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More FERC Investigation Risks

New transparency practice turns confidentiality on its head.

Fortnightly Magazine - March 2011

the preliminary findings stage, that staff’s investigation and its details soon will be made public by means of settlement, show-cause order, or a Securities and Exchange Commission filing of a subject’s potential financial liability. FERC decides on balance that the public notice of staff’s preliminary opinions may acceptably be accelerated.

Monitoring for Abuses

Industry participants who might wish FERC would amend its Notice policy face discouraging prospects. It would take time to challenge FERC’s position that its procedural orders here are unreviewable in the courts. Alternately, FERC could decide to modify its orders after its OE staff report on 2010-’11 experience with these Notices, but such a decision would require changes of mind among the FERC majority that authorized the Notice procedure.

Realistically, gas and electric industry participants should reconcile themselves to the Notice mechanism, which increases risks of harm from accelerated public disclosure of preliminary staff analysis before FERC either conducts its own review of staff recommendations or makes any findings of wrongdoing itself. Moreover, the Notice’s glaring public eye encourages others, including competitors, to contribute not-previously-known factors to ongoing investigations, or possibly to employ Notice information for purposes apart from staff’s preliminary investigation. Subjects must be wary of such consequences and give great care to staff’s initial reviews of information, preliminary examinations of identified activities, investigations, fact discovery and gathering through data and document requests, interrogatories, interviews, depositions, and preliminary findings letters.

FERC indicates that its new Notice procedure promotes additional investigative transparency and good government. Likewise, all industry participants should be alert that FERC and its OE staff operate the Notice mechanism to avoid inaccurate, conclusory, unfair, or otherwise inappropriate agency decision making, and to monitor for third party abuses. Best regulatory practice sustains due process of law and a presumption of innocence.



1. Enforcement of Statutes, Regulations, and Orders , Order Authorizing Secretary To Issue Staff’s Preliminary Notice of Violations, 129 FERC ¶ 61,247, at text para. (P) 6 (2009) (“One cost of accelerated public disclosure is that the entity…is placed in the public eye, with possible adverse consequences to its reputation.”); Order On Requests For Rehearing And Clarification, 134 FERC ¶ 61,054 (2011). “OE staff” also are referred to here as “staff.”

2. FERC predicts “settlement negotiations will soon follow upon the heels of the Notice, and a subject’s identity would… be disclosed at the time…[FERC] approves a settlement…or issues an order to show cause.” 134 FERC ¶ 61,054, at P 18. But, timing for those events is uncertain and the glare of the public eye is not.

3. Natural Gas Act (NGA), 15 U.S.C. § 717t-1(a); Natural Gas Policy Act of 1978 (NGPA), 15 U.S.C. § 3414(b)(6)(A); Federal Power Act (FPA), 16 U.S.C. § 825o-1(b); J. Michel Marcoux, “Day Of Decision For FERC,” 143 Pub. Utils. Fort., No. 12, 55, 58 (Dec. 2005) (“Stiff New Penalties” chart). EPAct 2005 also increased criminal penalties (fines, prison terms) for NGA, NGPA, and FPA violations.

4. FERC or its staff may, in its discretion, initiate a preliminary investigation where no process is issued or testimony is compelled.