REPORT OF THE COMPLIANCE AND ENFORCEMENT COMMITTEE

• Published in: Energy law journal Vol. 41; no. 1; pp. 1 - 32
• Main Authors: Archuleta, Archuleta P, Berman, David S, Brint, Juliana, Bruni, Karen, Fleishman, Robert S, Kooistra, Russell E, Mills, Charles R
• Format: Journal Article
• Language: English
• Published: Washington Foundation of the Energy Law Journal 01.01.2020
• Subjects: Data collection; Due diligence; Energy industry; Energy policy; Enforcement; Extensible Markup Language; Federal regulation; Filing; Fines & penalties; Inflation; Jurisdiction; MISO (control systems); Mitigation; Natural gas; Natural gas utilities; Public information; Public utility districts; Sanctions; Utilities; Violations; United States > US
• ISSN: 0270-9163

Joint Staff stated that FERC's practice is to treat information asserted to be CEII as non-public information until such time as it finds that the information is not entitled to CEII status.7 Joint Staff reported that FERC did not review NERC NOP filings for CEII status until it received, for the first time, a Freedom of Information Act (FOIA)8 request for the name of the undisclosed CIP violator.9 Joint Staff stated that recently, FERC has "received an unprecedented number of FOIA requests" for the release of non-public CIP NOP information.10 Joint Staff proposed to revise the NOP process so that NERC will submit CIP NOPs with a public cover letter disclosing the alleged violator's name, the Reliability Standard alleged to have been violated, and the penalty amount.11 The remainder of the CIP NOP filing-details on the nature of the violation, mitigation activity, and potential vulnerabilities to cyber systems-would be included as a non-public attachment, along with a request for the designation of such information as CEII.12 Numerous parties filed comments in response to the White Paper, including utilities, public utility commissions, and private citizens.13 As of the end of 2019, FERC has not issued any orders substantively addressing the White Paper. 3.Final Rule on Data Collection On July 18, 2019, FERC issued Order No. 86014 to require that "certain information currently filed in [its] electric market-based rate program" be submitted through an extensible markup language relational database15 effective October 1, 2020.16 Order No. 860 creates a new approach to data collection, by imposing numerous and detailed filing requirements concerning certain upstream ownership information, asset appendix information (including a new requirement to report long-term firm purchases) for the seller and its affiliates that do not have marketbased rate authority, indicative screen information (used to determine whether a seller lacks market power), and certain other market-based rate information.17 In addition, Sellers18 subject to the rule will be required to update the database on a monthly basis to reflect any changes.19 Further, the change in status filing requirement is changed from thirty days to a quarterly obligation.20 One related issue specifically addressed in Order No. 860 was the extent to which a Seller could be liable for mistakes or misinformation in its submissions.21 FERC stated that while it "will not seek to impose sanctions for inadvertent errors, misstatements, or omissions in the data submission process," it expects Sellers to apply due diligence to "ensure the accuracy of their filings and submissions," and that the "intentional or reckless submittal of incorrect or misleading information could result in the imposition of sanctions, including civil penalties. "23 FERC indicated that it generally would allow inadvertent errors to be corrected without sanctions, with any necessary corrections to be made on a timely basis, but declined to adopt any "safe harbor" or other provisions that would preclude enforcement actions.24 Commissioner Glick filed an opinion dissenting in part, stating that while he generally supported Order No. 860, he opposed the decision not to adopt the requirement for Sellers and other entities to provide additional information regarding their legal and financial connections to various other entities (the Connected Entity Information).25 While FERC had declined to require the provision of this information,26 Commissioner Glick asserted this information is necessary to detect and combat market manipulation, in part because such information might not be easily available otherwise.27 4. The Rescission Order reinstates FERC's pre-2009 practice of barring public notice of an investigation until a matter was resolved through settlement or the Commission issued a show cause order.29 The order states that the intended transparency benefits of the NAV Order have been limited, and that NAVs have not been a significant source of information for market participants or for FERC Staff investigations.30 FERC also stated that the potential risk of reputational harm from the public disclosure of an investigation in the early stages weighed against continuing the 2009 policy.31 FERC indicated that the NAV Order was intended to increase transparency regarding investigations and conduct that Enforcement considers unlawful, while still protecting investigative subjects' confidentiality in the early stages of an investigation.32 FERC noted, however, that it would monitor the NAV procedure and would remain open to re-evaluating after FERC Staff acquired some experience with the revised procedure.33 5. Final Rule on Civil Monetary Inflation Adjustments On January 8, 2019, FERC issued Order No. 853, its Final Rule on Civil Monetary Penalty Inflation Adjustments.34 FERC indicated that the Federal Civil Penalties Inflation Adjustment Act of 1990,35 as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act),36 required each federal agency to issue a rule by July 2016 adjusting for inflation each civil monetary penalty within the agency's jurisdiction.37 FERC stated that the 2015 Act requires it to make an initial inflation adjustment to its civil monetary penalties, and adjust each such penalty on an annual basis every January 15 thereafter.38 FERC indicated that Order No. 853 is intended to implement the annual adjustment.39 The Energy Policy Act of 200540 initially granted the Commission the authority to assess civil penalties under Part II of the Federal Power Act (FPA), the Natural Gas Act (NOA), and the Natural Gas Policy Act (NGPA), in amounts up to $1,000,000 per violation for each day that the violation continues.41 FERC stated that applying the requisite inflation adjustments resulted in a maximum civil penalty of $1,269,500 per violation.42 FERC also adjusted other civil monetary civil penalties it is authorized to assess under these and other statutes.43 Order No. 853 became effective February 1, 2019, the date it was published in the Federal Register.44 B.Requests Regarding Enforcement and Investigations 1.The Midcontinent Independent System Operator, Inc.'s 2015/16 Planning Resource Auction On July 19, 2019, FERC issued an order dismissing a series of complaints filed against certain sellers of capacity in Illinois Local Resource Zone 4 arising from the Midcontinent Independent System Operator, Inc. (MISO) 2015/16 Planning Resource Auction.45 Prices in the 2015/16 Planning Resource Auction in Zone 4 had cleared at $150/megawatt (MW)-day, while prices in other MISO zones cleared at $3.48/MW-day or less.46 One seller, Dynegy, Inc. (Dynegy), owned 6,106 MW of generation in Zone 4.47 The complainants filed four complaints, alleging that the 2015/16 Planning Resource Auction resulted in an unjust, unreasonable, and unduly discriminatory rate increase