Public disclosure that FERC plans to launch an enforcement action will continue to take the form of a Preliminary Notice of violation from the Director of FERC’s Office of Enforcement, which will not issue until after the target has been (1) presented with a letter from the Enforcement Staff detailing its preliminary findings of a statutory or regulatory violation, (2) afforded a full opportunity to rebut the allegations put forth in the preliminary findings, and (3) notified in advance that a public Notice will be issued. Before the agency adopted this practice in a December 17, 2009 order, public disclosure typically did not occur unless and until FERC either approved a settlement between its Enforcement Staff and the target or issued an order directing the target to show cause why it should not be adjudicated to have committed the alleged violations. In a January 24 order, FERC declined the requests that it revert to this earlier practice.
Various energy associations — the Edison Electric Institute, the Electric Power Supply and American Gas Associations, and the Interstate Natural Gas Association of America — as well as the Financial Institutions Energy Group — had urged FERC to return to the earlier practice of later public disclosure. But FERC made short work of their arguments and concluded that the newer practice strikes a better balance between the target’s reputational interest in confidentiality and the public’s interest in transparency in governmental process.
According to the agency, it achieves this optimal balance by creating a window between the point in time when Enforcement Staff has decided to recommend an enforcement action and issuance of a show cause order in which third parties can come forward with further evidence, be it implicatory or exculpatory. It also notifies others engaged in the same conduct that FERC views it as a violation and that they should cease. Moreover, the current practice results in public notice no earlier than that which publicly traded companies provide in SEC filings. And lastly, if the enforcement action is later terminated or the target is acquitted, then those occurrences are immediately reported publicly.