Compliance with Dodd-Frank might not be as complicated as feared; however, companies must be vigilant in order to maintain the relevant exemptions.
Penalty Predictability Enhanced
FERC modifies its enforcement guidelines.
In 2005, the U.S. Congress increased Federal Energy Regulatory Commission (FERC) penalty authority over the country’s natural gas pipeline and electric utility industries. Five years later, FERC implemented September 2010 modified policy guidelines (guidelines) to assess civil penalties under that authority, once it has determined that a violation has occurred and a penalty is warranted. These civil penalty guidelines follow on the heels of proposed such guidelines issued in March 2010 that were the subject of an earlier article (See “ Penalty Predictability ,” Fortnightly, July 2010.) The final guidelines, summarized here, merit industry scrutiny.
The Energy Policy Act of 2005 (EPAct 2005) gave FERC greater civil and criminal penalty authority. For example, gas and electric industry violators face these maximum civil monetary penalties: Under the Natural Gas Act (NGA)—$1 million per day per violation for as long as the violation continues; under the Natural Gas Policy Act of 1978 (NGPA)—$1 million for any one violation; and under the Federal Power Act (FPA)—$1 million for each day that such violation continues. 1 FERC’s Sept. 17, 2010, revised policy statement and attached penalty guidelines 2 modify previously proposed guidelines in important ways.
Guidelines From 10,000 Feet
FERC’s civil penalty authority under the NGA, NGPA, and FPA should be exercised with care, based on experience, to provide fairly for just punishment and deterrence. The guidelines repeatedly make plain that FERC’s analysis is influenced in part by an ongoing public dialog with affected industries. 3 FERC promotes increased consistency, transparency, and fairness in its monetary and non-monetary penalty assessments when organizations violate the statutes, orders, rules, regulations, and approved tariffs or statements of operating conditions that FERC oversees. The guidelines, modified from proposals made available for public comment in early 2010, 4 add consistency to the penalty assessment process because penalties are to be based on more objective, specified factors, which are assigned transparent values and are uniformly weighted for similar violations and similar violators.
Effective Sept. 17, 2010, the guidelines attached to FERC’s revised policy statement enhance penalty predictability for gas and electric industry organizations; however, FERC’s discretion to make individual penalty assessments based on a given case’s facts also remains unrestricted. If multiple acts of misrepresentations, or of fraud, anti-competitive conduct, and other rule, tariff, or order violations occur, FERC on a case-by-case basis can use the guidelines to treat each act as a separate violation, but will take the cumulative harm of the multiple violations into account to determine a penalty. If multiple acts of electricity reliability violations occur related to the same conduct or event, FERC on a case-by-case basis can use the guidelines based on the conduct as a whole. FERC sees the civil penalty guidelines as motivating organizations to devote significant efforts to develop and maintain sufficient compliance measures. FERC repeatedly declares compliance, not penalty assessment, to be its central enforcement goal. 5
Guidelines Chapter & Verse
Chapter 1 of the guidelines consists of