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Day of Decision for FERC

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

Fortnightly Magazine - December 2005

civil penalty under NGA § 22(b) or FPA § 316A(b). The limitation on penalties does not operate, however, where FERC finds a seller has contracted either to transport or sell gas subject to FERC jurisdiction, or to sell electric energy at wholesale or for transmission service subject to FERC jurisdiction, and has engaged in fraudulent market manipulation activities materially affecting the contract in violation of NGA and FPA market manipulation prohibitions.

FERC’s enforcement policy statement sets out factors for possible consideration in determining the severity of penalties, including the harm caused, whether manipulation, deceit, or artifice was present, whether the action was willful or a repeat offense, the extent of senior management involvement, how the wrongdoing came to light, and the effect of penalties on the violator’s financial viability. 14 Points taken in mitigation can include the presence of internal compliance tools, self-reporting of violations, and cooperation. 15 FERC declares that in circumstances of egregious conduct full use of its penalty authorities may be necessary regardless of other factors.

Ball in FERC’s Court

The importance of efficient, trustworthy energy markets always has been evident, and especially so since 2001. Congress, apparently with significant appreciation for FERC’s recent work under pre-EPACT statutes, has presented the gas and electric industries with laws that potently promote market price transparency.

EPACT also commissions FERC to act on rules with due regard for the public interest, the integrity of those markets, fair competition, and the protection of consumers. In theory, FERC could rest on the laurels of its last few years of market-price transparency work if it concludes that present voluntary industry measures are adequate. Or, FERC can consider further action given the EPACT focus on market-price transparency, market manipulation, and the large size of the new fines and penalties to promote the former and prevent the latter. Further agency action of substance seems much more likely.



1. FERC’s July 6, 2005, Order Further Clarifying Policy Statement on Natural Gas and Electric Price Indices , 112 FERC ¶ 61,040, Para. 3 & nn. 2-5, summarizes those FERC efforts.

2. Policy Statement on Natural Gas and Electric Price Indices , 104 FERC ¶ 61,121, PP 13-15, 39-47 (2003)(“Price Indices Policy Statement”).

3. Arkansas Louisiana Gas Co. v. Hall , 453 U.S. 571, 577 n.7 (1981).

4. Under the FPA only, FPA § 220 shall not affect any FPA electronic information filing requirements as of the EPACT’s Aug. 8, 2005, enactment. Nor shall FPA § 220 apply to a purchase or sale of wholesale electric energy or transmission services in the geographic area of the Electric Reliability Council of Texas.

5. Price Indices Policy Statement, supra , 104 FERC ¶ 61,121, P 42.

6. Under NGA § 23(d)(1), FERC shall not condition access to interstate pipeline transportation on NGA § 23 market transparency rule reporting requirements.

7. Notice of Proposed Rulemaking, Prohibition of Energy Market Manipulation , 113 FERC ¶ 61,067 (2005)(“Market Manipulation NOPR”). Dkt. RM06-3 amending errata notice issued Nov. 8, 2005. See also FERC’s contemporaneous notice of proposed rulemaking permitting audited persons to challenge FERC