On September 19, 2019, one Independent and four Democratic U.S. Senators wrote a letter to FERC asking for an explanation of three actions the Senators believed showed an “apparent erosion” of the “vital role” FERC plays in preventing fraud and manipulation in U.S. energy markets and financial markets: (1) the decline in FERC-initiated civil penalty actions and the abrupt termination of non-public investigations without explanation; (2) the elimination of the Division of Energy Market Oversight (“DEMO”); and (3) the rescission of its policy on issuing Notices of Alleged Violations (“NAVs”) for investigations. Those Senators were Maria Cantwell (D-WA), Dianne Feinstein (D-CA), Ron Wyden (D-OR), Edward Markey (D-MA), and Angus King (I-ME).
On the same day the Senators issued the letter, Chairman Neil Chatterjee, during FERC’s public meeting, announced that DEMO—formerly an enforcement arm of FERC that oversaw natural gas and power markets related to energy and financial markets—was being eliminated. In response, the Commission noted that DEMO’s responsibilities would be delegated to other FERC offices. For example, DEMO’s policy matters will now be housed within the Office of Energy Policy and Innovation, and data management support will now be housed within the newly created Data Governance Division of the Office of the Executive Director. Though there was some push-back regarding the dissolution of DEMO, all three Commissioners argued that eliminating DEMO would not diminish oversight.
The Senators, however, explained in their letter that the decline in civil penalty actions, termination of non-public investigations, elimination of FERC’s DEMO, and rescission of FERC’s policy on issuing NAVs (see May 22, 2019 edition of the WER) indicated that the Commission “may not be fully committed to finding, stopping, and punishing” market manipulation that can result in unjust and unreasonable prices. Accordingly, the Senators attached a list of questions to the letter, including: (1) why there has been a decline in enforcement activity and whether any non-public investigations were terminated by the Chairman as opposed to a vote of the Commission; (2) whether all Commissioners were aware of the decision to eliminate DEMO and what analysis the Commissioners relied on in deciding to shutter the division; and (3) whether alternative information methods cited in the order rescinding the NAV policy effectively warn markets that there may be participants who warrant additional scrutiny by FERC. The Senators asked that each Commissioner provide an individual response to each question.
Click here to read the letter.