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Day of Decision for FERC

How will the commission answer Congress’ call for energy market transparency?

Fortnightly Magazine - December 2005

or selling electric energy or FERC-jurisdictional electric transmission services.

However, such a black-letter reading of EPACT § 1288 may not reflect Congress’s intent. According to the public statement of a key congressional legislative staff member, EPACT § 1288 instead should have referenced FPA § 222 market manipulation, and should not have referenced FPA § 221 reporting of false information. 10 The staff member predicts that subsequent, congressional technical corrections legislation could change the assertedly erroneous reference from § 221 to § 222. If and when that occurs, under EPACT § 1288 the enforcing court would be able to take away people’s jobs for FPA § 222 market manipulation violations, parallel to NGA § 4A.

Penalties Encourage Transparency, Deter Manipulation

NGA and FPA criminal and civil penalties apply to EPACT market price transparency policy and market manipulation prohibition violations. In fact, EPACT §§ 314 and 1284 (d) & (e) enormously increase those penalties, and similar Natural Gas Policy Act of 1978 (NGPA) penalties. Concurrently with its market manipulation NOPR, FERC issued a policy statement on enforcement to provide guidance and regulatory certainty for the enforcement of statutes, orders, rules, and regulations, as well as provide notice to entities subject to FERC jurisdiction of the consequences of violations. 11 Again, FERC enforcement staff should have access to sufficient gas and electric market technical expertise to evaluate the appropriateness of such remedies in individual situations.

For NGA, FPA, and NGPA violations, limits on criminal fines are raised from $5,000 to $1 million—or 19,900 percent ( see table “Stiff New Penalties” ). Maximum imprisonment increases from two to five years for an NGA, FPA, or NGPA criminal violation. For criminal violations of a rule, regulation, restriction, condition, or order under the NGA, or a rule or order under the NGPA, the fine increases from $500 to $50,000, or 9,900 percent, for each day the offense occurs. For such FPA violations, the fine increases from $500 to $25,000, or 4,900 percent, for each such day. FERC can refer such violations to the U.S. Department of Justice for criminal prosecution where warranted. 12

New NGA § 22 civil penalty authority also is established, with a limit of $1 million per day per violation, after notice and opportunity for public hearing, for any NGA violation or any violation of a rule, regulation, restriction, condition, or order under the NGA. FERC is to consider the violation’s nature and seriousness, and efforts to remedy it. 13 EPACT § 1284(e) amends FPA § 316A to raise the civil penalty limit for violations of FPA part II or of any rule or order under FPA part II from $10,000 to $1 million, or 9,900 percent, for each day the violation continues.

Retroactive penalty application can be limited by NGA § 23(e) and FPA § 220(e), which place time limits on liability for any person under any civil penalty for a violation under the gas or electric market transparency sections. No penalty may be assessed if the violation occurred more than three years before the date the person is provided notice of the proposed