On September 29, 2015, the Office of the Inspector General (“OIG”) of the Department of Energy issued a special report describing the results of its audit of FERC’s Office of Enforcement (“OE”). Based on its review, the OIG determined that “nothing came to our attention to indicate that OE had not performed enforcement activities in accordance with relevant policies and procedures.”
According to the special report, the OIG initiated the inquiry into OE’s enforcement practices in response to requests by several members of the U.S. Senate (see July 21, 2014 edition of the WER). In doing so, the OIG reviewed OE’s policy statements and procedures, closed investigations, and hotline and self-report cases. The OIG also interviewed OE officials and FERC Commissioners. Specifically, the OIG found that: (i) OE had policies and procedures that required oversight and approval at various stages of an investigation; (ii) regulatory provisions and OE-specific policies and procedures address access to depositions taken by FERC; (iii) OE had policies and procedures regarding the release of exculpatory material to subjects of investigations; and (iv) both regulatory provisions and OE-specific policies and procedures address the confidentiality of nonpublic information.
In addition to concluding that OE enforcement activities were performed properly, the OIG also concluded that, based on its review of a sample of closed investigations and FERC internal status reports, “nothing came to our attention to indicate FERC enforcement activities were not consistently applied against each case.” Additionally, the OIG found that OE’s policies and procedures required, and FERC staff had consistently given, notice to subjects of investigations when investigatory actions were initiated.
The OIG also investigated an allegation that the settlement of an enforcement action involving Constellation Energy Commodities Group, Inc., (“Constellation”) was inappropriately linked to a then-pending request for merger between Constellation and Exelon Corporation (“Exelon”). Specifically, the OIG examined whether Constellation’s agreement to settle the enforcement action was provided in exchange for FERC’s approval of the merger as a quid pro quo. The OIG found that Exelon had been involved in the settlement negotiations and had specifically asked for language in the settlement agreement that linked the effective date of the settlement with the effective date of the merger. The OIG also found that FERC officials had internal discussions and performed internal analyses regarding whether a pending nonpublic OE investigation could be a factor in merger approval decisions, but FERC’s Office of the General Counsel concluded that such action would be inconsistent with precedent. Moreover, the OE attorneys involved with this investigation were given specific instructions not to take into account the pending merger during settlement negotiations. The OIG stated that its interview process provided no direct evidence of an inappropriate quid pro quo.
A copy of the OIG’s special report may be found here.