Report summarizes FERC's enforcement efforts during the fiscal year 2015 in Enforcement's four divisions:  Investigations, Audits and Accounting, Energy Market Oversight, and Analytics and Surveillance.  The Report offers insight into FERC's public and non-public enforcement activities, which include self-reported violations and investigations that were closed without further action, and audits of jurisdictional companies.  Consistent with the form of its past reports, FERC focused on four major areas:

  1. Fraud and market manipulation;
  2. Serious violations of the Reliability Standards;
  3. Anticompetitive conduct; and
  4. Conduct that threatens the transparency of regulated markets.

It intends to maintain these priorities in 2016.  The Report's hard numbers verify an increase in FERC enforcement activity this year, and confirm FERC's continued emphasis on investigations and audits.

Division of Investigations

FERC highlighted several significant matters to which it directed its resources this year.  FERC is litigating six enforcement actions in federal district courts, more than ever before.  FERC also approved nine settlement agreements with eleven subjects to resolve six alleged violations of the Anti-Manipulation Rule, four alleged violations of reliability standards related to the 2012 blackout in Arizona and California, and an alleged violation of tariff provisions.

District Court Litigation:  FERC issued orders to show cause why a penalty should not be assessed in three investigations for violations of its Anti-Manipulation Rule.  In all three cases, FERC imposed civil penalties.  The targets of these investigations were Powhatan Energy Fund, Maxim Power Corporation, and City Power Marketing as well as individual defendants associated with each of these entities.  Each defendant refused to pay the assessed penalties, and FERC sought to enforce the penalties in United States District Courts across the country.

In Powhatan, FERC alleged that Powhatan, Alan Chen, HEEP Fund, Inc., and CU Fund, Inc. violated the Anti-Manipulation Rule by engaging in a scheme of fraudulent up-to congestion trades in the PJM Interconnection.  Maxim Power, Maxim Power Holding Company, Inc., Pawtucket Power Holding Co, LLC and Pittsfield Generating Company, LP allegedly violated the Anti-Manipulation Rule through a scheme to collect inflated "make-whole" payments based upon alleged misrepresentations and material omissions to the ISO-NE market monitor.  Finally, FERC assessed penalties against City Power and its owner K. Stephen Tsingas for engaging in fraudulent up-to congestion trades.

FERC also continued to litigate cases it had filed in years prior against Barclays Bank PLC and Lincoln Paper & Tissue, Inc. in federal district court and litigated against BP in an administrative hearing.  FERC sought to enforce civil penalties against Barclays and several of its traders for violating the Anti-Manipulation Rule, alleging that Barclays and its traders made certain trades between 2006 and 2008 that manipulated prices for electricity at four trading hubs in the western United States.1 In Lincoln Paper, FERC assessed civil penalties after finding that Lincoln Paper artificially inflated its energy load baseline and offered load reductions against that inflated baseline.  In the ongoing administrative litigation between BP and FERC, FERC contends that BP made uneconomic sales at Houston Ship Channel and took steps to increase its market share at Houston Ship Channel as part of a manipulative scheme to suppress the Houston Ship Channel Gas Daily index, and that this scheme was motivated by a desire to benefit certain physical and financial positions held by BP whose price was set by the same index.

Anti-Manipulation Rule Settlements:  In addition to the blackout cases, FERC issued an Order approving the settlement of a market manipulation investigation with Twin Cities Energy, two of its affiliates, and three of its traders. This settlement resulted in $3,250,000 in civil penalties, $978,186 in disgorgement, and temporary trading bans for each of the individuals involved.

Reliability Standards Settlements: The Office of Enforcement sought penalties against the California Independent System Operator ("CAISO") for failing to monitor the intertie separation scheme at the San Onofre Switchyard moments before the outage began.  Because of its failed monitoring, CAISO could not take the necessary emergency measures to stop the scheme when the intertie became overloaded.  To settle, CAISO agreed to a civil penalty of $6 million—$2 million to the U.S. Treasury, $2 million to NERC, and $4 million to be invested in measures to improve reliability.  Southern California Edison Company ("SCE") agreed to pay $650,000—$250,000 to the U.S. Treasury, $250,000 to NERC, and $400,000 to be invested in reliability enhancement—for failing to develop emergency plans to deal with a similar blackout.  The Office of Enforcement targeted Western Area Power Authority-Desert Southwest ("Western DSW") for operating faulty equipment that shut down during the blackout.  Western-DSW agreed to mitigation and compliance monitoring, but escaped a civil penalty.  Finally, the Office of Enforcement alleged that Western Electricity Coordinating Council ("WECC") failed to respond properly to alarms and relying on outdated reliability data.  For these failures, WECC paid a civil penalty of $16 million—$3 million to the U.S. Treasury, $3 million to NERC, and $13 million to be invested in reliability enhancements.

Tariff Provisions Settlements: FERC's allegations against Columbia Gas Transmission for violating the FERC gas tariff ended in settlement when Columbia Gas agreed to pay a civil penalty of $350,000.

Self-reports:  In FY 2015, FERC received 122 new self-reports, the highest number in any year since 2011.  The total number of self-reports since then now stands at 460.  The majority of these self-reports came from RTOs and ISOs.

The Division of Investigation closed 78 self-reports during 2015.  FERC enumerated several examples of conduct that, when self-reported, lead to no action: regulatory filing violations, errors in electric quarterly reports, tariff/OATT violations, and RTO/ISO billing failures.  FERC also noted that the absence of significant harm to the market can be a factor in its decision to close a self-report.

Investigations:  During FY 2015, the Division of Investigations opened 19 investigations, two more than it opened in 2014.  As in the year before, most of these new investigations began with a referral from either the Division of Analytics and Surveillance or the RTO/ISO market monitoring units.  Of the 19 new investigations, 14 involve market manipulation, seven involve tariff violations, four involve violations of the market behavior rules, one involves gas capacity releases, one involves violations of natural gas posting requirements, and one involves false statements to FERC.

The Division of Investigation also closed 22 investigations, seven more than it closed in FY 2014.  Six of the 22 cases were closed as a result of a settlement, while the remaining 16 cases were closed because the Division of Investigations found insignificant evidence of a violation.

Division of Audits and Accounting

The Division of Audits and Accounting administers FERC's audit and accounting programs.  The Division of Audits and Accounting completed 22 audits of oil pipeline, public utility, and natural gas companies.  These audits covered market-based rate authority and electric quarterly reports ("EQRs"), formula rates, transmission incentives, natural gas tariff and accounting, mergers and acquisitions, oil tariff and accounting, Form No. 552, nuclear decommissioning trust funds, and capacity markets and demand response.  The Division of Audits and Accounting issued 360 recommendations for corrective action and collected more than $26.3 million in refunds and recoveries.  The amount of refunds and recoveries gets higher every year – it more than doubled this year over the last.2

Division of Energy Market Oversight

The Division of Energy Market Oversight oversees wholesale natural gas and electric power markets.  It continued to study the market for emerging trends, as reported to the Commission in the 2014 State of the Markets Report and seasonal market assessments.  The Division of Market Oversight reviewed EQR submittals from more than 2,000 individual respondents – roughly 100 more than in FY 2014.  And it led a technical conference devoted to the eForms Refresh Project and transitioning to a new electronic filing format.

Division of Analytics and Surveillance

The Division of Analytics and Surveillance analyzes transactional and market data to detect potential market manipulation, anticompetitive conduct, and other anomalous activities in the energy markets.  In FY 2015, this Division issued a Notice of Proposed Rulemaking for the Collection of Connected Entity Data from RTOs and ISOs.  It also continued to analyze manipulative and anti-competitive behavior in the natural gas and electricity markets.  The Division worked on more than 30 investigations this year.

The full Report is available on FERC's website at: http://www.ferc.gov/legal/staff-reports/2015/11-19-15-enforcement.pdf.


1 While the Federal Power Act provides for de novo review if the parties elect to litigate in federal court, FERC has taken the position that the de novo review is limited to the pleadings in the administrative file, without discovery or an evidentiary hearing in the federal court proceeding.

2 FY 2010: 52 audits completed, 210 corrective action recommendations and $4.1 million in monetary recoveries; FY 2011: 72 audits completed, 300 corrective action recommendations, $290,00 in refunds and a write-off of $95.8 million in regulatory assets; FY 2012: 44 audits completed, 399 corrective action recommendations, $5.8 million in refunds, and accounting adjustments of $3.5 million not recoverable in future rate proceedings; FY 2013: 29 audits completed, 360 corrective action recommendations, $15.4 million in refunds, and accounting adjustments of $200,000; FY 2014: 19 audits completed, 62 corrective actions recommendations and $11.7 million in refunds and recoveries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.