On January 5, 2022, FERC denied a motion of the Andrew Kittell Estate (“Kittell Estate”) to drop FERC’s enforcement action against GreenHat Energy, LLC (“GreenHat”) because of an October 1, 2021 revelation that FERC’s decisional staff had improperly communicated with FERC enforcement litigation staff (“Email Exchange”) regarding the GreenHat enforcement proceeding, potentially violating FERC’s Separation of Functions regulations (“January 5 Order”). In the January 5 Order, however, FERC abstained from deciding whether the Email Exchange violated Commission regulations, finding that “the conduct at issue here would not warrant the extraordinary remedy of dismissal,” which sparked a dissent from Commissioner Danly, who “would have explicitly found that the email exchange . . . was inappropriate, ordered the two attorneys barred from all future involvement in this matter, and directed Commission staff to conduct a robust, public investigation with findings to be set forth in a later Commission order.”

The January 5 Order follows FERC’s May 20, 2021 order to show cause (see May 28, 2021 issue of the WER) and subsequent November 5, 2021 order assessing penalties against GreenHat and its owners to disgorge $13 million in unjust profits, plus interest, and to pay civil penalties totaling $229 million. FERC’s penalty assessment was the result of a FERC enforcement staff investigation into GreenHat’s alleged manipulative scheme involving the PJM Interconnection, L.L.C. (“PJM”) financial trading rights market. That scheme imposed approximately $179 million in losses on PJM market members.

On October 1, 2021, FERC enforcement staff issued a notice disclosing that an enforcement litigation attorney had reported that he had an email exchange with a member of the Commission’s decisional staff, which may have constituted a violation of the Commission’s Separation of Functions regulations. On October 5, 2021, the Kittell Estate filed a motion requesting that the Commission “drop all enforcement action against the estate of Andrew Kittell, ban [the two FERC attorneys] from any future involvement, and order other offices within the Commission to investigate what happened.” FERC enforcement staff filed a response stating that it followed proper procedure by disclosing the emails to the Designated Agency Ethics Official (“DAEO”) and ensuring that the emails were made public and included in the record of the proceeding.

In the January 5 Order, FERC explained that even though it believed the Email Exchange addressed procedural matters that were not pending before the Commission in this proceeding, it nevertheless referred the matter to the Department of Energy’s Office of the Inspector General (“OIG”). After considering the matter, the OIG declined to take further action. In addition, the Commission’s DAEO and his staff conducted an internal inquiry into whether additional communications had occurred and concluded that there were no additional prohibited communications to report. For these reasons, FERC found that there is no evidence that the Kittel Estate was harmed by the Email Exchange, and to the extent there was any harm, it was appropriately remedied by the immediate disclosure of the Exchange, the referral to OIG, and the internal DAEO inquiry. FERC, therefore, concluded that “the extraordinary remedy of dismissal” was unwarranted because “there has been no violation of Constitutional due process, no impact on any substantive order by the Commission, no deprivation of an opportunity to know the substance of the communication or to respond to it, and no other fairness concern that could merit dismissal.”

Commissioner Danly wrote separately in dissent for two reasons. First, Danly found the majority’s reasons for denying the requested dismissal to be unconvincing because he disagreed that enforcement staff’s alleged prosecutorial misconduct “is neither a violation of due process nor an extreme circumstance.” In support, Danly stated that, when faced with credible allegations of misconduct by enforcement staff, as an institutional matter the Commission “should not shy away from making the determinations that it is called upon to make” because “the movant and the public deserve an answer.” Second, Danly disagreed with the majority’s decision to decline to remove both of the attorneys from future involvement in this enforcement action (FERC only removed the decisional staff member) because failing to do so “condones and encourages” future prosecutorial misconduct rather than deterring it.

A copy of FERC’s order can be found here.