An interpretation of FERC’s first application of EPACT.
William F. Hederman Jr. is the executive director of the Energy Resources Group for the law firm of Morgan Lewis & Bockius LLP. He most recently was director of FERC’s Office of Market Oversight and Investigations (OMOI) and also founded that office. He can be reached at email@example.com. The views expressed here are his personal views and not those of Morgan Lewis or its clients.
At its open meeting on Jan. 18, 2007, the Federal Energy Regulatory Commission (FERC) unanimously approved settlements with five electric utilities for a total of $22.5 million and other considerations (most notably commitments to effective compliance programs).
This action by the commission answers some important questions that energy market participants have been asking. In particular, the commission’s decision to issue multiple settlement orders at once helps market participants connect some important dots regarding the regulatory landscape in which they must operate, but it also raises important questions that market participants would like answered.
The Energy Policy Act of 2005 (EPACT) gives FERC the authority to issue penalties of up to $1 million per day per violation. The financial penalties issued, through settlement agreements, varied from a high of $10 million to half a million dollars. Table 1 summarizes the penalties and briefly characterizes the alleged violations. FERC sought to enhance communication to the energy markets about its intent by discussing these settlements at its open meeting. The commission appeared acutely aware that the industry would draw lessons from these settlements.