Natural gas and power trade associations filed a white paper with the Federal Energy Regulatory Commission on Wednesday calling for more transparent and efficient enforcement investigations by the agency.
FERC's market manipulation probes are an important part of its oversight of gas and power markets, but the agency has faced criticism for drawn-out investigations in which subjects contend they have little ability to defend themselves until late in the process.
A key recommendation revolves around the concern that subjects often get minimal detail from staff about the scope or main concerns as investigations proceed. The paper backs earlier discussions of facts and potential violations, and an explanation of scope at the outset and as a probe evolves.
The white paper was put forward on behalf of the American Gas Association, the Edison Electric Institute, Electric Power Supply Association, Interstate Natural Gas Association of America and the Natural Gas Supply Association, and was written by two former FERC enforcement officials now in private law practice, David Applebaum of Jones Day and Todd Brecher of Akin Gump Strauss Hauer & Feld.
The advice comes more than 13 years after Congress passed the Energy Policy Act of 2005.
SCOPE OF PROBE
"Enforcement staff generally shares very little about its views until the investigation is nearly complete, which frequently takes years," the white paper said, adding subjects are often not provided with data, including exculpatory information until then. "Not providing the company with relevant data makes it difficult for the company and the trader to fully recall and explain their trading, thereby hindering their ability to defend their actions," the paper said.
Sharing such information would also allow subjects to work more collaboratively, provide more "responsive" data and promote a sense of fairness and trust, they wrote.
Striving for efficiency in the probes was another goal, and the groups suggested staff more narrowly tailor discovery requests and strive to finish fact gathering within six months or explain extensions.
The groups also want FERC to publish an enforcement manual, as other agencies do, in order to increase transparency by providing a high-level overview of its practices.
ADVISING COMMISSION
FERC should also change practices that allow designated enforcement staff, not involved in an investigation, to advise the commission when a case reaches an adjudication stage, it said. The practice can undermine confidence in fairness of the process, the paper suggested.
To further the access at FERC, they argue that before a formal show-cause order, which initiates public enforcement action, subjects should have a chance to state their case to commissioners.
Other topics address penalty levels, and steps to ensure enforcement promotes market liquidity. To cut the risk and burden for companies that report prices, the associations back reforms to FERC's safe harbor policy and audit process.
Finally, they address the statute of limitations for enforcement, suggesting FERC decide as a matter of policy to file de novo review actions in federal court within five years of the unlawful conduct.
