Report of the Electricity Regulation and Compliance Committee

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This report covers the enforcement activities of the Federal Energy Regulatory Commission's (FERCs) Office of Enforcement (OE) from January 1, 2008, to December 31, 2008.1 Below is an index of major subjects covered:

I. OVERVIEW OF FERC ENFORCEMENT AND COMPLIANCE ACTIVITIES

The FERCs OE continued its active enforcement of electric statutes, orders, rules, and regulations. In 2008, the FERC issued orders in three cases involving electric utilities, approving consent and settlement agreements arising from electric enforcement matters. The orders, summarized below, resulted in civil penalties totaling nearly eight million dollars and mandated in two cases additional expenditures totaling three million dollars towards the development and implementation of comprehensive regulatory compliance plans. In addition, the FERC continued to clarify its enforcement programs and emphasize effective compliance programs.

II. Policy Developments

A. 2008 Report on Enforcement1

In its October Report, prepared pursuant to the FERCs Revised Policy Statement on Enforcement (Revised Policy Statement),3 the OE provided further guidance regarding FERC compliance generally, noting trends in self-reporting and investigations, describing the types of investigations that were closed without payment of a civil penalty, providing an overview of the activities of the four divisions within the OE. The OE also noted that a July 2008 Workshop on Regulatory Compliance assisted the OE in formulating recommendations to the FERC.4

B. Enforcement Policy Statement (Docket No. PL09-1)5

On October 16, 2008, the FERC supplemented its Revised Policy Statement, providing additional guidance on compliance. The FERC identified and described the following four key factors related to effective compliance: (i) the role of senior management in fostering compliance; (ii) effective preventive measures to ensure compliance; (iii) prompt detection, cessation, and reporting of violations; and (iv) remediation efforts.6 The FERC noted that the factors would be applied in light of a company's commitment to compliance arid the results of its compliance program, and could lead to the reduction or elimination of civil penalties for violations. Highlighting the importance of compliance programs by companies engaged in jurisdictional activities, the FERC reaffirmed its commitment to provide updated guidance and information on its enforcement and compliance program policies.8

C. Order on Standards of Conduct for Transmission Providers (Order No. 71 7)

The FERC adopted in Order No. 717 a series of reforms to the Standards of Conduct for transmission providers designed to encourage compliance, facilitate FERC enforcement, and conform the Standards of Conduct10 to the decision of the U.S. Court of Appeals for the D.C. Circuit in the National Fuel Gas Supply Corp. v. FERC. n Notably, the FERC eliminated from the Standards the concept of energy affiliates and revised the category of employees who must function independently from transmission function employees to those who actively and personally engaged in marketing functions.12

D. Ex Parte Contacts and Separation of Functions (Order No. 718)'3

In this order, the FERC adopted revisions to its regulations, first outlined in its May 2008 Notice of Proposed Rulemaking,14 to clarify the application of rules governing off-the-record contacts (ex parte communications) and separation of functions in the context of non-public investigations. The revisions specify when the FERC litigation staff and persons outside the FERC may contact decisional employees once the FERC has established proceedings on matters that had been investigated under Part lb of the Federal Power Act. 5 In addition, the FERC revised its regulations to clarify that intervention is not permitted as a matter of right in proceedings arising from Part lb investigations.16

III. SETTLEMENTS OF FERC ENFORCEMENT PROCEEDINGS

A. …