The Federal Energy Regulatory Commission (FERC) became an enforcement agency in 2005 when Congress enacted the Energy Policy Act, which authorized the agency to impose million dollar a day penalties and required the agency to police against market manipulation. FERC has implemented this authority over the last five and one-half years by first issuing policy statements and promulgating regulations.
The agency issued its first policy statement in October 2005, revised it in May 2008, and supplemented it with more discussion of the importance of compliance in October 2008. Under these announced policies, as of the beginning of this year, FERC has issued 44 orders approving enforcement settlements involving $121.73 million in penalties. To date, the Commission has yet to apply its latest policies embodied in its Penalty Guidelines. Approved in September 2010 and modeled after the U.S. Department of Justice Sentencing Guidelines, the Penalty Guidelines represent a major change in FERC’s approach to enforce compliance with its orders, rules, and regulations.
The Commission promulgated its market manipulation regulations in January 2006, and has since pursued a significant number of investigations of allegations of manipulation in both the natural gas and electric energy markets. One of its most publicized investigations involved the activities of Amaranth entities, including trader Brian Hunter, in the 2006 natural gas market. While most of the entities under investigation eventually settled with FERC’s enforcement staff, Brian Hunter continues to challenge the Commission’s authority to use financial market evidence in the investigation. The Commodity Futures Trading Commission (CFTC) agrees with Brian Hunter, and has opposed FERC in several Federal courts. The conflict between the two agencies will continue to be center stage against the backdrop of the Dodd-Frank Wall Street and Consumer Protection Act of 2010 (Dodd-Frank Act), which requires FERC and the CFTC to enter into a Memorandum of Understanding (MOU), by the end of January 2011, delineating their respective jurisdictions in regard to market manipulation. In addition, the CFTC is poised to finalize a rule to implement its market manipulation authority under the Dodd-Frank Act.
Please join Susan J. Court, Partner, Hogan Lovells US LLP, who served as FERC’s first Director of Enforcement after the enactment of the Energy Policy Act, as she provides an update of the FERC’s enforcement authority, including:
- A discussion of the FERC’s Penalty Guidelines, and a comparison with the agency’s previously announced enforcement policies
- An overview of the exercise of the FERC’s market manipulation authority
- A comparison of the FERC’s and the CFTC’s market manipulation authority as reflected in the FERC’s final rule and the CFTC’s proposed rule
- A discussion of the FERC-CFTC MOU