On November 20, 2014, FERC’s Office of Enforcement (“Enforcement”) released its 2014 Report on Enforcement (“Report”). The Report provided an overview of Enforcement’s activities during 2014, specifically detailing the activities of the Division of Investigations (“DOI”), Division of Audits and Accounting (“DAA”), Division of Energy Market Oversight (“Market Oversight”), and Division of Analytics and Surveillance (“DAS”). The Report is provided pursuant to FERC’s 2008 Revised Policy Statement on Enforcement, and according to the Report, is designed to provide additional information regarding the nature of the non-public work of Enforcement.
The Report highlighted the following four priority areas that Enforcement focused on during 2014: (1) fraud and market manipulation; (2) serious violations of Reliability Standards; (3) anticompetitive conduct; and (4) conduct that threatens the transparency of regulated markets. The Report noted that these four areas present a significant threat to the markets FERC regulates, undermine confidence in energy markets, and have the potential to result in actual harm to the bulk power system. As such, the Report stated that Enforcement will continue to target these four priority areas in 2015.
The Report also highlighted that DOI opened 17 new investigations and closed 15 pending investigations without action or through settlement during 2014, with market manipulation and/or false statements as the most common violation settled. The Report noted that the 15 closed investigations resulted in $25 million in civil penalties, $4 million in disgorgement, and $1.7 million in public safety improvements. In addition, the Report highlighted that FERC approved its first ever settlement of a self-reported violation of FERC’s Anti-Manipulation Rule during 2014.
The Report stated that DAA – which initiates its audits without an allegation of wrongdoing – planned all 19 of its audits using a risk-based methodology for 2014, a first for DAA. Of these 19 audits, DAA recommended 162 corrective actions and refunds that totaled more than $11.7 million. The Report noted that FERC’s strategic plan for 2014 – 2018, as implemented through DAA, promotes strong compliance plans while placing a renewed emphasis on timely implementation of corrective actions after the discovery of a compliance violation.
Last, the Report summarized the efforts of Market Oversight and DAS in 2014. In doing so, the Report noted that Market Oversight continued its analysis of market fundamentals to identify potentially improper market behavior. The Report also included Market Oversight’s annual State of the Market report, which assessed significant events affecting FERC-regulated markets in 2013. With regard to DAS – FERC’s newest division within Enforcement – the Report noted that DAS continued its surveillance of natural gas and electricity markets, and gained new access to a daily feed of the Commodity Futures Trading Commission’s Large Trader Report data. Through use of this data, the report explained that DAS was able to quickly and efficiently analyze financial incentives in the markets during the Polar Vortex in order to help it identify potential instances of market manipulation.
A copy of the Report is available here.