On October 27, 2011, the Commission held a Technical Conference on last September’s Revised Policy Statement on Penalty Guidelines.   Overall, various members from the Energy industry provided feedback to the Commission, and the industry representatives repeatedly asked for: (1) increased transparency, (2) more communication, (3) more detail on what exactly comprises an effective compliance program, and (4) what determines a penalty amount.   The Commissioners and Staff acknowledged the industry concerns, but also stated the Commission had to balance the need for more information with the confidentiality of settlements. 

The Technical Conference was chaired by Norman Bay, the Director for the Office of Enforcement, and Commissioners Moeller, Norris, and LaFleur were present for the first panel discussion; Commissioner LaFleur was the only Commissioner to attend the second panel.  The first panel discussion focused on compliance programs while the second panel discussed specific issues with penalty calculations. 

The first panel focused on compliance programs since the issuance of the penalty guidelines and whether the seven elements that have been identified as indicators of an effective program have helped to prioritize compliance programs.  The first panel consisted of: 

  • Andrew Soto from the American Gas Association;
  • Nancy Bagot from the Electric Power Supply Association;
  • Shari Gribbin from Exelon Corporation;
  • Susan Kelly from the American Public Power Association;
  • Richard Meyer from the National Rural Electric Cooperative Association; and
  • Joan Dreskin from the Interstate Natural Gas Association of America.

The first panel was in consensus on most issues, and the individuals provided the Commission with several areas where more clarity is needed.

The second panel consisted of:

  • Former Chairman Joseph Kelliher for NextEra Energy, Inc.;
  • Former Commissioner William Massey from Covington & Burling LLP; and
  • Frank Lindh from the California Public Utilities Commission.

 The second panel was asked the following questions:

  1. Whether duration and volume are already sufficiently accounted for in the loss calculation;
  2. Whether the penalty guidelines should account for situations in which the entity that committed the violations passed the gain onto ratepayers; and
  3. Whether penalties should be calculated based on each separate act, the conduct as a whole, or whether it should depend on the type of the violation and the particular facts/circumstances.

Chairman Kelliher and Lindh provided diametrically opposed answers to the questions presented.  Chairman Kelliher asked specifically that the Commission consider striking the loss and duration enhancement factor while Lindh advocated continued usage.   Commissioner Massey stated the Commission should use its discretion and only apply the loss factor when it is not sufficient in certain instances.  Massey and Kelliher supported the Commission considering whether shareholders received a benefit from misconduct, and Lindh argued against giving an automatic credit based on whether a rate payer benefited from the misconduct.   For the third question, Kelliher believes it is a mistake for North American Electric Reliability Corporation to create a ticket and review every violation, and Lindh endorsed this process.  Massey advocated looking at the particular facts surrounding multiple violations.