It's certainly puzzling, if not downright peculiar. That's the feeling one gets after studying the notice of inquiry (NOI) that FERC launched late last year, after nearly 10 years of dragging its...
FERC's Tough New Rules: Survival Skills for A New Era
a history of violations, and failed to cooperate with the investigation, the civil penalties levied would be substantially different. 14
In its Policy Statement, FERC has outlined three “mitigating factors” that will affect the likelihood, and amount, of civil penalties:
• Internal Compliance. Does the company have an established, formal program for internal compliance? Is the program well documented and widely disseminated throughout the company? Is the program independently operated and managed? Does the program have sufficient resources? Is compliance fully supported by senior management? Is the program supervised by an officer or other high-ranking official? Does the compliance official report to or have independent access to the CEO or the board of directors? Is the program actively reinforced within the company?
• Self Reporting. How did the company uncover the misconduct ( i.e., through a self-evaluation, internal audit, or internal compliance program)? Did the company act immediately when it learned of the misconduct ( e.g., report it to FERC)? Did senior management actively participate and encourage employees to provide information to identify the misconduct? Did the company take immediate steps to stop and create an adequate response to the misconduct?
• Cooperation. Did the company volunteer to provide internal investigation or audit reports relating to the misconduct? Did the company hire an independent outside entity to assist the company’s investigation? Did senior management make clear to all employees that their cooperation has the full support and encouragement of management and the directors of the company? Did the company actively encourage employees to provide FERC with complete and accurate information?
These factors will not absolve a violator of all liability. The commission likely will insist on disgorgement of unjust profits and perhaps some other remedy. However, there is no question that an effective, comprehensive compliance plan and quick action on allegations of impropriety can go a long way toward avoiding potentially crippling civil penalties. Plus, an effective compliance program would help management become aware of, and correct, these practices before the regulators become involved.
1. Inside FERC, “Given broader mandate and a new director, OMOI gears up for compliance push,” at 14 (Jan. 30, 2006).
2. EPACT 2005 §§ 314(a) and 1284(d).
3. Statement of Chairman Joseph T. Kelliher on Anti-Market Manipulation Final Rule (Jan. 19, 2006), http://www.ferc.gov/press-room/statements/kelliher/2006/01-19-06- kelliher-M-1.asp.
4. Prohibition of Energy Market Manipulation, Order No. 670, Docket No. RM06-3-000 (Jan. 19, 2006), 71 Fed. Reg. 4244 (Jan. 26, 2006) at P 20 (emphasis added) (“Final Rule”).
5. See Notice of Proposed Rulemaking, Prohibition of Energy Market Manipulation, 113 FERC ¶ 61,067 at P 9 (2005) (“Market Manipulation NOPR”).
6. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 737 (1975).
7. Final Rule at P 50.
8. Id. at P 25.
9. EPACT 2005 §§316 and 1281.
10. EPACT 2005 §§ 316 and 1281.
11. State of Connecticut Attorney General’s Office Press Release (Jan. 31, 2006).
12 FERC ¶61,068 (2005).
13. Id. at P 2.
14. Kelliher Statement on Market Manipulation NOPR at http://www.ferc.gov/press-room/ statements/ kelliher/10-20-05-kelliher-M-1.pdf at 2.