On April 16, 2026, FERC issued a civil penalty assessment order, directing American Efficient and affiliated companies (together, American Efficient or Company) to pay $1.1 billion in disgorgement and civil penalties for what FERC called “one of the largest and most brazen frauds in the history of the [] Commission.”[1] The Assessment Order was issued following an investigation by FERC’s Office of Enforcement and Regulatory Accounting (Enforcement), and a public Order to Show Cause proceeding in which the Company contested Enforcement Staff’s allegations and challenged aspects of FERC’s jurisdiction and scope of authority. In the Assessment Order, FERC rejected American Efficient’s defenses and arguments and concluded that American Efficient violated PJM Interconnection LLC (PJM) and Midcontinent Independent System Operator, Inc. (MISO) market rules by selling energy efficiency resources (EER) that it did not own or control into the PJM and MISO capacity markets. FERC also concluded that American Efficient violated Section 222(a) of the Federal Power Act (FPA) by engaging in a fraudulent scheme or course of business and making misrepresentations and omitting material information in communications with PJM and MISO.

As required by FPA section 31(d), when FERC initiated the Show Cause Order proceeding that resulted in the Assessment Order, FERC informed American Efficient of its right to elect either an agency adjudication pursuant to the Administrative Procedures Act or a “prompt[]” penalty assessment, after which—if the penalty is not timely paid—FERC is required to “institute an action” in federal district court, with “de novo review of the law and the facts involved.”[2]  Courts have held that the district court option under section 31(d)(3) is an “ordinary civil action,” pursuant to the Federal Rules of Civil Procedure and the Federal Rules of Evidence.[3] Because American Efficient elected the prompt penalty assessment path, FERC will be required to initiate a civil action in federal district court if the Company chooses not to pay the penalty that FERC has assessed.

PJM and MISO both operate capacity markets, the main purpose of which is to determine the amount of capacity resources required to serve forecasted load for their respective regions and satisfy administratively set reliability criteria for a given delivery year. PJM generally conducts a Base Residual Auction (BRA) three years in advance of a Delivery Year to procure sufficient resource commitments. PJM also holds three Incremental Auctions between each BRA and the corresponding Delivery Year, allowing for additional capacity sales based on updated reliability requirements. MISO conducts Planning Resource Auctions (PRA) each spring for the Delivery Year that begins on June 1.

PJM and MISO both permit EERs to participate in their capacity markets. Under the PJM Tariff, for example, an EER is defined as a “project, including installation of more efficient devices or equipment or implementation of more efficient processes or systems, . . . designed to achieve a continuous . . . reduction in electric energy consumption at the end-use customer’s retail site that is not reflected in the peak load forecast prepared for the Delivery Year.”[4] EERs can include items like LED light bulbs and heat pump water heaters. The PJM Tariff provides that, if an individual or entity “owns or has the contractual authority to control the . . . load reduction capability” of an EER, they may offer the EER into PJM’s capacity market. If that offer clears in the capacity market, the seller receives a capacity payment from PJM to compensate the seller for the committed energy consumption reductions associated with the EER. 

American Efficient began participating in PJM’s capacity market in 2014 and in MISO’s capacity market in 2017.  According to FERC, American Efficient did not install any energy efficiency products at end-use sites and did not enter into direct contracts with any of the end-use customers who purchased the energy efficiency products. Instead, the Commission alleges that American Efficient entered into agreements with manufacturers of energy efficiency products, as well as retailers and distributors, together referred to as “Program Partners.”  Pursuant to the agreements with its Program Partners, American Efficient paid for data concerning the Partners’ sales of energy efficiency products to end-use customers. 

In the Show Cause Order proceeding before FERC, American Efficient asserted (among other arguments) that the agreements with its Program Partners conveyed a contractual right to the demand reduction associated with the EERs, including the right to seek capacity payments from RTOs like PJM and MISO.  FERC rejected this argument, stating a finding that American Efficient violated the PJM and MISO Tariffs by participating in capacity markets when it was ineligible to do so because it lacked the requisite ownership of, or equivalent contractual rights to control, the load reduction capability of the capacity resources it purported to sell into the relevant markets.  FERC concluded that American Efficient’s “EER Program” monetized the value of end users’ load reductions for the Company’s benefit, without the knowledge or consent of the end users of the EER products.

In addition to the stated findings of Tariff violations, the Assessment Order also states a finding that American Efficient engaged in market manipulation in violation of FPA section 222(a) and the Commission’s Anti-Manipulation Rule.  Specifically, the Assessment Order states that American Efficient fraudulently held itself out as a legitimate EER provider, thereby collecting capacity payments. The Assessment Order also states that American Efficient engaged in market manipulation by making material misstatements or omissions: (1) misstating that its program lowered prices, and failing to correct those misstatements; (2) failing to disclose information about the small size of its “micropayments” to retailers, distributors, and manufacturers of energy efficiency products; (3) failing to disclose to PJM that MISO and Independent System Operator – New England expelled American Efficient from their capacity markets, and making material misrepresentations about the status of its participation in MISO; and (4) making false affirmations in various reports about the rights it held to EERs.

According to the Assessment Order, over more than ten years, American Efficient cleared 20,750 MW in the PJM capacity market, for which PJM paid the Company approximately $465.8 million in capacity payments. In addition to capacity payments, PJM awarded American Efficient approximately $26.9 million for “overperformance” during Winter Storm Elliott in 2022. In the MISO market, American Efficient cleared approximately 1,233 MW, for which MISO paid American Efficient approximately $15.5 million in capacity payments before MISO disqualified American Efficient from participating in the PRA in 2021.

Based on the foregoing, FERC assessed a $722 million civil penalty and directed American Efficient to pay disgorgement of $407,732,930 (plus interest) to PJM, and $2,084,828 (plus interest) to MISO.

Pursuant to the FPA, “[i]f the civil penalty has not been paid within 60 calendar days after the assessment order …, the Commission shall institute an action” in the appropriate federal district court.[5]

Chair Swett and Commissioner LaCerte each wrote separate, brief concurrences. Chair Swett, noting her belief that the energy sector is “drastically overregulated,” stated that “there is no conflict between [her] commitment [to policing overregulation] and the robust use of enforcement powers when appropriate, such as this $500 million fraudulent green scam.”[6] Commissioner LaCerte urged the Commission to refer the case, pursuant to the Commission’s authority under FPA section 314(a), to the Attorney General for criminal enforcement. He also urged PJM to “take appropriate actions to protect ratepayers and immediately stop any additional capacity payments to American Efficient or its affiliates pending the final resolution of this proceeding.”[7]

FERC’s Assessment Order, issued in Docket No. IN24-2-000, is available here.

[1]      American Efficient, LLC, et al., 195 FERC ¶ 61,043 (2026) (“Assessment Order”).

[2]      16 U.S.C. § 823b(d); see American Efficient, LLC, et al., 189 FERC ¶ 61,196, ordering para. G (2024) (addressing right to election pursuant to FPA section 31(d)(1) – (3)).

[3]      E.g., FERC v. Maxim Power Corp., 196 F. Supp. 3d 181, 185, 197 (D. Mass. 2016); FERC v. City Power Mktg., LLC, 199 F. Supp. 3d 218, 232 (D.D.C. 2016).

[4]      Assessment Order at P 3.

[5]      16 U.S.C. § 823b(d)(3).

[6]      American Efficient, LLC, et al., 195 FERC ¶ 61,043 (2026) (Swett, Chair, concurring at P 6).

[7]      American Efficient, LLC, et al., 195 FERC ¶ 61,043 (2026) (Swett, LaCerte, concurring at P 2).