(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
Preparing for the Inevitable
Mitigating enforcement penalties in NERC hearings and appeals.
of the rejection of a revised mitigation plan by the regional entity’s compliance staff, or within two days of receiving a remedial action directive. 12 If a hearing is requested, the regional entity will conduct an evidentiary review to address issues such as whether there has been a violation, the appropriate penalty, and the terms of a mitigation plan. 13
At the hearing, the regional entity’s compliance staff must establish, by a preponderance of the evidence, that the non-compliance occurred and validate the reasonableness of the proposed penalty. 14 In addition, if challenged, the staff must prove the insufficiency of any proposed mitigation plans and defend mandatory compliance with any remedial action directives. 15 In this regard, the hearing process shifts the burden of persuasion from the registered entity to the regional entity.
In general, the hearing procedures aren’t uncommon for administrative agency evidentiary hearings, but there are some important differences. As is typical, the procedures include rules on discovery, presentation of evidence, examination of witnesses, and admission of evidence, as well as pre-hearing and post-hearing procedures. 16 The more stringent traditional legal rules of evidence, however, don’t apply, and the hearing officer may waive, suspend or modify the hearing procedures “for good cause shown.” 17 Any discretion under the procedures must be exercised to accomplish such goals as maintaining the integrity of the fact-finding process and ensuring fairness, independence, balanced decision-making, impartiality and expedition. 18
Following the hearing, the hearing officer will issue an initial opinion on evidence presented and admitted into the record. 19 The initial opinion will include the findings of fact, conclusions of law and reasons for them, as well as all recommended orders to dispose of the matter. 20 An appeal or exception to the initial opinion may be filed within 21 days after the initial opinion is issued. 21 The regional entity’s hearing body then will issue a final decision. 22 The regional entity’s ruling may be appealed to NERC within 21 days of the final decision. 23 The appeal must include the final decision, a concise statement of errors, a clear statement of the relief being sought, and supporting arguments. 24
The registered entity may appeal the regional entity’s ruling directly to NERC. In general, this appeal process is envisioned to take 90 days from the time the appeal is filed to the issuance of a written decision. NERC’s decision is final, subject to further appeal to FERC. NERC also may decide to remand the case to the regional entity if it wants the regional entity to examine other aspects of the case. 25 Once it issues its decision, NERC will file with FERC a record of the proceedings, along with any mitigation plans, settlements, and a notice of penalty for the violations. 26 The penalty cannot take effect earlier than 31 days after NERC files the notice of penalty with FERC. 27
An entity subject to a notice of penalty may submit an application for review within 30 days of the date of the notice, before FERC’s decision. 28 However, the filing