On September 16, 2010, FERC unanimously approved the Revised Policy Statement on penalty guidelines for enforcement cases at their monthly meeting. FERC released their initial penalty guidelines on March 18, 2010, but on April 15, 2010, the Commission suspended the use of the guidelines and opened up the forum for comments. (See April 16, 2010 issue of the WER) The revised guidelines incorporate many changes based on the comments FERC received.
In an effort to promote objectivity, consistency, and transparency, the modified guidelines are still based on the United States Sentencing Guidelines that apply to organizations in federal cases. However, Enforcement staff emphasized that the new guidelines will not impact their discretion to close investigations or self-reports. Enforcement also stated the modified guidelines will only apply to Commission Part 1b investigation and enforcement actions, and the guidelines will not apply to FERC’s review of any NERC Notice of Penalty. The new guidelines will apply to all future and pending violations where settlement negotiations have not been initiated, and one year from now, the Enforcement staff will conduct a technical conference to evaluate the use of the new guidelines.
The new penalty guidelines include the following changes:
- FERC is reducing the base violation level for reliability violations from sixteen to six while increasing the risk of harm enhancements for reliability violations;
- The quantity of load lost in MWh from a violation will be evaluated instead of the monetary value of the load lost, and this is in order to avoid the burden of trying to calculate the value of what was lost;
- The Commission will now give partial compliance credit for entities that have imperfect compliance programs in place;
- The provision that automatically removes compliance credit due to senior-personnel participating, condoning, or willfully ignoring a violation has been taken out of the guidelines to prevent a company from being punished for the action of rogue employees;
- The Commission is unbundling mitigation credits for self-reports, cooperation, avoidance of trial-type hearings, and acceptance of responsibility in an effort to give organizations independent value for each factor; and
- The modified guidelines now contain a scienter requirement for violations of misrepresentation and false statements.
Chairman Wellinghoff praised Enforcement for their efforts, and emphasized that FERC will not be using strict liability to penalize operators for shedding load. Also, Wellinghoff stated the goal of the guidelines is not to penalize operators for shedding load to comply with a reliability standard, but it will allow FERC to assess the risk of the load lost due to a violation. Wellinghoff also reiterated that FERC is not using these guidelines for reviewing any NERC Notice of Penalty, and he stated FERC is preserving their appellate role in those situations.
The other commissioners also expressed their support for the penalty guidelines at today’s meeting. Commissioner Spitzer attempted to allay concerns that there is a criminal analogy in place by using sentencing guidelines as a model. Spitzer said FERC’s mission is one of compliance and reliability, and the sentencing guidelines increase transparency and predictability.
The Revised Penalty Statement is available here. The news release from FERC is available here.