FERC Order 826 increases penalty power

Tuesday, July 5, 2016

Acting under a 2015 law, the Federal Energy Regulatory Commission has released an interim final rule increasing the maximum civil monetary penalties that it can assess for violations of statutes, rules, and orders within the Commission’ s jurisdiction.  FERC Order No. 826 effectively raises the Commission's maximum penalty authority by nearly 20 percent, to $1,193,970.

FERC, along with some other federal agencies, is authorized by statute to impose civil monetary penalties for violations of Federal law and regulations.  In some cases, the maximum penalty is set and specified in dollars.  But the 1990 enactment by Congress of the Federal Civil Penalties Inflation Adjustment Act established a mechanism to allow for regular adjustment for inflation of civil monetary penalties, primarily to support enforcement and maintain the deterrent effect of civil monetary penalties.

Congress revamped that mechanism last year by enacting the Federal Civil Penalties Inflation Adjustment Act Improvements Act (FCPIA) of 2015.  The FCPIA of 2015 amends the 1990 law, requiring federal agencies to adjust the level of civil monetary penalties through rulemaking to reflect inflation in order to maintain the deterrent effect on regulated entities.

Specifically, the 2015 adjustment act requires the head of each federal agency to issue an “interim final rule” by July 1, 2016 adjusting for inflation each civil monetary penalty provided by law within the agency’s jurisdiction.  The process is driven by changes in the U.S. Department of Labor’s Consumer Price Index for all-urban consumers (CPI-U), relative to the baseline used the last time the penalties were set.  After a "catch-up" round when the penalties are initially adjusted under the 2015 law, the law requires agencies to update penalty amounts on an annual basis every January 15.

In response, on June 29, the Federal Energy Regulatory Commission issued Order No. 826.  In Order 826, the FERC noted the previous maximum civil monetary penalty authority of up to $1,000,000 per violation, per day under section 316A(b) of the Federal Power Act.  The Commission then found that inflation during the relevant period -- the ten years from October 2005 through October 2015 -- inflation was 19.397 percent.  Accordingly, the Commission increased the Commission's maximum penalty authority to $1,193,970.

In Order No. 826, FERC also adjusted its maximum civil monetary penalties for other violations, including violations of Sections 31(c) and 315(a) of the Federal Power Act, Section 22 of the Natural Gas Act, and sections of the Natural Gas Policy Act of 1978 and the Interstate Commerce Act.

The regulation is effective upon its publication in the Federal Register.

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