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Day of Decision for FERC

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

Fortnightly Magazine - December 2005

rules and regulations prescribed in the public interest or to protect ratepayers. In an Oct. 20, 2005, NOPR on market manipulation, FERC proposes after public comment to implement the new statutes through rules and regulations to be issued in the winter of 2005-2006. 7

While creating no private right of action to bring a case in court, Congress declared that the NGA § 4A and FPA § 222 “manipulative or deceptive devices or contrivances” phrase protects both the public interest and gas and electric ratepayers just as the same phrase is used in Securities Exchange Act of 1934 § 10(b) in the public interest and for the protection of investors. The U.S. Supreme Court explains that the phrase, in securities law, refers to practices intended to mislead investors by artificially affecting market activity. 8

By analogy across industries, those new NGA and FPA terms now might be understood to refer generally to practices intended to mislead gas and electric ratepayers by artificially affecting market activity for purchase or sale either of gas or FERC-jurisdictional transportation services, or of electric energy or FERC-jurisdictional transmission services. After careful FERC review of Securities Exchange Act § 10(b) precedents, the market manipulation NOPR proposes to add gas and electric regulations declaring it unlawful for “any entity,” directly or indirectly to: (i) use or employ any device, scheme, or artifice to defraud; (ii) make any untrue statement of a material fact or omit to state a material fact that is necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or (iii) engage in any act, practice, or course of business that operates or would operate as a fraud or deceit on any person. 9 Governmental utilities and other market participants are included as entities in the ambit of those regulatory market manipulation prohibitions, not just NGA and FPA jurisdictional entities.

Taking a Person’s Job Away

At trial, in a FERC enforcement action for injunction, EPACT § 318 provides the U.S. District Court with significant new NGA authority. The enforcing court can prohibit individuals engaged in practices violating the NGA § 4A market manipulation statute, including related FERC rules and regulations, either from acting as interstate pipeline officers or directors, or from engaging in the energy trader business of purchasing or selling gas or FERC-jurisdictional gas transmission services. The prohibition thus removes individuals from gas-industry workplaces. Certainly, FERC’s Division of Enforcement Staff should have access to appropriate technical evaluation expertise before asking a court for that forcible remedy.

Similar FPA authority to take away people’s jobs is provided by EPACT § 1288, but apparently from a different statutory angle. As EPACT reads, the enforcing court can punish individuals engaged in practices violating not the FPA § 222 market manipulation statute, but the new FPA § 221 prohibition on reporting false information relating to electricity wholesale prices or transmission capacity availability, including violations related to rules and regulations. Violators apparently can be prohibited either from acting as electric utility officers or directors, or from engaging in the business of purchasing