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FERC Announces Two Changes to Enforcement Process

On December 17, 2009, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) released an order (“Enforcement Order”) that authorizes the Secretary of the Commission to issue a Staff’s Preliminary Notice of Violations (“Notice”) after the entity that is subject to an investigation has been given the opportunity to respond to staff’s preliminary findings.  Additionally, the Commission released a Policy Statement where the Office of Enforcement (“OE”) will provide exculpatory evidence to those entities subject to their investigations and respondents in administrative enforcement proceedings. 

Most of the Commission’s investigation under Part 1b of its regulations is nonpublic.  This includes the Office of Enforcement’s preliminary examination before opening an investigation, its decision to initiate investigations, and the fact-gathering stage of an investigation.  This also includes the staff’s determination that the investigation should be terminated or if a violation occurred.  If a violation occurred, staff will seek authorization from the Director of OE to issue preliminary findings, to which the subject of the investigation can respond.  Currently, most investigations are not made public until a public settlement is reached or the Commission issues an order to show cause. 

However, under the Enforcement Order, the investigation is made public after the subject has had a chance to respond to the staff’s preliminary findings.  Thus, the OE staff does not have to wait until a settlement is in place or the Commission issues an order to show cause.  In reaching its conclusion, the Commission stated that the Notice will increase the transparency of staff’s nonpublic investigations.  Specifically, the Notice will identify the entity subject of the investigation, the time and place of the alleged conduct, the applicable rules or laws violated, and a description of the alleged wrong. 

The Commission concluded that the timing of the Notice “balances the need to protect the subject’s confidentiality in the early stages of an investigation with the public interest of promoting additional transparency during investigations.”  Additionally, the Commission noted that while most investigations terminate without a preliminary finding of violation, those that reach the stage of a preliminary finding will ultimately be made public through a settlement or public order to show cause. 

In the Policy Statement, the Commission announced that OE will provide exculpatory evidence to those entities subject to their investigations.  While the Commission was not required to release the statement and such actions have been the longstanding practice of OE staff, the Commission stated that the Policy Statement eliminates uncertainty and provides guidance to judges, staff, and the regulated community in general. 

In Brady v. Maryland, the Supreme Court held that the Due Process Clause required the government to provide exculpatory evidence to criminal defendants if it is material to guilt or punishment.  However, some courts have held that the Due Process Clause does not require Brady disclosure in administrative proceedings.  As such, some agencies apply Brady to their proceedings and others do not. 

While the OE prior practices have been to follow Brady, the Commission stated that formalizing that obligation will promote fairness in its Section 1b investigations and administrative enforcement actions.  Notably, OE staff will not have to provide exculpatory material that maybe located at other agencies or material that contains staff’s strategies, legal theories, or evaluations of evidence.  However, staff may have to disclose exculpatory material or information that is considered privileged.

The full text of the Commission’s Enforcement Order is available at http://www.ferc.gov/whats-new/comm-meet/2009/121709/M-1.pdf while the Commission’s Policy Statement is available at http://www.ferc.gov/whats-new/comm-meet/2009/121709/M-2.pdf.