On December 9, 2011, FERC issued a stipulation and consent agreement between the Commission’s Office of Enforcement (“Enforcement”) and Atmos Energy Corporation (“Atmos”), the parent company of Atmos Energy Marketing, Inc. (“AEM”) and Trans Louisiana Gas Pipeline, Inc. (“Trans La”) assessing a civil penalty of $6,364,029 and ordering the disgorgement of $5,635,971, plus interest for the unjust profits from shipper-must-have-title violations.  AEM and Trans La also agreed to submit semi-annual compliance monitoring to Enforcement.

Enforcement officially opened an investigation in 2008 to examine the possible “flipping” activities of Atmos and its subsidiaries; however, the entire investigative period extended from August 1, 2005 through April 30, 2008.  Soon after Enforcement launched the official investigation, Enforcement staff then received information alleging that AEM was also engaged in activities violating shipper-must-have-title requirements.  “Flipping” is a term that describes transactions that avoid the posting and bidding requirements for discounted rate firm capacity, and flipping usually occurs through a series of short-term releases of discounted rate capacity to two or more affiliated replacement shippers on an alternating monthly basis, avoiding FERC’s posting and bidding requirements for that capacity; flipping essentially creates a long-term, noncompetitive discounted rate release.  AEM or Trans La used affiliates or defunct companies as replacement shippers in order to avoid competitive bidding for capacity.  Enforcement staff concluded that AEM and Trans La flipped a total of 26.1 Bcf, but the conduct did not result in pecuniary harm to AEM’s competitors, since all of the capacity utilized in the violations was effectively contractually committed to AEM.  Additionally, AEM violated the shipper-must-have-title requirement by shipping 297.8 Bcf of gas titled in its name using the capacity rights of other parties, including its affiliated utilities.  Enforcement staff found for both violations that it is unlikely that a third party was harmed, but there were unjust profits for the shipper-must-have-title violations.

A copy of the stipulation and consent agreement is available here.