Federal energy enforcement: $304 million in penalties in 2013

The Federal Energy Regulatory Commission has released its report on its enforcement activities in fiscal year 2013.  The FERC's 2013 Report on Enforcement (69-page PDF) gives the public insight into how the Commission's Office of Enforcement operates.  The report also provides key statistics on the Commission's 2013 enforcement actions, which led to over $304 million in civil penalties and disgorgement of almost $141 million in unjust profits.

In recent years, the Commission has increased its market surveillance and enforcement of federal energy law.  The Commission has explained that conduct involving fraud and market manipulation poses a significant threat to energy markets, and that this in turn harms consumers who are exposed to losses from intentional misconduct.  These concerns, coupled with increased enforcement powers granted in the Energy Policy Act of 2005, have led the Commission to ramp up its enforcement efforts.  Today, the Commission's Office of Enforcement is now structured around four divisions: Investigations, Audits and Accounting, Energy Market Oversight, and Analytics and Surveillance.  These divisions are designed to identify and prosecute violations of federal energy laws and regulations.

The enforcement report describes the Commission's 2013 activity, which includes the largest civil penalty ever assessed by the Commission.  In that case, the Commission found that Barclays Bank PLC and four traders violated the Commission’s rule against market manipulation.  As a result, the Commission assessed civil penalties of $435 million against Barclays and $18 million against the traders, and directed the company to disgorge $34.9 million plus interest in unjust profits.  That case is now before the U.S. District Court for the Eastern District of California.

The report also describes 29 financial and operational audits of public utilities and natural gas pipelines conducted in fiscal 2013.  According to the report, these audits resulted in 360 recommendations for corrective action, and directed the targeted companies to pay $15.4 million in refunds. Other recommendations directed improvements to companies’ internal processes and procedures, enhancements to the accuracy and transparency of reports and web sites, and more efficient and cost-effective operations.

The Commission announced that it does not intend to change its enforcement priorities for 2014.  As described in the report, the Commission will continue to target fraud and manipulation, serious violations of mandatory reliability standards, anticompetitive conduct, and conduct that threatens the transparency of regulated markets.