On November 21, 2019, FERC’s Office of Enforcement (“OE”) released its thirteenth annual Report on Enforcement (“Report”) to provide an update about its activities during the last fiscal year (i.e., 12-months ending September 30, 2019; hereinafter “FY2019”). The Report provides an overview of, and statistics reflecting, the activities of OE’s Divisions of Investigations (“DOI”), Division of Audits and Accounting (“DAA”), Division of Analytics and Surveillance (“DAS”), and Division of Energy Market Oversight (“DEMO”).
In addition to summarizing the status and resolution of various matters that were public in FY2019, the Report also includes new information about: (1) DOI’s investigatory processes and practices; (2) the Market Monitoring Unit (“MMU”) referral process; (3) DAA’s audit processes and practices; and (4) DAS’s processes and practices related to reviewing MMU referrals and data management. Furthermore, the Report emphasizes that, although certain functions performed by DEMO and DAS were realigned within FERC on September 16, 2019, the primary objective of the realignment was to better reflect the key functions and mission statements of existing Commission offices that allow OE staff to be more focused on its core mission of continuing oversight of market activities, investigations, and audits. OE’s enforcement priorities remained the same: (1) fraud and market manipulation; (2) serious violations of the Reliability Standards; (3) anticompetitive conduct; and (4) conduct that threatens transparency in regulated markets.
The Report indicates that in FY2019, DOI staff opened 12 new investigations and closed 14 pending investigations with no action. In certain other matters where a violation had occurred, DOI exercised its discretion not to pursue a sanction and closed the investigation. DOI also closed 130 self-reported incidents without further action and 10 MMU referrals without opening full investigations. Despite those resolutions, DOI continues to litigate three cases in federal district court on the Commission’s behalf.
For DAA activities, the Report notes that in FY2019, DAA completed 11 audits of public utility and natural gas companies, resulting in 76 findings of noncompliance and 286 recommendations for corrective action, and directed $161.2 million in refunds and recoveries. DAA also acted on 120 accounting filings requesting approval of a proposed accounting treatment or financial reporting matter.
The Report also discusses DAS’s surveillance program and describes how DAS analyzed transactional and market data in FY2019 to detect potential manipulation, anticompetitive behavior, and other activities in the energy markets, as well as how DAS reviews MMU referrals and data management. In total, DAS closed 31 surveillance inquiries with no referral and, as of the end of the fiscal year, continued its analytic work on six. DAS also worked with DOI on approximately 45 investigations involving allegations of manipulation in the Commission-jurisdictional natural gas and electricity markets, or violations of tariff provisions.
Finally, the Report summarizes DEMO’s recent Market Reports and Assessments, and details other measures DEMO used to monitor and analyze wholesale natural gas and electric power markets. The Report notes that DEMO issued its State of the Markets Report and seasonal Market and Reliability Assessments. DEMO also continued to provide its market-based rate ex post analysis, which evaluates transactions against market fundamentals to identify instances of anti-competitive market outcomes.
Click here to review OE’s Report.