On January 25, 2011, the Federal Energy Regulatory Commission initiated its new policy of publishing notices of alleged rules violations by releasing five Notices of Alleged Violations. The Notices announced to the public that FERC has been undertaking nonpublic investigations of the five companies listed in the Notices and has found sufficient evidence that the companies have violated FERC's rules and regulations.
This action is particularly unusual given the fact that FERC has never before published the results of its investigations at such an early stage in the investigative process. Until now, the first publication of an alleged violation would only occur when either the subject settled the investigation with staff or FERC issued a "show cause order." Any party who is the subject of a nonpublic FERC investigation now faces the very real risk of reputational harm from the publication of its name associated with an enforcement violation upon a mere preliminary determination that a violation occurred.
The regulated energy industry has been anticipating this unusual policy shift since at least December 2009 when FERC announced that it intended to disclose information about its investigations at an earlier stage in the proceeding to increase transparency about nonpublic investigations and to provide the public with information about FERC's enforcement activities.
The industry was almost universally opposed to this change in policy. Leading industry associations, including the Edison Electric Institute, Electric Power Supply Association, American Gas Association, Interstate Natural Gas Association of America and the Financial Institutions Energy Group, all took vocal and public positions against the new policy. These industry groups have argued that FERC has struck an incorrect balance between the risk of reputational harm to the subject of an investigation and the public's interest in transparency.