Recently, more companies have been self-reporting possible inappropriate activity to FERC than ever before. The recent increase in self-reporting likely does not stem from a trend in bad behavior, but rather from FERC’s strong indications that it intends to more aggressively pursue perceived wrongdoing by gas and power market participants.
In February 2012, FERC Chairman Jon Wellinghoff announced the establishment of a new Division of Analytics and Surveillance (DAS) under the Office of Enforcement. Just six months later, Mr. Wellinghoff revealed that the activities of DAS have proved to be a “huge deterrent” to market manipulation. In particular, Mr. Wellinghoff stated that more companies have been self-reporting to FERC than ever before, especially with respect to the area of energy trading, which Mr. Wellinghoff observed as “very unusual.”
The DAS was originally created to conduct continuous surveillance to ensure that natural gas and power market participants do not violate FERC rules related to market manipulation, anticompetitive behavior, and other anomalous activity. FERC then effectively broadened the tools at DAS’ disposal with FERC Order No. 760, which requires independent service operators (ISOs) and regional transmission organizations (RTOs) to provide FERC with extensive transaction data, some of which includes information on supply offers and demand bids for energy and ancillary services, virtual offers and bids, and financial transmission rights (FTRs) transactions. Based on some of these strong surveillance resources, it is DAS’ objective to identify potential subjects for FERC investigations. It is this threat of time-consuming and costly investigations initiated by DAS that has likely incentivized companies to self-report potential wrongdoing to FERC at a higher rate than in the past.