A Modest Proposal for Reforms of the Ferc's Reliability and Enforcement Programs

By Moot, John S. | Energy Law Journal, July 1, 2012 | Go to article overview

A Modest Proposal for Reforms of the Ferc's Reliability and Enforcement Programs


Moot, John S., Energy Law Journal


Synopsis: The Energy Policy Act of 2005 (EPAct 2005) gave the Federal Energy Regulatory Commission (FERC) more effective tools to protect the public interest, including broad authority over electric reliability and enhanced enforcement powers. These tools have been used consistently and aggressively, but they remain a work in progress. This article considers the continuing implementation challenges in two areas: the electric reliability program and the assessment of civil penalties in enforcement proceedings. With respect to electric reliability, the article recommends certain reforms that could enhance the ability of the program to produce timely standards on priority matters. With respect to enforcement, the article recommends certain reforms that could better align civil penalties with corporate culpability.

I. INTRODUCTION

The Energy Policy Act of 2005 (EPAct 2005) gave the Federal Energy Regulatory Commission (FERC or "the Commission") more effective tools to protect the public interest, including broad authority over electric reliability and enhanced enforcement powers. These tools have been used consistently and aggressively, but they remain a work in progress. This article considers the continuing implementation challenges in two areas: the electric reliability program and the assessment of civil penalties in enforcement proceedings. Although these two areas differ substantively, they each require difficult balancing acts. For the reliability program, it is the balance between preserving the benefits of a stakeholder-driven standards development process and ensuring that this process produces timely results that enhance reliability. For the enforcement program, it is the balance between aggressively enforcing the law and tailoring civil penalties to recognize that violations often do not involve intentional or reckless conduct.

This article recommends modest reforms in both areas. With respect to electric reliability, the article recommends certain reforms that could enhance the ability of the program to produce timely standards on priority matters. With respect to enforcement, the article recommends certain reforms that could better align civil penalties with corporate culpability.

A. The Electric Reliability Program

The electric reliability program hit somewhat of a low point at the March 2010 FERC open meeting when the Commission issued multiple orders that were critical of the standards development process.1 Since that time, the tenor of the discourse has, with some exceptions, improved and the Commission has shown increased flexibility in resolving several contested rulemaking proceedings. Despite these gains, there remains a fundamental debate regarding whether the existing standards development process can produce strong standards on a timely basis to address the most difficult reliability questions. FERC officials have often questioned whether this "ANSI" process2 is at the heart of the problem, whereas the North American Electric Reliability Corporation (NERC) and the industry have defended it as a valuable and indispensable part of the program. There also remain questions regarding whether the FERC routinely oversteps its bounds in reviewing proposed standards by failing to give "due weight" to NERC's technical expertise. There are new flashpoints on the horizon that may again create tensions between the FERC and the NERC over this issue.

Perhaps unwisely, this article wades into these contentious and recurring debates. With respect to the FERC's role, I continue to believe that the FERC should gradually elevate its role to focus on broad policy objectives and defer3 more frequently to the NERC in the implementation of those objectives.4 In the last two years, the FERC has made progress in this regard by engaging the NERC and the industry in a continuing dialogue regarding reliability priorities. It has also issued important orders that clarify the standards for the deference it will provide to the NERC. …

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