On December 17, 2009, the Federal Energy Regulatory Commission ("FERC") issued three enforcement-related publications that highlight the Office of Enforcement's enforcement priorities and provide additional clarity regarding the enforcement process. They are: (1) the 2009 Report on Enforcement, (2) an order permitting Enforcement staff to make public certain limited information about ongoing investigations, and (3) a policy statement directing staff to disclose exculpatory information in administrative enforcement proceedings.

2009 Report on Enforcement

The 2009 Report on Enforcement[1] highlights investigation statistics from the past year and outlines FERC's enforcement priorities for 2010. Compared to 2008, 2009 saw more self-reports, more settlements, and increased civil penalty payments.

FERC Enforcement has provided the industry with a list of priorities for the coming year. Looking forward to 2010, FERC's priorities include focusing enforcement resources on:

  • fraud and market manipulation,
  • serious violations of reliability standards,
  • anticompetitive conduct, and
  • conduct that threatens transparency in regulated markets.

Importantly, FERC has indicated that it will give highest priority to cases involving harm to the public or significant gains to the violator or losses to the victims of the misconduct.

Order Authorizing Secretary to Issue Staff's Preliminary Notice of Violations

FERC's second enforcement-related issuance—an Order Authorizing Secretary to Issue Staff's Preliminary Notice of Violations[2]—permits Enforcement staff to make public certain high-level information about ongoing investigations. Specifically, if the Office of Enforcement makes a preliminary determination that the subject of its investigation has violated a FERC regulation, statute, or order, Enforcement staff may then authorize the public issuance of a Preliminary Notice of Violation(s) after privately notifying the alleged wrongdoer and providing opportunity to respond to the preliminary determination. This Notice will include:

  • the identity of the subject(s) under investigation,
  • the time and place of the alleged conduct,
  • the rules, regulations, statutes, or orders that staff alleges were violated, and a concise description of the alleged wrongful conduct.

Up until now, investigations have become public only after FERC reaches a settlement or issues an order to show cause, or the subject of the investigation discloses the matter itself. (In fact, most investigations are closed without ever becoming public.) As a FERC staffer explained at December's open meeting, the new disclosure process is meant to balance the Commission's interest in transparent proceedings with the privacy interest of the alleged wrongdoer. From a practical standpoint, most Notices will disclose at an earlier date information that will eventually be made public in a settlement or show cause order. But in those instances where a Notice is issued and Enforcement staff ultimately closes its investigation without need for settlement or further litigation, the Director of Enforcement may authorize a second issuance to publicly notice the terminated investigation. In any event, FERC makes clear that this new Notice process does not confer on third parties the right to intervene in the investigation or enforcement proceedings.

Policy Statement on Disclosure of Exculpatory Materials

FERC's third issuance, a Policy Statement on Disclosure of Exculpatory Materials,[3] formalizes a procedure requiring Enforcement staff to provide exculpatory evidence to subjects of investigations and respondents in administrative enforcement proceedings. In doing so, FERC takes as its model the Supreme Court's holding in Brady v. Maryland,[4] that the Due Process Clause of the Fifth Amendment requires disclosure of exculpatory or potentially exculpatory evidence "material to guilt or punishment" in criminal proceedings. Although FERC notes that Brady disclosure is not required in administrative enforcement proceeding—for example, the Federal Trade Commission, National Labor Relations Board, and the National Association of Securities Dealers do not require it—FERC joins the Securities and Exchange Commission and the Commodity Futures Trading Commission in providing for such disclosure of exculpatory evidence in its enforcement proceedings.