A few months back, the Federal Energy Regulatory Commission directed Deutsche Bank Energy Trading LLC to show cause why it shouldn’t be assessed a civil penalty of $1.5 million and be made to...
Compliance Program Guidance
The industry debates how far FERC should go.
compliance incident self-report. 8 If companies are to continue being measured on the rigor of their compliance programs, the question arises as to how a company can: 1) have confidence that it has gone far enough in building out its program; and 2) interpret the credit that it might be given in self-reporting compliance incidents.
Providing Further Guidance
Upon examining the breadth of organizations regulated by FERC, the range of their operational portfolios, the diversity of organizational structures, and the variety of management cultures, it’s worth stepping back to assess whether more prescriptive direction can be provided to companies regarding their compliance programs. In organizations with more mature compliance programs that have been in operation for several years, these programs tend to be woven into the fabric of the operations and management of the businesses. These compliance programs form part of the everyday activities and culture of both operations and transaction-focused personnel, not just personnel with regulatory-compliance oversight responsibilities. In short, meeting regulatory-compliance obligations is not treated as a check-the-box exercise, but is integrated with the everyday practices of the organization. Against this backdrop, it would appear that individual companies are in the best position to determine what their compliance programs should look like for meeting their on-going compliance obligations.
Companies developing and maintaining compliance programs can look to industry-leading practices, as well as FERC policy statements, for guidance on what they should have in place for effective functioning programs. In addition to the formal policy guidance provided by FERC, energy-market participants also can avail themselves of a number of different vehicles to obtain further clarification and support directly from FERC including:
• Petitioning for declaratory orders;
• Petitioning for general counsel opinion letters;
• Petitioning for accounting interpretations;
• Calling the enforcement hotline;
• Communicating informally with FERC staff;
• Calling the virtual Compliance Help Desk; and
• Initiating a no-action letter process.
If industry participants believe the policy guidance and clarification options still aren’t adequate for helping companies to establish and maintain robust compliance programs, then further prescription may be needed from FERC. What companies and their industry lobbying groups should consider is that if FERC goes down the path of providing a model compliance program, companies still will be required to apply these practices to their respective operations and manage the changes required. As we have heard from change-management experts through the years, “top-level commitment is vital to engendering commitment to change from those at the coal face. If employees don’t see the company’s leadership is backing a project, they’re unlikely to change.” 9 Herein lies one of the conundrums for the industry, that while it may be seeking more specific guidance from FERC, such guidance won’t absolve companies from the primary task and challenge of leading change and implementation. No matter how much further guidance is provided, companies still bear the responsibility for implementation and demonstrating a corporate commitment to compliance.
Furthermore, companies shouldn’t necessarily request FERC to provide the industry with the same kind of prescriptive guidance provided in the North American Electric Reliability Corporation (NERC) Standards.