Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Business Crimes BulletinKickerFeaturesTopicsCommercial LawSectionsNewsLJN Newsletters

Energy Markets Face Expanded Enforcement

By Christopher J. Barr
November 27, 2007

Following the Enron bankruptcy and West Coast energy crisis of 2001-2002, Congress gave the Federal Energy Regulatory Commission (FERC) more powerful enforcement tools to prevent unlawful and manipulative activities in energy markets. The Energy Policy Act of 2005 (EPACT) gave FERC the authority to assess penalties under the Natural Gas Act and Federal Power Act of up to $ 1 million per day per violation. See 15 U.S.C.A. ' 717t-1; 16 U.S.C.A. ' 825o-1. FERC has expanded its Office of Enforcement, called for heightened industry compliance programs and self-disclosure of misconduct, and is newly focused on enforcement rather than on traditional ratemaking. Two years into the EPACT era, FERC has used its newly acquired authority vigorously:

  • In July 2007, FERC issued proposed penalties and disgorgement remedies in two different proceedings (Amaranth and Energy Transfer Partners) totaling $458 million, for alleged market manipulation and other violations.
  • FERC's action in Amaranth included proposed penalties against two individual energy traders totaling $32 million.
  • Since January 2007, FERC has approved 12 consent agreements to terminate enforcement investigations, which collectively required payments of more than $40 million in penalties and disgorgements.

Major questions remain about FERC's enforcement policies, including: the scope of FERC's jurisdiction; the scope of the penalties to be associated with particular violations; and whether respondents facing penalty awards are entitled to a de novo hearing in district court. FERC has also not indicated whether it will exercise its long-standing authority to refer willful violations of its major statutes to the Department of Justice (DOJ) for criminal prosecution, particularly given that the potential monetary penalties and terms of imprisonment were significantly increased under EPACT. However, FERC's actions under EPACT suggest some benchmarks for companies active in the energy industry seeking to avoid or minimize liability under this new regime.

The Far Reach of EPACT Jurisdiction

A wide range of businesses active in energy markets now may be exposed to FERC enforcement actions. Historically, FERC enforcement focused on the traditionally regulated companies ' chiefly interstate natural gas pipelines and electric utilities ' and compliance with energy transmission and sales regulations and tariffs. In the past, FERC did not focus on the actions of the utilities' customers. EPACT, however, prohibits any manipulative or deceptive device by any person in connection with jurisdictional sales of gas or electricity, and enhances FERC's authority over customers in some circumstances.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Legal Possession: What Does It Mean? Image

Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?