UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

 

 

 

2016 REPORT ON ENFORCEMENT 

Docket No. AD07-13-010 

Prepared by Staff of the 

Office of Enforcement 

Federal Energy Regulatory Commission 

Washington, D.C. 

 

NOVEMBER 17, 2016 
The matters presented in this staff report do not necessarily represent the views 

of the Federal Energy Regulatory Commission, its Chairman, or individual 

Commissioners, and are not binding on the Commission. 
2016 Staff Report on Enforcement 1 

TABLE OF CONTENTS 

TABLE OF CONTENTS .................................................................................................................1

INTRODUCTION ...........................................................................................................................3

OFFICE OF ENFORCEMENT PRIORITIES ................................................................................4

DIVISION OF INVESTIGATIONS................................................................................................6

A. Overview ....................................................................................................................................6

B. Orders to Show Cause and Related Proceedings .......................................................................7

1. District Court Litigation .............................................................................................................. 8

2. Administrative Hearings ............................................................................................................ 11

C. Settlements ...............................................................................................................................12

D. Self-Reports .............................................................................................................................17

1. Illustrative Self-Reports Closed with No Action ....................................................................... 21

E. Investigations ...........................................................................................................................26

1. Statistics on Investigations ........................................................................................................ 26

2. Illustrative Investigations Closed with No Action ..................................................................... 31

F. Enforcement Hotline ................................................................................................................32

G. Other Matters ...........................................................................................................................33

DIVISION OF AUDITS AND ACCOUNTING ...........................................................................34

A. Overview ..................................................................................................................................34

B. Compliance Reviews and Alerts ..............................................................................................35

1. Compliance Reviews ................................................................................................................. 35

2. Compliance Alerts ..................................................................................................................... 35

C. Significant Audit Matters .........................................................................................................39

D. Other Audit Matters .................................................................................................................41

1. Formula Rates ............................................................................................................................ 41

2. Mergers and Acquisitions .......................................................................................................... 42

3. Oil .............................................................................................................................................. 43

4. Natural Gas Tariff, Accounting, and Reporting ........................................................................ 44

5. No Audit Findings ..................................................................................................................... 45

E. Accounting Matters ..................................................................................................................45

1. Filings Reviewed by DAA ........................................................................................................ 46

2. Requests for Approval of the Chief Accountant ........................................................................ 47

3. Rate Proceedings ....................................................................................................................... 48

4. Certificate Proceedings .............................................................................................................. 49

5. Merger and Acquisition Proceedings ........................................................................................ 49
2016 Staff Report on Enforcement 2 

6. Debt and Security Issuance Proceedings ................................................................................... 49

7. Accounting Inquiries ................................................................................................................. 49

8. Policy Statement on Hold Harmless Commitments .................................................................. 50

9. International Financial Reporting Standards ............................................................................. 50

10. Hydro-Power Licensee Requirements under Part 1 of the FPA ................................................ 51

DIVISION OF ENERGY MARKET OVERSIGHT .....................................................................52

A. Overview ..................................................................................................................................52

B. Market-Based Rate Ex Post Analysis ......................................................................................52

C. Market Monitoring ...................................................................................................................52

1. 2015 State of the Markets Report .............................................................................................. 52

2. Seasonal Market Assessments ................................................................................................... 53

D. Outreach and Communication .................................................................................................54

1. Website ...................................................................................................................................... 54

2. Snapshot Calls ........................................................................................................................... 54

3. Domestic and Foreign Delegation Briefings ............................................................................. 55

4. Updated Energy Primer ............................................................................................................. 55

E. Forms Administration and Compliance ...................................................................................55

1. Electric Quarterly Reports ......................................................................................................... 55

2. eForms Refresh Project ............................................................................................................. 56

F. Agenda Items and Rulemakings ..............................................................................................56

DIVISION OF ANALYTICS AND SURVEILLANCE ...............................................................58

A. Overview ..................................................................................................................................58

B. Natural Gas Surveillance .........................................................................................................59

C. Electric Surveillance ................................................................................................................59

D. Analytics ..................................................................................................................................60

CONCLUSION ..............................................................................................................................61

APPENDIX A: OFFICE OF ENFORCEMENT ORGANIZATION CHART ............................62

APPENDIX B: FY2016 CIVIL PENALTY ENFORCEMENT ACTIONS ................................63

APPENDIX C: FY2016 NOTICES OF ALLEGED VIOLATIONS ...........................................66

 
2016 Staff Report on Enforcement 3 

INTRODUCTION 

The staff of the Office of Enforcement (Enforcement) of the Federal Energy Regulatory 

Commission (Commission) is issuing this report as directed by the Commission in its Revised 

Policy Statement on Enforcement.1 This report informs the public and the regulated community 

of Enforcement’s activities during Fiscal Year 2016 (FY2016),2 including an overview of, and 

statistics reflecting, the activities of the four divisions within Enforcement: Division of 

Investigations (DOI), Division of Audits and Accounting (DAA), Division of Energy Market 

Oversight (Market Oversight), and Division of Analytics and Surveillance (DAS). 

Enforcement recognizes the importance of informing the public of the activities of its staff 

and prepares this report with that objective in mind. Because much of the investigative work of 

Enforcement is non-public, most of the information the public receives about investigations 

comes from public Commission orders approving settlements, orders to show cause, publicly 

released staff reports, audit reports, and notices of alleged violations. However, not all of 

Enforcement’s activities result in public actions by the Commission. As in previous years, the 

FY2016 report provides the public with more information regarding the nature of non-public 

Enforcement activities, such as self-reported violations and investigations that are closed without 

public enforcement action. This report also highlights Enforcement’s work auditing 

jurisdictional companies, monitoring market trends and market competitiveness, and performing 

surveillance and analysis of conduct in wholesale natural gas and electric markets. 

 In response to requests from the industry, concurrent with the release of this Annual Report, 

Enforcement also is releasing two white papers providing insights regarding Enforcement staff’s 

views and emerging trends related to manipulation of the FERC jurisdictional markets. The first, 

which is entitled Staff White Paper on Effective Energy Trading Compliance Practices, provides 

guidance to entities regarding best practices within their own organizations to help prevent and 

detect market manipulation and other violations.3 The second, which is entitled White Paper on 

Anti-Market Manipulation Enforcement Efforts Ten Years After EPAct, summarizes recent 

Commission and federal court case law regarding development of the Commission’s antimanipulation doctrine and identifies factors staff considers when deciding whether to pursue or 

close allegations of manipulation.4  

 

1

 Enforcement of Statutes, Regulations and Orders, 123 FERC ¶ 61,156, at P 12 (2008) (Revised 

Policy Statement). A current Enforcement organizational chart is attached as Appendix A to this 

report. 

2

 The Commission’s fiscal year begins October 1 and ends September 30 of the following year. 

FY2016, the subject of this report, began on October 1, 2015 and ended on September 30, 2016. 

3

 See White Paper on Effective Energy Trading Compliance Practices, available at 

http://www.ferc.gov/legal/staff-reports/2016/tradecompliancewhitepaper.pdf. 

4

 See White Paper on Anti-Market Manipulation Enforcement Efforts Ten Years After EPAct, 

available at http://www.ferc.gov/legal/staff-reports/2016/marketmanipulationwhitepaper.pdf 
2016 Staff Report on Enforcement 4 

OFFICE OF ENFORCEMENT PRIORITIES 

The Commission’s current Strategic Plan announced its mission of assisting consumers in 

obtaining reliable, efficient, and sustainable energy services at a reasonable cost through 

appropriate regulatory and market means.5 The Strategic Plan identifies three primary goals to 

fulfill this mission: (1) ensuring that rates, terms, and conditions of jurisdictional services are 

just, reasonable, and not unduly discriminatory or preferential; (2) promoting the development of 

a safe, reliable, and efficient energy infrastructure that serves the public interest; and (3) 

facilitating organizational excellence through increased transparency, communication, and 

managing Commission resources and employees. To further those goals and assist the 

Commission in its obligation to oversee regulated markets, Enforcement’s four divisions gather 

information about market behavior, market participants, and market rules. Enforcement also 

gathers information as appropriate regarding energy infrastructure. The divisions continue to 

work to bring entities into compliance with applicable statutes, Commission rules, orders, 

regulations, and tariff provisions. 

In FY2016, Enforcement had the same priorities as in previous years, continuing to focus on 

matters involving: 

• Fraud and market manipulation; 

• Serious violations of the Reliability Standards; 

• Anticompetitive conduct; and 

• Conduct that threatens the transparency of regulated markets. 

Enforcement does not intend to change these priorities in Fiscal Year 2017. Conduct 

involving fraud and market manipulation poses a significant threat to the markets the 

Commission oversees. Such intentional misconduct undermines the Commission’s goal of 

ensuring provision of efficient energy services at a reasonable cost, because the losses imposed 

by fraud and manipulation are ultimately passed on to consumers. Similarly, anticompetitive 

conduct and conduct that threatens market transparency undermine confidence in the energy 

markets and harm consumers and competitors. Such conduct might also involve the violation of 

rules designed to limit market power or to ensure the efficient operation of regulated markets. 

Enforcement focuses on preventing and remedying misconduct involving the greatest harm to the 

public, where there may be significant gain to the violator or loss to the victims. 

The Reliability Standards established by the Electric Reliability Organization (ERO) and 

approved by the Commission protect the public interest by ensuring a reliable and secure bulk 

power system. This office enforces these standards and focuses primarily on violations resulting 

in actual harm, through the loss of load or other means. Enforcement also focuses on cases 

involving repeat violations of the Reliability Standards or violations that present a substantial 

risk to the bulk power system. 

 

5

 The Federal Energy Regulatory Commission, Strategic Plan FY 2014-2018 (Mar. 2014), 

available at http://www.ferc.gov/about/strat-docs/FY-2014-FY-2018-strat-plan.pdf. 
2016 Staff Report on Enforcement 5 

Enforcement continued its commitment to these priorities in FY2016. DOI staff opened 17 

new investigations, while bringing 11 pending investigations to closure either with no action or 

through a Commission-approved settlement. During FY2016, staff negotiated settlements 

allowing it to recover a total of more than $12.25 million in civil penalties and disgorgement of 

nearly $5.7 million in unjust profits.6 These settlements also included provisions requiring the 

subjects to enhance their compliance programs and periodically report back to Enforcement 

regarding the results of those compliance enhancements. 

Staff from DAA reviewed the conduct of regulated entities through 14 audits of oil pipeline, 

public utility, and natural gas companies, resulting in 214 recommendations for corrective action 

and directing refunds and recoveries totaling $5.3 million. 

Market Oversight continued its analysis of market fundamentals (including significant trends 

and developments) and enhanced its analytical capabilities related to identifying anticompetitive 

outcomes and anomalies that may indicate an exercise of market power. As in prior years, 

Market Oversight presented its annual State of the Markets report assessing significant events of 

the previous year, as well as its Winter Energy Market Assessment and Summer Energy Market 

and Reliability Assessment. It also published a revised edition of Market Oversight’s Energy 

Primer handbook. Additionally, Market Oversight continued ensuring compliance with the 

Commission’s filing requirements for Electric Quarterly Reports (EQR) and various Commission 

financial forms. 

Finally, in FY2016, DAS worked on more than 40 investigations and reviewed numerous 

instances of potential misconduct, with some reviews resulting in referrals to DOI. DAS also 

continued to develop its Notice of Proposed Rulemaking (NOPR) to revise the Commission’s 

regulations to facilitate the collection of certain information from market-based rate (MBR) 

sellers and entities trading virtual products or holding financial transmission rights and to change 

certain aspects of the substance and format of information submitted for MBR purposes. The 

information collected would assist the Commission’s screening and investigative efforts to detect 

market manipulation by providing it with a more complete view of the relationships between 

electric market participants and the incentives underlying their trading activities. In response to 

public comments and informal outreach, the Commission withdrew an earlier version of the 

NOPR that it had issued in Fiscal Year 2015 (FY2015) and revised its proposal to eliminate 

duplication with existing MBR requirements, ease compliance burdens, modernize its data 

collections, and render information collected through its programs usable and accessible for the 

Commission and its staff. 

 

 

6

 A table of FY2016 Civil Penalty Enforcement Actions, both those resolved through settlement 

and those resolved through agency proceedings, is attached to this report as Appendix B. 
2016 Staff Report on Enforcement 6 

DIVISION OF INVESTIGATIONS 

A. Overview 

The Division of Investigations (DOI) conducts investigations of potential violations of the 

statutes, regulations, rules, orders, and tariffs administered by the Commission. Those 

investigations may begin from self-reports, tips, calls to the Enforcement Hotline, referrals from 

organized markets or their monitoring units, other agencies, other divisions within Enforcement, 

other program offices within the Commission, or as a result of other investigations. DOI staff 

works closely with other Enforcement divisions, and other Commission offices as appropriate, 

throughout its investigations. If staff finds significant violations, it reports its findings to the 

Commission and attempts to settle investigations for appropriate sanctions and future compliance 

improvements before recommending that the Commission initiate a public show cause 

proceeding.7

 

As in previous years, DOI staff continued in FY2016 to support the Commission’s initiatives 

to increase transparency and promote consistency as it carried out its investigatory mission. 

Among other efforts to support these initiatives, the Director of Enforcement directed the 

Secretary to issue four notices of alleged violations (NAVs) involving conduct of five separate 

individuals or entities. The notices identified investigation subjects and included a concise 

description of alleged violations of applicable statutes and Commission regulations and orders.8

 

If a settlement cannot be reached, the Commission may issue an order to show cause (OSC) 

directing the subject to explain why it did not commit a violation and why penalties and 

disgorgement are not warranted. The subject has a full opportunity to respond to that OSC, and 

Enforcement staff may reply to the subject’s response. After considering the factual record and 

legal arguments submitted by the subject and Enforcement staff, if the Commission concludes 

that the subject committed a violation and that violation warrants penalties and/or disgorgement, 

the Commission will state those conclusions in a subsequent order. In matters arising under the 

Federal Power Act (FPA), that subsequent order is called an Order Assessing Civil Penalties. In 

FY2016, the Commission issued two OSCs related to FPA investigations, and it assessed civil 

penalties in both of those matters. The third matter in which the Commission issued an OSC, a 

proceeding under the Natural Gas Act (NGA), remains pending before the Commission. 

If the company or individual against which the Commission assessed a civil penalty pursuant 

to the FPA does not pay that penalty in a timely fashion, DOI staff seeks to affirm and enforce 

that assessment in federal court through the de novo review process set forth in section 31 of the 

FPA. Including actions filed in previous years, staff currently is litigating six such actions in 

federal court, and it is seeking to enforce the Commission’s combined assessment of more than 

$592 million in penalties and disgorgement in those proceedings. Staff settled two other FPA 

matters that were pending in federal court at the beginning of the fiscal year. As noted, one 

 

7

 For a discussion of the processes by which Enforcement staff conducts and concludes 

investigations, see Revised Policy Statement, supra note 1, at PP 23-40. 

8

 See Appendix C to this report for a complete listing of the notices of alleged violations that 

Enforcement issued in FY2016. 
2016 Staff Report on Enforcement 7 

NGA-related proceeding is pending before the Commission following the issuance of an OSC. 

In another NGA-related proceeding, the Commission’s Order on Initial Decision assessing more 

than $20 million in civil penalties, plus disgorgement and interest, is pending rehearing before 

the Commission 

Most DOI investigations do not result in contested litigation but are either closed without 

further action or settled. In all cases, staff attempts to settle matters when it is in the public 

interest to do so. In addition to the two federal court matters that staff settled in FY2016, 

Enforcement staff also settled with: (1) the owner of a generator and its administrative services 

firm for violations of the Commission’s Anti-Manipulation Rule (18 C.F.R. § 1c.1), the Market 

Behavior Rules (18 C.F.R. §§ 35.41(a) & (b)), various provisions of an RTO/ISO tariff, and 

Commission-approved Reliability Standards; (2) a trader and his employer for violations of the 

Anti-Manipulation Rule; and (3) an energy trading firm for violations of an RTO/ISO tariff. 

Although the public NAVs, settlements, orders to show cause, and orders assessing penalties 

often receive the most public attention, DOI generally closes the majority of its investigations 

with no further action and without those investigations becoming public. During the course of its 

investigation, if DOI concludes that there is insufficient evidence to establish a violation or 

otherwise concludes that further proceedings are not warranted, it tries to close the matter 

promptly. DOI closed five investigations in FY2016 because either staff found no violation or 

because there was not enough evidence to conclude that a violation had occurred. Adding those 

five closed investigations to the six investigations that DOI closed through settlement brings the 

total investigations closed in FY2016 to 11. 

In addition to its investigation-related work, DOI continued its rigorous analysis of selfreports, Enforcement Hotline calls, referrals, and other matters within the Commission in 

FY2016. It also worked on a rulemaking to update regulations concerning the civil penalties that 

may be assessed by the Commission and provided guidance and assistance as requested by other 

program offices on advisory matters. 

B. Orders to Show Cause and Related Proceedings 

DOI staff spent substantial time in FY2016 preparing reports, briefs, and other public filings 

related to OSC proceedings before the Commission and subsequent litigation in federal courts. 

The Commission issued three OSCs in FY2016, two related to investigations arising out of 

violations of the FPA and one related to an investigation arising out of violations of the NGA. 

The Commission subsequently assessed civil penalties in both of the FPA matters in which it 

issued OSCs: (1) ETRACOM LLC and Michael Rosenberg (Docket No. IN16-2-000) and (2) 

Coaltrain Energy, L.P., Peter Jones, Shawn Sheehan, Robert Jones, Jeff Miller, Jack Wells

(Docket No. IN16-4-000). The subjects of those investigations declined to pay the assessed 

penalties and, consistent with their elections, the Commission sought affirmance and 

enforcement of its penalty assessment orders in United States District Court. 

The Commission issued an OSC in a third matter, an NGA matter captioned Total Gas & 

Power North America, Inc., Total, S.A., Total Gas & Power, Ltd., Aaron Hall, and Therese Tran 

f/k/a Nguyen, Docket No. IN12-17-000 (Total). Enforcement and the subjects of the 

investigation submitted their reports and responses pursuant to that OSC, and the matter 

currently is pending before the Commission. One of the Total entities and two traders filed an 

action for declaratory judgment in the United States District Court for the Western District of 

Texas, challenging (among other things) the Commission’s authority to assess penalties for 
2016 Staff Report on Enforcement 8 

violations of the NGA. The court rejected that challenge on multiple grounds, and the 

Commission is continuing its review of the merits. 

Staff also continued its work on another NGA matter, this one concerning Enforcement’s 

investigation of BP America, Inc. and various affiliates (collectively, BP). As described more 

fully below, the Commission affirmed the Administrative Law Judge’s initial decision in 

FY2015 that BP had engaged in market manipulation. In FY2016, the Commission assessed a 

civil penalty of $20,160,000 and required BP to disgorge unjust profits in the amount of 

$207,169, but it stayed BP’s obligation to pay that money until it issues an order on rehearing. 

In addition to those matters, Enforcement staff continues litigating four other FPA matters in 

United States District Courts. It also settled two litigation matters that were pending in United 

States District Court at the beginning of the fiscal year. 

In total, counting all pending federal court and the BP ALJ litigation, staff currently is 

seeking to recover $567,210,000 in civil penalties and $45,708,118 in unjust profits through 

seven litigation proceedings. 

1. District Court Litigation 

In FY2016, excluding matters that settled, Enforcement staff litigated six matters in United 

States District Courts to enforce the Commission’s penalty assessments under the FPA. It also 

litigated in United States District Court a challenge to the Commission’s jurisdiction brought by 

one of the Total entities and two of its traders. Those seven District Court litigation matters are: 

a) FERC v. Barclays Bank PLC, No. 2:13-cv-2093 (E.D. Cal.) 

On July 16, 2013, in Docket No. IN08-8-000, the Commission issued an order assessing civil 

penalties, in which it determined that Barclays Bank, PLC (Barclays) and several of its traders 

had violated the Commission’s Anti-Manipulation Rule by engaging in loss-generating trading 

of next-day, fixed-price physical electricity on the Intercontinental Exchange with the intent to 

benefit financial swap positions at primary electricity trading points in the western United 

States. The Commission assessed civil penalties of $435 million against Barclays and $18 

million against the named traders and ordered Barclays to disgorge $34.9 million in unjust 

profits, plus interest. On October 9, 2013, Enforcement staff filed a petition in the United States 

District Court for the Eastern District of California to enforce the penalty assessment order. On 

May 20, 2015, the court denied in full the respondents’ motion to dismiss or alternatively 

transfer. On October 2, 2015, the court issued a scheduling order indicating that it will proceed 

with this case by reviewing the Commission’s penalty assessment order and underlying 

administrative record and will also consider whether a determination as to this penalty 

assessment requires supplementation of the administrative record submitted by the Commission 

and/or alternative means of fact-finding. Pursuant to the scheduling order, Enforcement staff 

filed a motion to affirm the Commission’s penalty assessment order on December 2, 2015. 

Before filing their oppositions to that motion, the respondents filed a motion seeking discovery, 

but the court denied that motion. Proceedings in the District Court are ongoing. 

In addition to the District Court litigation, the respondents appealed the court’s scheduling 

order to the United States Court of Appeals for the Ninth Circuit on November 9, 2015. After 

briefing, the Ninth Circuit rejected the appeal on jurisdictional grounds. 
2016 Staff Report on Enforcement 9 

b) FERC v. Silkman, No. 1:13-cv-13054 (D. Maine.) 

On August 29, 2013, in Docket Nos. IN12-12-000 & IN12-13-000, the Commission issued 

orders assessing civil penalties in which it determined that Competitive Energy Services, LLC 

(CES) and Richard Silkman (CES’s Managing Partner) had violated the Commission’s AntiManipulation Rule by engaging in a scheme related to ISO-NE’s day ahead load response 

program. More specifically, the Commission found that the respondents had engaged in a 

scheme to fraudulently inflate energy load baselines for a resource and then offer load reductions 

against that inflated baseline. It assessed civil penalties of $7.5 million against CES, and $1.25 

million against Silkman and ordered disgorgement of $166,841 from CES, plus interest. 

On December 2, 2013, Enforcement staff filed a petition in the United States District Court 

for the District of Massachusetts to enforce the penalty assessment order against CES and 

Silkman. The petition was filed at the same time as the related case, FERC v. Lincoln, discussed 

later in this Annual Report. The respondents filed motions to dismiss the petitions in Fiscal Year 

2014, which the District Court denied on April 11, 2016. In its order denying the respondents’ 

motions to dismiss in both the Silkman and Lincoln cases, the court specifically rejected their 

argument that the Commission was required to file its District Court action within five years of 

the violation (confirming that it has five years after the order assessing penalty to make such a 

filing), as well as their argument that the Commission cannot assess penalties against individuals 

for violating the Anti-Manipulation Rule. The court then transferred the cases to the United 

States District Court for the District of Maine. The Maine District Court held a scheduling 

conference in the Silkman/CES case on June 3, 2016 and ordered briefing on whether Silkman 

and CES should be entitled to discovery. That issue has been fully briefed and is pending 

decision by the court. 

c) FERC v. Powhatan Energy Fund LLC, No. 3:15-cv-00452 (E.D. 

Va.) 

On May 29, 2015, in Docket No. IN15-3-000, the Commission issued an order assessing civil 

penalties, in which it determined that Powhatan Energy Fund, LLC (Powhatan), Houlian “Alan” 

Chen, HEEP Fund, Inc. (HEEP), and CU Fund, Inc. (CU) had violated the Commission’s AntiManipulation Rule by engaging in fraudulent Up-To Congestion (UTC) trades in the PJM 

Interconnection, LLC market during the summer of 2010. The Commission determined that the 

respondents had engaged in trades to improperly collect certain market payments (called 

Marginal Loss Surplus Allocation, or “MLSA”) intended for bona fide UTC trades. Specifically, 

the respondents had placed fraudulent round-trip trades (trades in opposite directions on the same 

paths, in the same volumes, during the same hours) that involved no economic risk and 

constituted wash trades. The Commission assessed civil penalties of $16.8 million against 

Powhatan, $1 million against Chen, $1.92 million against HEEP, and $10.08 million against CU 

and ordered disgorgement of unjust profits in the amounts of $3,465,108 from Powhatan, 

$173,100 from HEEP, and $1,080,576 from CU, plus interest. On July 31, 2015, Enforcement 

staff filed a petition in the United States District Court for the Eastern District of Virginia to 

enforce the Commission’s Order. After rejecting the respondents’ motion to dismiss, the court 

requested briefing, on the de novo review procedures required by section 31(d)(3) of the FPA. 

The court has not yet issued an order identifying the procedures that it plans to use. 
2016 Staff Report on Enforcement 10 

d) FERC v. City Power Marketing LLC, No. 15-cv-01428 (D.D.C.) 

On July 2, 2015, in Docket No. IN15-5-000 addressing a PJM UTC market manipulation 

matter, the Commission issued an order assessing civil penalties against City Power Marketing, 

LLC (City Power) and its owner, K. Stephen Tsingas. The Commission found that City Power 

and Tsingas had violated its Anti-Manipulation Rule by engaging in fraudulent UTC trades in the 

PJM market during the summer of 2010. As part of that finding, the Commission determined 

that City Power and Tsingas had engaged in three types of trades to improperly collect MLSA 

payments intended for bona fide UTC trades: (1) round-trip trades that constituted wash trades, 

(2) trading between export and import points (SOUTHIMP and SOUTHEXP) that had the same 

prices, and (3) trading between two other points (which had minimal price differences) not to 

profit from spread changes but instead for the purpose of collecting MLSA payments. The 

Commission also found that City Power had violated section 35.41(b) of the Commission’s 

regulations by making false and misleading statements and material omissions in its 

communications with Enforcement staff to conceal the existence of relevant instant messages. 

The Commission assessed $14 million in civil penalties against City Power and $1 million 

against Tsingas and ordered disgorgement of $1,278,358 in unjust profits, plus interest. On 

September 1, 2015, Enforcement staff filed a petition in the United States District Court for the 

District of Columbia to enforce the Commission’s Order. After rejecting the respondents’ 

motion to dismiss, the court held that the case would be treated as an ordinary civil action, but 

noted that FERC could move immediately for summary judgment, which it did on September 21, 

2016. That motion is pending. 

e) FERC v. ETRACOM LLC, No. 2:16-cv-01945 (E.D. Cal.) 

On June 17, 2016, in Docket No. IN16-2-000, the Commission issued an order assessing civil 

penalties against ETRACOM LLC and its majority owner and primary trader, Michael 

Rosenberg. The Commission determined that ETRACOM and Rosenberg had violated the 

Commission’s Anti-Manipulation Rule by submitting virtual supply transactions at the New 

Melones intertie at the border of the CAISO market, in order to affect power prices and 

economically benefit ETRACOM’s CRR positions sourced at that location. The Commission 

assessed civil penalties against ETRACOM and Rosenberg in the amounts of $2,400,000 and 

$100,000, respectively. The Commission further directed ETRACOM to disgorge $315,072 of 

unjust profits, with interest. On August 17, 2016, Enforcement staff filed a petition in the United 

States District Court for the Eastern District of California to enforce the Commission’s order. 

Proceedings are ongoing. 

f) FERC v. Coaltrain Energy L.P, No. 2:16-cv-00732 (S.D. Oh.) 

On May 27, 2016, in Docket No. IN16-4-00, the Commission issued an order assessing civil 

penalties against Coaltrain Energy, L.P., its owners, Peter Jones and Shawn Sheehan, and Robert 

Jones, Jeff Miller, and Jack Wells, who developed and implemented the trading strategy. The 

Commission found that the respondents had violated the Commission’s Anti-Manipulation Rule 

by engaging in fraudulent UTC trades in the PJM market during the summer of 2010. In so 

doing, it determined that the “over-collected loss” or “OCL” trading strategy in which 

Respondents had engaged, which sought to capture payments by placing large volumes of UTC 

trades between trading points with negligible price separation, was fraudulent and 

manipulative. The Commission found that the respondents’ OCL trading strategy involved three 

types of trades to improperly collect MLSA payments intended for bona fide Up-To Congestion 

trades: (1) trading between export and import points (SOUTHIMP and SOUTHEXP) that had 
2016 Staff Report on Enforcement 11 

identical prices, (2) trading between export and import points (NCMPAIMP and NCMPAEXP) 

that had de minimis price differences, and (3) trading along various other paths and combinations 

of paths with minimal price differences not to profit from spread changes but instead for the 

purpose of collecting MLSA payments. The Commission also found that the respondents had 

violated section 35.41(b) of the Commission’s regulations by making false and misleading 

statements and material omissions in Coltrain’s communications with Enforcement staff to 

conceal the existence of relevant documents. The Commission ordered Coaltrain, jointly and 

severally with its co-owners Peter Jones and Shawn Sheehan to disgorge $4,121,894 in unjust 

profits, plus interest. It also imposed penalties on Peter Jones and Shawn Sheehan of $5 million 

each, on Robert Jones of $1 million, and on Jeff Miller and Jack Wells $500,000 each. On July 

27, 2016, Enforcement staff filed a petition in the United States District Court for the Southern 

District of Ohio to enforce the Commission’s Order. On September 26, 2016, the respondents 

filed three separate motions to dismiss, and the Commission filed its opposition brief on October 

20, 2016. 

g) Total Gas & Power North America, Inc. v. FERC, No. 4:16-cv-01250 

(S.D. Tex.) 

On, January 27, 2016, Total Gas & Power North America, Inc. and two of its traders filed a 

lawsuit in United States District Court for the Western District of Texas seeking to prevent the 

Commission from adjudicating the violations identified by staff in the Order to Show Cause 

proceeding regarding Total. The plaintiffs sought a declaratory judgment that the Commission: 

(1) has no legal authority to adjudicate NGA violations; (2) any such adjudication would violate 

Article III and the Fifth and Seventh Amendments of the United States Constitution; (3) the 

process by which FERC appoints administrative law judges is unconstitutional, because those 

judges are not appointed by the Commission as a whole; and (4) communications among FERC 

staff during the investigative stage (i.e. before issuance of the Order to Show Cause) of the Total

matter violated the prohibition on ex parte communications and the separation of function 

requirements established by the Administrative Procedure Act. The court subsequently 

transferred the matter to the United States District Court for the Southern District of Texas, and 

that court dismissed the plaintiffs’ complaint on July 15, 2016. The court held that: (1) the 

complaint was non-justiciable, because the relief sought would not completely resolve the 

parties’ dispute and the plaintiffs’ claims are hypothetical and not ripe; (2) the Commission does, 

as a matter of law, have jurisdiction to adjudicate NGA violations; and (3) the discretionary 

factors considered by courts in evaluating whether to exercise jurisdiction in such declaratory 

judgment matters favor dismissal. The discretionary factors cited by the court included its 

determination that the lawsuit was premature, inequitable, and a waste of resources and that the 

plaintiffs were engaged in impermissible forum-shopping. Plaintiffs appealed that dismissal to 

the U.S. Court of Appeals for the Fifth Circuit on September 26, 2016. 

2. Administrative Hearings 

a) BP America Inc., et al., Docket No. IN13-15-000

On August 5, 2013, the Commission issued an order to show cause and notice of proposed 

penalty in Docket No. IN13-15-000 directing BP to demonstrate why it should not be required to 

pay $28 million in civil penalties and disgorge $800,000 of unjust profits related to certain 

trading by BP of next-day, fixed-price natural gas at the Houston Ship Channel. Enforcement 

staff alleged that such trading was uneconomic and part of an unlawful manipulative scheme to 

increase the value of BP’s financial position that was based on Houston Ship Channel (HSC) 
2016 Staff Report on Enforcement 12 

natural gas prices. The Commission later ordered that an Administrative Law Judge hold a 

hearing as to whether BP violated the Commission’s Anti-Manipulation Rule. 

After substantial discovery and a lengthy hearing, Judge Carmen Cintron issued an Initial 

Decision finding that BP’s Texas team had engaged in market manipulation by changing BP’s 

trading patterns in the investigative period to flood HSC with next day gas to benefit its 

corresponding short financial positions. The Commission affirmed Judge Cintron’s decision on 

July 11, 2016, finding that the record showed that BP’s trading practices during the investigative 

period were fraudulent or deceptive, undertaken with the requisite scienter, and carried out in 

connection with Commission-jurisdictional transactions. After reviewing the statutory factors 

for civil penalties under the NGA, the Commission assessed a civil penalty of $20,160,000 and 

required BP to disgorge unjust profits in the amount of $207,169 to the Low Income Home 

Energy Assistance Program (LIHEAP) of Texas for the benefit of its energy consumers. On 

August 10, 2016, BP sought rehearing and a stay of the Commission’s July 11, 2016 order. The 

Commission responded by staying the payment directive of the July 11, 2016 order until it issues 

an order on BP’s request for rehearing. On September 7, 2016, while the request for rehearing of 

the merits was pending, BP appealed the Commission’s original order setting the matter for 

hearing before an ALJ to the U.S. Court of Appeals for the Fifth Circuit. 

C. Settlements 

In FY2016, the Commission approved six settlement agreements between Enforcement and 

11 separate subjects to resolve pending matters. The settlements totaled more than $12.25 

million in civil penalties and disgorgement of nearly $5.7 million. Since 2007, the total civil 

penalties assessed by the Commission (excluding pending and overturned proceedings) amounts 

to approximately $641 million, and the total disgorgements amount to slightly over $401 million. 

Since the 2010 issuance of the Revised Penalty Guidelines,9 almost every Commissionapproved settlement subject to the Penalty Guidelines has fallen within the established applicable 

range. An organization’s civil penalty can vary significantly depending on the amount of market 

harm caused by the violation, the amount of unjust profits, an organization’s efforts to remedy 

the violation, and other culpability factors, such as senior-level involvement, prior history of 

violations, compliance programs, self-reporting of the violation, and cooperation with 

Enforcement’s investigation. For example, under the Penalty Guidelines, an organization’s 

culpability score can be reduced through favorable culpability factors to zero, lowering the base 

penalty by as much as 95 percent.10 Because a number of factors can influence the civil penalty 

in each case, the amount of disgorgement of unjust profits (if any) does not always directly relate 

to the amount of the civil penalty. 

In FY2016, the Commission approved settlement agreements that resolved investigations 

concerning violations of the Anti-Manipulation Rule by ten entities, violations of tariff 

provisions by three entities (and related violations of the market behavior rules by two entities), 

 

9

 Revised Policy Statement on Penalty Guidelines, 132 FERC ¶ 61,216 (2010) (Revised Penalty 

Guidelines). 

10 Revised Penalty Guidelines, 132 FERC ¶ 61,216 at P109. 
2016 Staff Report on Enforcement 13 

and violations of the Reliability Standards by two entities. Some of those settlements concerned 

multiple types of violations. 

Types of Violations Settled, FY2016

OATT/Tariff

Reliability Standards

Market Manipulation and/or

False Statements

Types of Violations Settled, FY2015

OATT/Tariff

Reliability Standards

Market Manipulation and/or

False Statements
2016 Staff Report on Enforcement 14 

 

Types of Violations Settled, FY2014

OATT/Tariff

Reliability Standards

Market Manipulation and/or

False Statements

Merger/Consolidation

Authorization

Hydro

Types of Violations Settled, FY2013

Natural Gas Transportation

OATT/Tariff

Reliability Standards

Market Manipulation and/or

False Statements

Market Based Rate Violation

Hydro
2016 Staff Report on Enforcement 15 

The Commission approved the following settlement agreements in FY2016: 

National Energy & Trade, LP and In re David Silva, Docket Nos. IN16-5-000 & IN16-6-000. 

On September 1, 2016, the Commission issued two separate orders approving settlements in 

market manipulation investigations of National Energy & Trade, LP (National Energy) and one 

Types of Violations Settled, FY2012

Natural Gas Transportation

OATT/Tariff

Reliability Standards

Market Manipulation

and/or False Statements

Types of Violations Settled, FY2011

Natural Gas Transportation

OATT/Tariff

Reliability Standards

Market Manipulation and/or False

Statements

Market Based Rate Violation

Violation of Commission Order
2016 Staff Report on Enforcement 16 

of its traders, David Silva. Following an investigation, staff determined that National Energy 

had violated the Commission’s Anti-Manipulation Rule by engaging in directional trading in the 

January 2012 and April 2014 bidweeks at natural gas trading hubs in New York and Texas, 

respectively to benefit its related financial positions. The Commission also found that Silva was 

directly responsible for the manipulative trading in New York in January 2012. In settling, 

National Energy and Silva agreed to the facts, but neither party admitted nor denied the 

violations. Nevertheless, National Energy agreed to pay a civil penalty of $1,155,225.91 and to 

disgorge $305,780.50. The disgorgement payment was made to the Low Income Home Energy 

Assistance Program (LIHEAP) of the state of Texas. Silva agreed to pay a $40,000 civil penalty 

and to accept a one-year trading ban. 

Saracen Energy Midwest, LP, Docket No. IN16-7-000. On August 22, 2016, the Commission 

issued an order approving the settlement of an investigation into violations by Saracen Energy 

Midwest, LP (Saracen) of the Southwest Power Pool, Inc.’s (SPP’s) Open Access Transmission 

Tariff (OATT). Following a referral from SPP’s Market Monitoring Unit (MMU), staff 

concluded that Saracen had violated the SPP OATT by submitting bids for Transmission 

Congestion Rights at Electronically Equivalent Settlement Locations (EESLs) during the periods 

September-October 2014, and March-April 2015. The SPP OATT prohibits such bids because 

EESLs are modeled such that there should never be congestion between electronically equivalent 

points and, therefore, trading transmission congestion rights between such points serves no 

legitimate purpose. Saracen stipulated and agreed to the facts, but neither admitted nor denied 

the violations. It agreed to pay a civil penalty of $25,000 and to implement new reporting and 

compliance measures. 

Berkshire Power Company and Power Plant Management Services, LLC, Docket No. IN16-3-

000. On March 30, 2016, the Commission issued an order approving the settlement of an 

investigation concerning concealment of generating plant maintenance and associated outages by 

Berkshire Power Company, LLC (Berkshire) and Berkshire’s administrative services firm, 

Power Plant Management Services (PPMS). This investigation arose out of a referral from the 

United States Attorney’s Office for the District of Massachusetts. An Assistant United States 

Attorney uncovered facts suggesting a potential violation of the FPA while she was investigating 

potential criminal violations of the Clean Air Act at the Berkshire-owned plant and then 

contacted Enforcement staff. After completing its fact-finding, Enforcement staff concluded that 

both companies had violated the Commission’s Anti-Manipulation Rule and that Berkshire 

separately had violated the Commission’s Market Behavior Rules, the ISO-NE Tariff, and 

several Commission-approved Reliability Standards. For their violations of the AntiManipulation and Market Behavior Rule violations and the violations of the ISO-NE Tariff, the 

two companies agreed to pay a civil penalty of $2,000,000, and Berkshire agreed to pay to ISONE disgorgement of $1,012,563. For its violations of the Reliability Standards, Berkshire agreed 

to pay an additional civil penalty of $30,000. The parties also agreed to additional reporting and 

compliance measures. On the same day that the Commission approved this settlement, the 

United States Attorney announced that PPMS had agreed to plead guilty to a criminal violation 

of the FPA for making false statements and failing to disclose certain maintenance outages. The 

court accepted that guilty plea on May 3, 2016, thereby marking the first criminal conviction 

obtained in the 81-year history of the FPA. 

FERC v. Lincoln Paper & Tissue, Inc., No. 1:13-cv-13056 (D. Maine). On June 1, 2016, the 

Commission issued an order approving a settlement with Lincoln Paper & Tissue, LLC 

(Lincoln). The Commission previously had assessed a civil penalty of $5 million against 

Lincoln and disgorgement of $379,016 for violating the Commission’s Anti-Manipulation Rule 
2016 Staff Report on Enforcement 17 

during its participation in ISO-NE’s day-ahead load response program. On December 2, 2013, 

Enforcement staff filed a petition in United States District Court for enforcement of that penalty 

assessment order. The ensuing litigation was related to the FERC v. Silkman matter, discussed 

earlier in this Annual Report. On September 28, 2015, Lincoln commenced a voluntary Chapter 

11 bankruptcy reorganization in the United States Bankruptcy Court for the District of Maine 

and then argued that the District Court was required to stay all enforcement proceedings against 

Lincoln while the bankruptcy was pending. Enforcement staff filed a proof of claim in that 

bankruptcy proceeding for civil penalties and disgorgement and, in a matter of first impression, 

filed a motion for declaratory order that the automatic stay in bankruptcy proceedings does not 

apply to enforcement of the Commission’s civil penalty orders under the FPA. After briefing 

and argument, the Bankruptcy Court agreed and held that the Enforcement case fell within the 

“regulatory power” exception to the automatic stay. Lincoln and DOI staff then negotiated a 

settlement, in which Lincoln stipulated to the facts but neither admitted nor denied the violations. 

The Commission agreed that the disgorgement could be paid as an unsecured claim and the civil 

penalty could be treated as a subordinated claim. The Bankruptcy Court approved the 

Commission-approved settlement order on July 18, 2016, and the Commission dismissed its 

petition for enforcement as to Lincoln in the District Court on August 8, 2016. 

FERC v. Maxim Power Corporation, No. 15-cv-30113 (D. Mass.). On May 1, 2015, the 

Commission issued an order assessing civil penalties against Maxim Power Corporation, Maxim 

Power (USA), Inc., Maxim Power (USA) Holding Company, Inc., Pawtucket Power Holding 

Co., LLC, and Pittsfield Generating Company, LP (collectively, Maxim) and Maxim employee 

Kyle Mitton. It determined that Maxim and Mitton had violated the Commission’s AntiManipulation Rule through a scheme to collect $3 million in inflated payments from ISO-NE for 

reliability runs by charging ISO-NE for costly oil when it actually burned much less expensive 

natural gas. The Commission also found that Maxim had violated section 35.41(b) of the 

Commission’s regulations by making false and misleading statements and material omissions in 

its communications with the ISO-NE Market Monitor. The Commission assessed civil penalties 

of $5 million against Maxim and $50,000 against Mitton. Enforcement staff filed a petition in 

the United States District Court for the District of Massachusetts to enforce the Commission’s 

order, and the respondents filed a motion to dismiss that petition. The court denied the 

respondents’ motion, finding that the Commission had properly pleaded claims both for market 

manipulation and for violation of section 35.41(b). The court held that the case would proceed 

as an ordinary civil action, but with limited discovery. 

While Enforcement staff was litigating the 2015 order assessing penalties in District Court, it 

also was investigating a separate potential violation of the Commission’s Anti-Manipulation 

Rule by Maxim. Enforcement staff ultimately concluded that Maxim had violated the rule by 

gaming the ISO-NE mitigation procedures to maximize its uplift payments when it was 

dispatched for reliability purposes. On September 26, 2016, the Commission approved a 

settlement between Enforcement and Maxim, resolving both the claims in the District Court 

lawsuit and the alleged gaming violations. Maxim stipulated to the facts but neither admitted nor 

denied the violations. It agreed to pay $4 million in disgorgement to ISO-NE and $4 million in 

civil penalties. 

D. Self-Reports 

Over the past five years (FY2012-16), staff has received approximately 470 self-reports. 

Staff concluded that further enforcement action was not necessary following review of the vast 

majority of those reports, because, for example, there was no material harm (or the reporting 
2016 Staff Report on Enforcement 18 

companies already had agreed to remedy any harms) and the companies had taken appropriate 

corrective measures (including appropriate curative filings), both to remedy the violation and to 

avoid future violations through enhancements to their compliance programs. 

In FY2016, staff received 110 new self-reports from a variety of market participants, 

including electric utilities, natural gas companies, generators, and RTO/ISOs. A significant 

number of these self-reports were from RTOs/ISOs. Staff closed 126 self-reports that had been 

submitted during this fiscal year and previous fiscal years. 

The Penalty Guidelines emphasize the importance of self-reporting by providing credit that 

can significantly mitigate a penalty when a self-report is made.11 Staff continues to encourage 

the submission of self-reports and views self-reports as showing a company’s commitment to 

compliance. 

The following charts depict the types of violations for which staff received self-reports from 

FY2012 through FY2016. Some self-reports include more than one type of violation. In 

FY2016, RTO/ISO self-reports and regulatory filing violations accounted for the majority of the 

self-reports received. 

 

11

 Revised Penalty Guidelines, 132 FERC ¶ 61,216, at P 127 (2010). 

0

10

20

30

40

50

60

70

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2016 by Type of Violation
2016 Staff Report on Enforcement 19 

0

5

10

15

20

25

30

35

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2015 by Type of Violation

0

5

10

15

20

25

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2014 by Type of Violation
2016 Staff Report on Enforcement 20 

0

5

10

15

20

25

30

35

40

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2013 by Type of Violation

0

5

10

15

20

25

30

35

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2012 by Type of Violation
2016 Staff Report on Enforcement 21 

1. Illustrative Self-Reports Closed with No Action 

In a continuing effort to promote transparency while encouraging the compliance efforts of 

regulated entities, Enforcement presents the following illustrative examples of self-reports that 

DOI staff closed in FY2016 without conversion to an investigation. One of the various factors 

staff considered in closing the following self-reports was the absence of significant harm to the 

relevant market. These summaries are intended to provide guidance to the public and to 

regulated entities as to why staff chose not to pursue an investigation or enforcement action, 

while preserving the non-public nature of the self-reports. 

RTO/ISO Violations. Multiple RTO/ISOs reported relatively minor violations of their tariffs, 

resulting from either software errors or human errors. Such errors included making payments to 

generating units that were not authorized by the RTO/ISO’s tariff (in some cases, shortly after 

the tariff language changed making the units ineligible for the payments); failing to post 

information, settle the market, respond to settlement mitigation requests, or make billing 

adjustments within the applicable tariff-mandated periods; improperly curtailing transmission 

service for a short period (where most of the curtailed transactions were related later in the day 

and the customers whose transactions could not be reloaded were given credits); and 

inadvertently forwarding market participants’ confidential information to other companies or 

individuals (but promptly reporting the disclosures and directing the recipients destroy the 

confidential information). In all such instances, the harm from the self-reported violation was 

relatively small and inadvertent, and the RTO/ISO took appropriate steps to ameliorate any such 

harm and prevent future violations. Accordingly, staff closed those matters with no further 

action. 

Electric Quarterly Report (EQR) Violation. A public utility reported errors in its subsidiaries’ 

Electric Quarterly Reports (EQRs). Over the next six years, the company subsequently refiled 

12 quarters of EQRs for 95 subsidiaries (a total of 1,100 refiled EQRs). DOI and Market 

Monitoring staff worked closely with the company to identify the errors and necessary 

corrections. Staff closed the self-report without further action because: (1) the company 

comprehensively reviewed its compliance obligations and identified all existing errors and then 

implemented procedures and processes to prevent similar violations, (2) company officials were 

thorough and transparent in all their dealings with staff, and (3) none of the company’s 

customers raised any concerns that they had been harmed by the erroneous EQRs. 

Qualifying Facility. The owner of a 1.2 MW hydropower project reported a violation of section 

205 of the FPA resulting from its failure to self-certify the project as a Qualifying Facility (QF) 

after acquiring it in August 2006. To remedy this violation, the project’s owner submitted a 

Form No. 556 self-certification and paid time value refunds to its customer. This violation was 

inadvertent and resulted from an administrative oversight. Staff closed this self-report without 

further enforcement action because: (1) the violation was isolated and inadvertent, and (2) the 

harm from not having an appropriate rate of file was remedied by the time-value refunds. 

Trading Violation. An energy trading firm reported that a trader accidentally had placed bids 

into an RTO/ISO day ahead market for an identical amount of INCs and DECs at the same node 

for four hours. Such off-setting trades match the pattern of a prohibited wash trade. The 

company promptly notified Enforcement, its RTO/ISO, and the RTO/ISO’s external market 

monitor of these trades. It also immediately ceased trading INCs and DECs in the RTO/ISO to 

resolve the error giving rise to the trades. The company lost money on the trades, because the 

prices negated each other and it had to pay uplift on both the INC and the DEC transactions. The 
2016 Staff Report on Enforcement 22 

firm’s risk management software should have prevented the trader from being able to submit 

such bids, but it had failed to do so. Staff closed the matter with no action after determining that 

the trades were in fact due to an error and resulted in the company losing money with no 

apparent manipulative intent. The company’s errors were inadvertent, self-reported, selfcorrected, and did not result in any harm to the market. The company has since adopted and 

implemented compliance measures sufficient to ensure that a similar error does not recur in the 

future. 

Oil Transportation Violation. An oil pipeline reported a potential violation of the Interstate 

Commerce Act involving a contract employee accidentally copying a shipper when emailing 

third party scheduling and nominations information to a connecting pipeline. Another employee 

who learned of the error elevated it to management, and the pipeline promptly asked the shipper 

to destroy that information. The shipper confirmed it had all recipients of the email delete it, and 

the shipper’s legal department instructed those employees not to disclose the information. The 

pipeline reviewed its procedures and determined that no further training was required, as the 

violation resulted from simple error. Because the pipeline self-reported the potential violation, 

the disclosure was isolated and inadvertent, the information was sent to only one shipper with no 

apparent harm, and the error was elevated to senior management who acted quickly to resolve 

the issue and take personnel action, staff closed the self-report without further enforcement 

action. 

Failure to Report Change-In-Status. Several affiliated companies with market-based rate (MBR) 

authority under section 205 of the Federal Power Act reported that they inadvertently had 

omitted their one-percent ownership interest in a 6-mile intrastate gas lateral pipeline from their 

MBR applications and asset appendices that are required by Order No. 697. The affiliated 

companies became aware that a different affiliate holds a general partner interest in the lateral 

pipeline that has the sole function of serving a generating facility formerly owned by an 

affiliate. The companies filed a notice of change-in-status under section 35.42 of the 

Commission’s regulations, implemented steps to ensure that all future filings contain complete 

information regarding affiliated entities, and committed to doing periodic reviews to confirm the 

accuracy of the information. The Commission’s order accepting the notice of change-in-status 

included a footnote reminding the companies that they must submit required filings on a timely 

basis or face possible sanctions by the Commission. For these reasons, and because there was no 

apparent harm to the market, staff closed this matter without additional enforcement action. 

Failure to Report Change-In-Status. An energy trading firm and its related companies reported 

that they had failed to timely submit change-in-status reports to the Commission, as was required 

by section 35.42 of the Commission’s regulations and the Commission order granting marketbased rate authority. The entities failed to report that an affiliate indirectly had acquired 

substantial indirect passive tax equity interests in a solar project and a wind farm. After learning 

of the omissions, the firm submitted the required change-in-status reports and reviewed its filings 

to ensure that appropriate reports had been filed regarding other transactions. Staff closed this 

matter without further action, because: (1) the filings were delayed for only a short time, (2) 

there was no apparent harm to the market, (3) the violations were limited in scope, and (4) the 

firm took appropriate measures to prevent similar violations in the future. 

Interlocking Directors Violation. Multiple companies reported that they inadvertently had 

created improper interlocking positions with a subsidiary by appointing their parent company’s 

officers as officers of the subsidiaries. Section 305(b) of the FPA generally prohibits such 

interlocking positions absent a prior Commission finding pursuant to Part 45 of the 

Commission’s regulations that neither public nor private interests will be adversely 
2016 Staff Report on Enforcement 23 

affected. The companies had not identified the potential violation until after they had made the 

appointments, but each company promptly made the requisite filing with the Commission and 

implemented additional compliance measures to avoid similar violations in the future. There 

was no indication that any of the relationships led to market harm. Accordingly, staff closed this 

matters without further action. 

Shipper Must Have Title Violation. A natural gas transmission provider reported a series of 

shipper must have title violations over a period of more than two years. The volume of gas 

involved in the violations was a tiny fraction of the total gas transported by the pipeline during 

the same period and involved a service that was used on only five days in two years. The 

pipeline concluded that the violations resulted from schedulers’ lack of familiarity with a rarelyused service and reviewed procedures and implemented training immediately to prevent future 

errors. Staff closed the matter with no further action because: (1) the violations were 

unintentional, were quickly remedied upon discovery, and were unlikely to be repeated; (2) a 

small number of customers were affected; (3) no customer suffered harm; and (4) the volume of 

gas involved was a small fraction of the total gas the provider transported. 

Tariff/OATT Violation. A utility reported an unexpected flow of 100 MWH in violation of its 

tariff due to operators’ failure to reprogram a piece of equipment from daylight time to standard 

time. Staff closed the matter with no further action because: (1) the violation was unintentional 

and was quickly remedied upon discovery; (2) training made the error unlikely to recur; and (3) 

no customer suffered harm. 

Natural Gas Transportation. A natural gas transmission provider reported several posting and 

gas tariff violations involving section 284.13(d)(1) of the Commission’s regulations: (1) failure 

to post no-notice service information for seven days, (2) delay in posting successful offer 

capacity awards by five hours, (3) delay in posting a successful offer capacity award by 45 

minutes and failure to notify a potential matching shipper by 30 minutes to match an offer for 

capacity, (4) failure to correct a data entry thereby allowing a competitor to receive sensitive 

commercial information improperly, and (5) failure to require a firm shipper to use up its daily 

allocation before receiving deliveries under an interruptible contract. Staff closed this matter 

without further action, because each violation was isolated, relatively minor as to flow volume 

involved, and caused little or no monetary harm (particularly after the company compensated 

affected shippers), and because the company took prompt and comprehensive action to prevent 

similar violations in the future. 

Natural Gas Tariff Violation. A pipeline company reported that a software error had caused it to 

erroneously assign a firm shipper secondary firm capacity in violation of the company’s 

tariff. The shipper’s nominations were pro-rated over portions of five different days until the 

company detected and corrected the error. Once it detected the error, the company provided the 

shipper with reservation charge credits equal to the denied service. Staff closed the matter with 

no action because the violation was unintentional, remedied quickly, unlikely to be repeated, 

affected only one customer, and resulted in very limited (if any) harm. 

Natural Gas Transportation. Two local distribution companies (LDCs) that also provide 

interstate service as Hinshaw pipelines inadvertently failed to timely revise their respective 

Statements of Operating Conditions (SOC) after changing their state commission-approved rates 

for gas transportation service. Section 284.123(e) of the Commission’s regulations requires that 

such revisions be made within 30 days of the rate change. The companies provided results of an 

internal investigation that: (1) determined that no customers were harmed because they were 

billed the (accurate) state commission-approved rate; (2) concluded that there was no harm to the 
2016 Staff Report on Enforcement 24 

market because of the transparency associated with the changes to the state rate; and (3) led the 

companies to implement procedural measures to prevent similar late filings/omissions. After the 

companies finally submitted their revisions to the Commission, the Commission accepted those 

revisions in an order that reminded the companies that future filings must be made on a timely 

basis or they may face sanctions. Staff then closed this self-report without additional 

enforcement action. 

Natural Gas Tariff Violation. A natural gas pipeline reported tariff violations resulting from a 

programming error related to calculation of cash-out of excess tolerance level imbalances. The 

pipeline had failed to reprogram its system to use a new methodology for the calculation for 30 

months after that methodology had been approved by the Commission. It discovered the error in 

response to a customer inquiry and promptly corrected the most recent six months of invoices 

per its tariff and compensated customers for the remaining 24 months according to a 

Commission-approved approach. Staff closed the matter with no further action because: (1) the 

violations were isolated to the events described and were not willful, (2) the customers who may 

have suffered any injury received refunds with interest, and (3) customers who were overpaid 

were forgiven from any refund obligation with the pipeline absorbing the difference. 

FPA Section 203 Violation. Several public utility companies reported that they had transferred 

jurisdictional assets or that their upstream owners’ interests had changed prior to obtaining 

Commission approval pursuant to section 203 of the FPA. The companies made the required 

filings concurrent with, or shortly after, their self-reports, and the Commission approved the 

transactions with a reminder that the companies must submit required filings on a timely basis or 

face possible sanctions. 

Violation of FPA Sections 203 & 205. A direct-to-retail power vendor that also engaged in 

incidental balancing wholesale sales of electricity reported that it (1) violated FPA section 203 

by transferring indirect control of the company without prior Commission authorization, and (2) 

violated FPA section 205 by engaging in balancing wholesale sales of electricity without MBR 

authority. The company submitted curative filings contemporaneously with its self-report to 

Enforcement, and the Commission issued orders: (1) concluding that the transfer was consistent 

with the public interest and giving prospective authorization under section 203, and (2) 

designating the company as a Category 1 seller and granting it MBR authority under section 

205. The Commission’s orders reminded the company that it must submit the required filings on 

a timely basis or face possible sanctions. In light of the company’s timely self-report once it 

recognized that its balancing sales subjected it to FERC jurisdiction, its prompt and thorough 

curative filings, its subsequent continued compliance, the lack of market harm, and its remedial 

measures, staff closed the self-report without further action. 

Ancillary Services Sales Violation. An electric power marketing company reported that it had 

made sales of ancillary services without explicit authority to make such sales under its MBR 

authorization and FPA section 205. The company filed a request to amend its MBR tariff to 

include an ancillary services sales provision, which the Commission granted with a prospective 

effective date. However, in that order, the Commission denied the company’s request for waiver 

of the 60-day prior notice requirement and reminded the company that it must submit required 

filings on a timely basis or face possible sanctions by the Commission. Staff closed this matter 

without further enforcement action, because it appeared that there was no market harm and the 

company had updated its internal procedures to ensure compliance with regulatory requirements. 

FPA Section 205 Violation. Two affiliated retail sales companies reported that they had made 

sales of electricity at market-based rates to three RTO/ISOs without obtaining this authority from 
2016 Staff Report on Enforcement 25 

the Commission as required by section 205 of the FPA. The companies do not own generation 

assets, but they purchase power to meet retail customer needs and sell any excess through 

balancing transactions. The total amount of unauthorized sales was less than $22,000. The 

companies discovered the violations shortly after they were acquired by a new owner, and they 

promptly submitted requests for MBR authority. The Commission granted the MBR 

authorization prospectively, and, following consultation with Enforcement staff, the companies 

made time-value refunds to the affected customers. Staff closed this matter without further 

enforcement action because the companies self-reported and promptly remedied the violations, 

took steps to ensure future compliance with Commission regulations and filing requirements by 

(among other things) hiring a new regulatory manager, and the unauthorized sales were relatively 

small and occurred over a short period of time. 

Violation of FPA Section 205 and Standards of Conduct. A vertically-integrated public utility 

transmission provider reported that when implementing tools for one of its operating 

applications, certain transmission outage information was inadvertently available to its wholesale 

merchant function (WMF) employees. Based on an internal investigation, the WMF employees 

had preferential access to non-public information related to three different outages that related to 

planned and ongoing work on certain transmission lines in violation of the undue preference 

provisions of section 205 of the FPA and the Standards of Conduct. The WMF employees 

attested that they had not actually accessed the information even though they had the capability 

to do so. The transmission provider retrained the employees and implemented new procedures 

for testing operating applications prior to going “live.” Staff closed this matter without further 

enforcement action because the WMF employees had not accessed or used the outage 

information, the transmission provider modified its compliance processes for revising operating 

applications to avoid such violations in the future, and the utility posted notice of the disclosure 

on its OASIS. 

Violation of the Standards of Conduct. A vertically-integrated public utility transmission 

provider made multiple self-reports regarding its failure to update on a timely basis certain 

information in its Standards of Conduct organizational chart postings under section 385.7(f) and 

(g) of the Commission’s regulations. Among other omissions, the company failed to update the 

organizational structure posting when an intern position was added to the transmission function 

and failed to disclose changes to job titles and functions. After identifying the violation, the 

transmission provider posted the updated information, made other curative postings, provided 

remedial training to key employees, and implemented policy changes to prevent similar 

violations in the future. Because there was no harm to the market and the company implemented 

new policies to prevent recurrence of similar violations, staff closed the matter without additional 

enforcement action. 

Violation of the Standards of Conduct. A vertically-integrated public utility transmission 

provider reported that an employee in its customer relations group inadvertently had forwarded 

an email containing non-public transmission outage to a WMF employee. The No-Conduit Rule 

of the Standards of Conduct (section 385.6 of the Commission’s regulations) prohibits such 

indirect disclosure through a conduit to a transmission provider’s marketing function employees. 

The WMF employee promptly notified his superior and the utility’s Chief Compliance Officer. 

The WMF was retrained and the Compliance Department worked with its information 

technology staff to identify and implement enhancements to the email system to reduce the risk 

of sharing non-public information. Staff closed this matter without further enforcement action, 

because it appeared that there was no market harm, and the company posted a notice of the 

disclosure on its OASIS. 
2016 Staff Report on Enforcement 26 

E. Investigations 

During FY2016, DOI staff opened 17 investigations, as compared to 19 investigations 

opened in FY2015. Nearly half of these new investigations arose from Commission referrals, 

with the vast majority of the remainder arising from conduct observed through surveillance by 

either DAS or the RTO/ISO Market Monitoring Units, and the rest arising from self-reports and 

Hotline tips. Staff closed 11 investigations in FY2016, either through a settlement or resolution 

without further action, as compared to 22 investigations closed in FY2015. 

1. Statistics on Investigations 

Of the 17 investigations staff opened this fiscal year (some of which involve more than one 

type of potential violation or multiple subjects), 12 involve potential market manipulation, 11 

involve potential tariff violations, one involves potential violations of a Commission certificate 

order, one involves potential violations of the Standards of Conduct, and one involves potential 

violation of a Commission filing requirement. 

DOI staff closed 11 investigations in FY2016, and it closed about half of those investigation 

through settlement. It closed the other half because staff concluded that the evidence did not 

support finding a violation. The Commission-approved settlements of investigations are 

summarized above, and illustrative examples of investigations closed without enforcement action 

are discussed below. 

The following charts show the year-by-year disposition of investigations that closed over the 

past five years (fiscal years 2012 through 2016) and the aggregate disposition of investigations 

that closed in fiscal years 2007 through 2016. 

Disposition of Investigations, FY2016

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Proceeded to Order to Show

Cause
2016 Staff Report on Enforcement 27 

Disposition of Investigations, FY2015

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Proceeded to Order to Show

Cause

Disposition of Investigations, FY2014

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Other
2016 Staff Report on Enforcement 28 

Disposition of Investigations, FY2013

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or No

Violation

Settlement

Proceeded to Order to Show Cause

Other

Disposition of Investigations, FY2012

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or No

Violation

Settlement

Proceeded to Order to Show Cause
2016 Staff Report on Enforcement 29 

The following charts summarize the nature of the conduct at issue for those investigations 

that were closed without action in fiscal years 2013 through 2016. 

Disposition of Investigations ‐ All to Date,

FY2007 ‐ FY2016

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Proceeded to Order to Show

Cause

Other

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Market Manipulation Tariff/OATT

Types of Alleged Violation in Investigations Closed

Without Action, FY2016
2016 Staff Report on Enforcement 30 

0

2

4

6

8

10

12

Market Behavior

Rules

Reliability Market

Manipulation

Tariff/OATT False Statement to

Commission

Types of Alleged Violation in Investigations Closed

Without Action, FY2015

0

0.5

1

1.5

2

2.5

3

3.5

Standards of

Conduct/Tariff Violation

Market Manipulation Market

Manipulation/Separation

of Functions

Market

Manipulation/Tariff

Violation

Types of Alleged Violation in Investigations Closed

With No Action, FY2014
2016 Staff Report on Enforcement 31 

2. Illustrative Investigations Closed with No Action 

The following summaries of the investigations that Enforcement closed without action in 

FY2016 are intended to provide guidance to the public while preserving the non-public nature of 

DOI’s investigations. 

Market Manipulation (Electricity). Acting on a referral from an RTO/ISO MMU, staff 

investigated whether a group of affiliated companies had violated the RTO/ISO tariff and/or the 

Commission’s Anti-Manipulation Rule by fraudulently avoiding one of the 

RTO/ISO’s settlement rules. The settlement rule at issue claws back profits from market 

participants when their Day-Ahead financial trading sufficiently affects their monthly congestion 

positions. After conducting written fact discovery and taking testimony, staff determined that 

while the corporate family avoided the settlement rule by splitting its trading among different 

affiliates (and not executing its trades through one entity), it did not do so with fraudulent 

intent. Accordingly, staff closed the investigation without further action. 

Market Manipulation (Natural Gas). In response to a referral from DAS’s Market Surveillance 

Group, staff opened an investigation into whether an energy trading firm had violated the 

Commission’s Anti-Manipulation Rule by engaging in directional trading within the physical 

natural gas markets to benefit the company’s various financial positions. After obtaining and 

analyzing relevant trade data and other documentary evidence and considering testimony from 

(and numerous telephone calls with) the relevant trader, and the trader’s behavior in other 

markets, staff concluded that there was insufficient evidence to establish manipulative intent, and 

staff decided to close the investigation. 

Market Manipulation (Natural Gas). DOI staff independently initiated an investigation of an 

energy trading company after identifying suspicious physical gas trades that the trading company 

had executed with another company that was under investigation. After the company repeatedly 

delayed production of relevant trading data, the Commission converted the non-public 

0

1

2

3

4

5

6

Market

Manipulation/False

Statement &

OATT/Tariff

Market

Manipulation/False

Statement

Reliability Tariff/OATT MBR

Types of Alleged Violation in Investigations Closed

With No Action, FY2013
2016 Staff Report on Enforcement 32 

preliminary investigation to a formal one. It initially appeared that the companies may have been 

engaged in wash trading with an intent to affect monthly index prices to benefit both companies’ 

financial positions. However, after a thorough review of the relevant trader’s transactions during 

his tenure at the company and documentary evidence, staff determined that the potential financial 

benefit from the suspicious trades was not significant enough to incentivize manipulative 

behavior. Accordingly, staff closed the matter with no action. 

Market Manipulation (Electricity). Acting on a referral from an RTO/ISO MMU, staff 

investigated whether a demand-response provider had violated the Commission’s AntiManipulation Rule by providing inaccurate load data to that RTO/ISO. After reviewing relevant 

documents and testimony, staff concluded that there was insufficient evidence of manipulative 

intent. 

Market Manipulation (Electricity) and OATT/Tariff Violation. In response to a referral from an 

RTO/ISO MMU, staff investigated whether a public utility violated the RTO/ISO’s tariff or 

Commission regulations by submitting erroneous maximum daily energy values in one day of 

Day-Ahead and Real-Time offers for its generation assets. The information submitted by the 

utility caused the RTO/ISO to treat approximately half of the utility’s generators as if they were 

not available, which in turn caused local marginal prices to spike. This error arose during an 

upgrade to the entity’s bidding software and was caught within 24 hours. After reviewing 

documentary evidence, conferring with the RTO/ISO, meeting with the utility’s representatives, 

and reviewing the utility’s response to follow-up questions, staff closed the investigation without 

further action. This decision was based on several factors, the most significant of which were: 

(1) the absence of manipulative intent and (2) the utility’s due diligence in testing its bidding 

software in the RTO/ISO’s software testing environment prior to using it to place live bids. 

F. Enforcement Hotline 

DOI staff fields calls and other inquiries made to the Enforcement Hotline (Hotline).12 The 

Hotline is a means for people, anonymously if preferred, to inform Enforcement staff of potential 

violations of statutes, Commission rules, orders, regulations, and tariff provisions. When staff 

receives information concerning possible violations, such as allegations of market manipulation, 

abuse of an affiliate relationship, or violation of a tariff or order, staff researches the issue 

presented and often consults other members of the Commission’s staff with expertise in the 

subject matter of the inquiry. In some cases, the Hotline calls lead to investigations by DOI. 

In FY2016, Enforcement received 198 Hotline calls and inquiries, 186 of which were 

promptly resolved within the fiscal year through advice provided by staff or otherwise, and 12 of 

which remained pending as of the end of the fiscal year. Staff also closed several Hotline 

matters that had been pending from previous years. In FY2016, staff converted one Hotline call 

to a preliminary investigation, and multiple FY2016 Hotline calls concerned conduct in 

investigations that were already pending. Every year, a significant percentage of the calls 

received relate to subjects outside of the Commission’s jurisdiction or contested matters pending 

before the Commission. DOI staff resolves these matters by advising those callers where they 

 

12 See 18 C.F.R. § 1b.21 (2016). 
2016 Staff Report on Enforcement 33 

may find the information they need, or directing them to the appropriate Commission office or 

docketed proceeding. 

G. Other Matters 

In addition to this investigative work, DOI staff worked on other important matters in 2016, 

including: 

Revision of Maximum Civil Penalties. In December 2015, Congress passed—and the President 

signed—a law requiring each federal agency to adjust for inflation the maximum civil penalties 

that may be assessed under the laws that the agency administers.13 Pursuant to that law, DOI 

drafted an interim final rule increasing the civil penalties that the Commission may assess under 

the FPA, the NGA, the Natural Gas Policy Act of 1978, and/or the Interstate Commerce Act.14 

Those revised maximum penalties took effect in July 2016. 

Collaboration With Other Commission Offices. DOI staff regularly coordinates with other 

Commission offices regarding potential enforcement matters. This includes working with the 

Office of the General Counsel (OGC) and the Office of Energy Market Regulation (OEMR) to 

address late filings submitted under sections 203 or 205 of the FPA. There were 225 such late 

filings in FY2016. Such collaboration also includes consulting on “No-Action Letter” requests 

submitted by regulated entities and assisting with the Commission’s Compliance Help Desk. 

Regulated entities can submit No-Action Letter requests and submit questions to the Compliance 

Help Desk to reduce their risk of subsequent findings of noncompliance and potential 

enforcement actions.15 Staff acted on one No-Action Letter submission and assisted in four 

Compliance Help Desk inquiries in FY2016. Finally, DOI staff confers with OGC and OEMR 

on requests for waiver of the Standards of Conduct under Order No. 717 and requests for waiver 

of the Affiliate Restrictions under Order No. 697. During FY2016, DOI staff reviewed 

approximately 11 such requests for waivers. 

 

13 See Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114-

74, § 701, 129 Stat. 584, 599 (2015). 

14

 See Civil Monetary Penalty Inflation Adjustments, Order No. 826, Docket No. RM16-16-000, 

FERC Stats. & Regs. ¶ 31,386 (2016), 81 Fed. Reg. 43,937 (Jul. 6, 2016). 

15 See Interpretive Order Modifying No-Action Letter Process and Reviewing Other 

Mechanisms for Obtaining Guidance, 123 FERC ¶ 61,157 (2008). 
2016 Staff Report on Enforcement 34 

DIVISION OF AUDITS AND ACCOUNTING 

A. Overview 

The Division of Audits and Accounting (DAA) administers the Commission’s audit and 

accounting programs to support the Commission’s mission to assist customers in obtaining 

reliable, efficient, sustainable energy service at a reasonable cost through appropriate regulatory 

and market means. DAA’s audit branches perform various types of audits that respond to the 

needs of the Commission and the industry, as well as advise the Commission on compliance and 

other matters. DAA’s regulatory accounting branch acts as the focal point for interpretive 

guidance concerning the Commission’s financial accounting and reporting rules, orders, 

regulations and statutes, and advises the Commission and the industry on accounting and other 

financial issues. In conducting its public audit and accounting activities, DAA’s primary goal is 

to enable the Commission to achieve its strategic objectives by ensuring compliance, 

accountability, and transparency. Consistent with this goal, DAA works with the Commission’s 

regulated industries as companies face and address audit and accounting challenges. 

DAA’s audit program supports Commission strategic objectives through the implementation 

of public risk-based audits. The audit program is a resource for the Commission to examine 

areas of concern within regulated industries to inform its actions addressing rates, tariffs, 

financial and operational transparency, policy initiatives, law, reliability, and other areas in the 

electric, natural gas, and oil industries. The audit program also provides jurisdictional entities 

the opportunity to work with audit staff to evaluate and improve their overall compliance, and 

identifies potential areas of noncompliance before they escalate. For the Commission’s 

regulated industries as a whole, the publicly-published commencement letters and audit reports 

provide insight into the areas of emphasis and concern, giving the industries and other 

stakeholders a valuable source of guidance. DAA’s accounting program is a vital component of 

the Commission’s strategic goal of establishing just and reasonable rates. The accounting 

program ensures the accuracy of financial information affecting rate design and also ensures that 

accounting outcomes best reflect the economic reality of an entity’s operations. DAA’s 

accounting program also provides accounting expertise to Commission program offices in 

developing Commission policies and rulemakings to ensure these initiatives properly consider 

and evaluate accounting and financial issues affecting jurisdictional entities. 

DAA’s programs inform the industry, public, and others about what constitutes effective 

compliance, accountability, and transparency through its outreach and guidance opportunities. 

DAA actively engages in industry outreach through interactions with trade associations, such as 

the Interstate Natural Gas Association of America, Edison Electric Institute, Association of Oil 

Pipe Lines, and Energy Bar Association; and encourages interested parties to contact DAA with 

any inquiries or concerns. In addition, DAA continues to provide formal accounting guidance 

through accounting requests filed with the Commission. Informal accounting guidance may be 

obtained via email (accountinginquiries@ferc.gov) and phone (202-502-8877). Informal 

guidance on all other compliance matters may be obtained through the Compliance Help Desk 

(www.ferc.gov/contact-us/compliance-help-desk.asp). DAA’s goal through its outreach efforts 

is to provide jurisdictional entities with ample opportunity to achieve compliance and avoid 

noncompliance that may result in harm to jurisdictional customers and energy markets. 
2016 Staff Report on Enforcement 35 

B. Compliance Reviews and Alerts 

1. Compliance Reviews 

Reviewing internal compliance related to the scope of the audit remains a key activity in 

DAA’s audit program. DAA’s assessment of a jurisdictional entity’s compliance under the 

scope areas serves as a necessary tool to help identify and understand the level of risk that 

internal compliance efforts may fail to detect or prevent noncompliance and factors into audit 

planning, e.g., the level of required detailed testing. Reviewing compliance also entails a review 

of a jurisdictional entity’s compliance culture. The results of this review are communicated to 

the jurisdictional entity under audit to encourage improved compliance. Providing such 

feedback to jurisdictional entities on their compliance is in line with the Commission’s strategic 

plan and enables jurisdictional entities to quickly implement corrective actions, reducing the risk 

of future noncompliance. The Federal Energy Regulatory Commission Strategic Plan, FY 2014-

2018, continues to encourage strong compliance and places emphasis on timely implementation 

of corrective actions within six months of audit completion. In FY2016, 98 percent of all audit 

recommendations were implemented within six months by the audited companies. DAA 

continues to be encouraged by the proactive responses of audited entities to address audit 

recommendations. 

2. Compliance Alerts 

DAA continues to observe certain areas in which compliance has been problematic for some 

entities. DAA believes that highlighting these areas for jurisdictional entities and their corporate 

officials will heighten awareness of these concerns and facilitate compliance efforts. The topics 

presented below are not the only areas in which compliance has been at issue, but relate also to 

areas where DAA has found consistent compliance concerns or noncompliance. DAA believes 

that focusing greater attention in these areas will enable jurisdictional entities to prevent 

noncompliance, avoiding enforcement actions. 

Formula Rate Matters. Compliance with the Commission’s accounting and the FERC Form No. 

1 regulations for costs that are included in formula rate recovery mechanisms used to determine 

billings to wholesale customers continues to be a focal point of DAA’s formula rate audits. 

DAA notes that certain areas of noncompliance could have been avoided had there been more 

effective coordination between the jurisdictional entity’s accounting and rate staff to prevent the 

recovery of costs that should be excluded from the formula rate. Additionally, formula rate 

audits in recent years have observed certain patterns of noncompliance in the following areas: 

 Transmission vs. Distribution Plant – Utilities have included plant balances related to 

their distribution function in transmission formula rates. This has occurred when a 

distribution capital project is placed in service, and the appropriate policies and controls 

are not utilized to ensure that those project costs are classified as distribution plant and 

that the related depreciation is appropriately classified. 

 Tax Prepayments – Utilities have incorrectly recorded income tax overpayments for 

which they elect to receive a refund, and not apply to a future tax year’s obligation, as a 

prepayment in Account 165, Prepayments. Including these overpayments in Account 165 

has led to excess recoveries through formula rate billings. These costs are properly 

recorded in Account 146, Accounts Receivable from Associated Companies, or Account 

143, Other Accounts Receivable, as appropriate. 
2016 Staff Report on Enforcement 36 

 Internal Merger Costs – Utilities have included merger-related costs in rates without 

Commission approval that are typically related to internal labor, severance, and 

integration costs. In these cases, utilities are subject to hold-harmless commitments to 

exclude merger-related costs from rates unless the Commission approves recovery of 

such costs. Utilities must have appropriate controls and procedures to ensure that 

merger-related costs are tracked and excluded from formula rates. 

 Merger Goodwill – Utilities have included goodwill in the equity component of the 

capital structure without Commission approval. It is the Commission’s long-standing 

policy that goodwill should be excluded from rates. 

 Depreciation Rates – Utilities have used state-approved depreciation rates or a blended 

depreciation rate in their formula rate recovery mechanisms, rather than the depreciation 

rates approved by the Commission. 

 Asset Retirement Obligation (ARO) – Utilities have included ARO amounts in formula 

rates without explicit Commission approval. This includes the asset component that 

increases rate base, the depreciation expense related to the asset, the accretion expense 

related to the liability, and associated deferred taxes. 

 Allocated Labor – Utilities have charged labor costs to transmission projects without 

using an appropriate cost allocation method or time tracking. Specifically, DAA 

observed that controls were not sufficient to ensure that labor costs charged were 

appropriately allocated between transmission and distribution capital projects when 

employees worked on both, resulting in an inappropriate or unsupported allocation of 

labor costs charged to transmission projects. 

 Administrative and General (A&G) Expenses – Utilities have recorded nonoperating 

expenses and functional operating and maintenance expenses in A&G expense accounts, 

leading to an inappropriate inclusion of such costs in the formula rates. 

 Unused Inventory and Equipment – Utilities have included the cost of materials, supplies, 

and equipment purchased for a construction project without removing the cost of items 

unused in whole or in part from the cost of a project. 

Open Access Transmission Tariffs (OATT). An essential goal of open access is to support 

efficient and competitive markets. On recent OATT audits, DAA noted instances where 

company actions did not support this goal, as DAA identified noncompliance with the OATT’s 

terms and conditions. Specifically, DAA identified issues related to: improper use of network 

transmission service, improper sales from designated network resources, transmission capacity 

not released in accordance with Commission-approved tariffs, inaccurate available transmission 

capacity data posted on the Open Access Same-Time Information System, and transmission 

service provided to customers under expired transmission service agreements. 

Natural Gas Accounting and Tariff Matters. DAA continues to evaluate natural gas pipeline 

compliance with the Commission’s accounting and the FERC Form No. 2 reporting requirements 

to ensure transparency and accuracy of data reported to the Commission. DAA’s evaluations 

also continue to cover the administration and application of transportation services and rates 

among customers in accordance with the approved gas tariff. In recent comprehensive natural 

gas audits, DAA has observed noncompliance in the following areas: 

 Gas Tariff Matters – Some natural gas pipelines did not comply with FERC gas tariff 

procedures. Specifically, they were not using the method specified in the tariff for 
2016 Staff Report on Enforcement 37 

valuing system gas activities, were not enforcing stipulations in Operational Balancing 

Agreements to manage and monitor gas imbalance activities between interstate and 

intrastate pipelines, were not updating reservation credit procedures for force majeure and 

non-force majeure events to be consistent with Docket No. RP11-1538-000,16 and were 

not reporting operational available capacity data consistent with North American Energy 

Standards Board requirements. 

 Accounting and Reporting Matters – Some natural gas pipelines did not comply with 

Commission accounting requirements as they pertain to gas charges and activities, 

including: penalty revenues assessed to noncompliant shippers, transmission mains and 

compression station expenses, line pack inventory changes, shipper imbalances and cashouts, lost and unaccounted-for gas, and fuel used in compressor stations. Other common 

accounting areas of noncompliance included derivation of allowance for funds used 

during construction; classification of non-operating activities associated with donations, 

fines and penalties, and lobbying activities; and capital project reimbursements and 

advances from customers. In regard to the FERC Form No. 2 reporting, there was some 

inaccurate or incomplete information for affiliate transactions and other subsidiary 

investment activities. Besides this, there were omissions and incomplete information 

from various schedules supporting the pipeline financial statements. 

 Pipeline Integrity Management Costs – Certain natural gas pipelines have misclassified 

integrity management costs that are properly recorded as maintenance expenses. 

Commission accounting requirements, including accounting guidance in Docket No. 

AI05-1-000, provide that costs to develop integrity management programs, prepare 

pipelines for inspection, conduct pipeline assessments, and make repairs are to be 

charged to maintenance expense in the period the costs are incurred. 

 Capacity Transparency and Allocation – Interstate natural gas pipelines are required to 

post available pipeline capacity on their web sites. These postings promote transparency 

of available pipeline capacity and enable greater competitive and efficient use of such 

capacity. Recent audits identified deficiencies in posting available pipeline capacity 

where quantities were omitted or incorrectly reported. The result is that some shippers 

may not be aware of or able to avail themselves of operational opportunities for use of 

available pipeline capacity. 

 

Oil Pipeline (Page 700). An essential part of oil pipeline audits is an examination of the 

accounting and operating data included on page 700 of the FERC Form No. 6, Annual Cost of 

Service-Based Analysis Schedule.17 The information reported on page 700 could be used by the 

Commission and interested parties to evaluate interstate pipeline rates, among other uses. Recent 

oil pipeline audits have identified some accounting errors that impact the accuracy of amounts 

reported on page 700, including: intrastate amounts incorrectly included as interstate on page 

 

16

 See Natural Gas Supply Association, et al., 137 FERC ¶ 61,051(2011). 

17 The schedule requires each oil pipeline company to report its Total Annual Cost of Service (as 

calculated under the Order No. 154-B methodology), operating revenues, and throughput in 

barrels and barrel-miles for the current and previous reporting year. The amounts reflected on 

page 700 represent interstate service (i.e., FERC-jurisdictional) amounts, while the rest of the 

FERC Form No. 6 includes both interstate and intrastate amounts. 
2016 Staff Report on Enforcement 38 

700, misclassification of carrier property, charitable donations, fines/penalties, lobbying 

activities, and failure to use Commission-approved depreciation rates. DAA also identified a 

another company that did not use or charge correct rates for intermediate points in billings to 

customers and a company that inadvertently disclosed confidential shipper information in a filing 

made with the Commission. 

Nuclear Decommissioning Trust Funds. The Commission’s regulations concerning nuclear 

decommissioning trust funds require jurisdictional utilities owning nuclear power plants to file 

annual trust fund reports, among other requirements. Recent audit activity has identified utilities 

that have not satisfied the Commission’s regulations by failing to: submit annual 

decommissioning trust fund reports, clearly distinguish Commission-jurisdictional monies from 

nonjurisdictional monies held in the trust funds, or accurately report the amount of Commissionjurisdictional money in the trusts. 

Allowance for Funds Used During Construction (AFUDC). Recent audit activity has shown 

deficiencies in how jurisdictional entities have calculated AFUDC, resulting in excessive 

accruals of AFUDC. Common findings during audits include: failure to exclude goodwillrelated equity from the equity component of the AFUDC rate, failure to include short-term debt 

in computing the AFUDC rate, computing AFUDC on contract retention and other noncash 

accruals, compounding AFUDC more frequently than semi-annually, inclusion of unrealized 

gains and losses from other comprehensive income, and use of an AFUDC methodology not 

prescribed by the Commission in Order No. 561.18

Consolidation. Commission accounting regulations require the equity method of accounting for 

all investments in subsidiaries. Recent audit activities continue to find jurisdictional companies 

incorrectly using the consolidation method of accounting for subsidiaries instead of the equity 

method. As a result, improper amounts were included in formula rate billings. Entities must 

seek a waiver from the Commission to use the consolidation method for an investment in a 

subsidiary. 

Price Index Reporting and FERC Form No. 552 Reporting. DAA’s recent energy-reporting 

audits have revealed common deficiencies that have led to unreported transactions to price 

indexes. Transactions that are unreported in price indexes lead to less robust price indexes and 

can impact prices published by indexes, particularly at illiquid hubs. Common deficiencies 

revealed during audits of the FERC Form No. 552 include: failures to disclose affiliate 

companies, improper transaction categorization, and inclusion of non-reportable transactions. 

These reporting errors on the FERC Form No. 552 hinder the usefulness and transparency of the 

form’s contents. 

Untimely Filing of Commission Reports. DAA identified instances in which companies have 

failed to file various reports with the Commission timely. These instances included 

decommissioning trust fund reports and required filings and reports related to mergers. Failure 

to timely file these reports immediately impacts the Commission’s and industry’s ability to use 

report-provided data. Untimely filing also negatively impacts the transparency of information 

and creates doubt regarding the effectiveness of these companies’ compliance programs. 

 

18 Revisions to Oil Pipeline Regulations Pursuant to the Energy Policy Act of 1992, FERC Stats. 

& Regs, ¶ 30,985 (1993). 
2016 Staff Report on Enforcement 39 

Record Retention. DAA has identified instances in which companies have failed to retain 

records in accordance with Commission regulations. In some cases, DAA determined that 

companies have failed to obtain records from the original owner when acquiring jurisdictional 

assets. DAA also identified instances in which inadequate records management programs led to 

premature destruction of records. Failure to maintain adequate records can impair the 

Commission’s ratemaking and enforcement activities and ultimately impact an entity’s ability to 

recover costs associated with those assets. 

C. Significant Audit Matters 

DAA’s audits are public, risk-based, and cover a variety of audit scope areas. They are 

typically commenced without reference to any allegation of wrongdoing. DAA consults with 

other divisions within OE and other Commission program offices to inform DAA’s risk-based 

methodology in the selection of audit scope areas and audit candidates. DAA also works with 

the other program offices to inform Commission actions addressing rates, tariffs, financial and 

operational transparency, policy initiatives, law, reliability, and other areas in the electric, natural 

gas, and oil industries. DAA is not limited in the types of audits it conducts; it responds to the 

needs of the Commission and the industry. Individual audits often contain multiple scope areas, 

and generally the audits review the entity’s compliance with respect to the audit scope area. The 

audits below were completed in FY2016 and provide a sample of DAA findings and results. 

DAA’s public audit reports provide great detail on the audit scope, methodology, and 

findings of noncompliance with the expectation that all jurisdictional entities will be better 

informed, avoid noncompliance, and improve operational performance. Finally, DAA expects 

timely implementation of all audit recommendations, which demonstrates an entity’s 

commitment to carry out enhancements to improve compliance with FERC rules and precedents 

and reduces the risk of future noncompliance. 

In FY2016, DAA completed 14 audits of oil pipeline, public utility, and natural gas 

companies covering a wide array of topics. The audits resulted in 214 recommendations for 

corrective action, all of which were accepted by the audited companies, and directed $5.3 million 

in refunds and recoveries. Specifically, DAA directed over $3.7 million to be refunded to 

jurisdictional customers and prevented over $1.6 million from being inappropriately included in 

transmission plant and wholesale formula rates. Audit recommendations also directed 

improvements to the audited companies’ internal processes and procedures, financial reporting 

for accuracy and transparency, web site postings, and efficiency and cost-effectiveness of 

operations. Collectively, these refunds, recommendations, prevented charges (i.e., savings), and 

procedural and process enhancements benefit ratepayers and market participants. 
2016 Staff Report on Enforcement 40 

The following significant audit activities reflect the issues and priorities identified and discussed 

above. 

Southwest Power Pool, Inc. (SPP) – PA15-6-000. DAA evaluated SPP’s compliance 

with: (1) the transmission provider obligations described in the SPP Open Access Transmission 

Tariff, with particular emphasis on the implementation of the Integrated Marketplace, under 

Attachment AE as of March 1, 2014; (2) Order No. 719, Wholesale Competition in Regions with 

Organized Electric Markets; (3) Commission accounting regulations under the Uniform System 

of Accounts (USofA); and (4) the FERC Form No. 1 financial reporting requirements.19 The 

audit resulted in five findings, one other matter, and 16 recommendations for corrective 

action. The five findings were: (1) SPP RTO’s inappropriate involvement with market 

monitoring unit (MMU) operations, such as SPP executive management involvement in MMU 

staff bonus determinations, performance review of the MMU Director, and other staffing 

matters; (2) the MMU’s inappropriate reliance on SPP RTO for legal services, IT resources, and 

staffing; (3) the MMU’s lack of a process to ensure that MMU staff members focused on MMUrelated activities rather than performing SPP RTO activities unrelated to MMU operations; (4) 

the MMU’s lack of sufficient physical safeguards to preserve the MMU’s independence by 

limiting access to MMU confidential work products; and (5) the MMU’s involvement with SPP 

RTO tariff formation, which went beyond the advisory role and resulted in conflicts that led to 

inefficient MMU and SPP RTO operations. SPP did not contest any of the audit report findings 

and committed to implement corrective actions to address all recommendations. Corrective 

actions related to these recommendations will result in the MMU strengthening its separation and 

independence from SPP RTO. While the audit specifically addressed SPP RTO and its internal 

MMU, the audit report garnered the attention of other MMUs in other RTO/ISOs on issues 

related to separation and independence. This led DAA to proactively engage in outreach to all 

 

19

 Southwest Power Pool, Inc., Docket No. PA15-6-000 (July 15, 2016) (delegated letter order). 

FY2016 Audits by Topic Formula Rates

Mergers & Acquisitions

Natural Gas Tariff & Accounting

Nuclear Decommissioning Trust Funds

Form No. 552

MBR & EQR

Oil Tariff & Accounting

RTO/ISO
2016 Staff Report on Enforcement 41 

jurisdictional MMUs to discuss how best to enhance their performance by incorporating the 

recommendations, as applicable, in these critical areas. 

Duke Energy Corporation (Duke) – PA14-2-000. DAA evaluated Duke Energy’s 

compliance with requirements established in Commission orders authorizing Duke’s merger with 

Progress Energy, Inc. and each of Duke’s public utility subsidiaries’ compliance with: (1) tariff 

requirements governing its transmission formula rate; (2) Commission accounting regulations 

under the USofA; and (3) Commission financial reporting regulations.20 The audit report 

identified eight findings of noncompliance and made 37 recommendations for corrective action. 

Of particular note, Duke and its subsidiaries improperly included approximately $32.9 million of 

merger transaction internal labor, outside services, and related costs in wholesale power and 

transmission formula rate service cost determinations without first submitting a section 205 filing 

demonstrating that the costs were offset by quantified savings produced by the merger. 

Consequently, the wholesale power and transmission customers’ revenue requirements were 

inappropriately overstated by an estimated $17.5 million. Additional findings of noncompliance 

identified at certain of Duke’s public utility subsidiaries included the following: failing to file 

merger accounting entries with the Commission and improperly recording merger transaction 

costs in operating accounts; improper accounting for investments in subsidiaries on a 

consolidated basis; improper inclusion of $2.4 million of lobbying costs in operating accounts; 

insufficient support for the allocation of labor costs of internal lobbyists and their support staff; 

and accounting misclassification of approximately $490,000 of other nonutility expenses in 

operating accounts. Collectively, these findings resulted in anticipated refunds of $1.6 million to 

wholesale customers. 

In addition, the audit identified accounting misclassifications of an estimated $94.7 million of 

non-operating expenses and receivables arising from sale of accounts receivable to subsidiaries. 

The audit determined that approximately $61 million of these funds may have been improperly 

charged to wholesale power and transmission customers. Upon rehearing, the Commission 

affirmed the Chief Accountant’s finding that discounts on the sale of accounts receivable without 

recourse are non-operating in nature and are appropriately recorded in Account No. 426.5.21

D. Other Audit Matters 

1. Formula Rates 

Kansas Gas and Electric Company (KGE) – FA15-15-000 and Westar Energy, Inc. (Westar) – 

FA15-9-000. DAA evaluated KGE and Westar’s compliance with: (1) approved terms, rates, 

and conditions of their transmission formula rate mechanism as provided in Attachment H-1 of 

Westar’s Open Access Transmission Tariff (OATT) and other jurisdictional rates on file with the 

Commission; (2) the accounting requirements of the Uniform System of Accounts for Public 

Utilities and Licensees; and (3) the reporting requirements of the FERC Form No. 1, Annual 

Report of Major Electric Utilities, Licensees, and Others and Supplemental Form 3-Q: Quarterly 

 

20

 Duke Energy Corporation, Docket No. PA14-2-000 (May 1, 2016) (delegated letter order). 

21 Duke Energy Carolinas, LLC, 156 FERC ¶ 61,201 (2016). 
2016 Staff Report on Enforcement 42 

Financial Report.22 The audits resulted in 13 findings (seven on KGE and six on Westar) and 44 

recommendations (25 on KGE and 19 on Westar). DAA found that KGE and Westar conducted 

improper formula rate billing of distribution plant and asset retirement obligations. DAA also 

determined that KGE and Westar improperly accounted for nonoperating expenses, such as 

amounts associated with discriminatory employment practices, corporate-owned life insurance 

policy expenses, and expenses related to running a nonprofit charitable organization. Westar and 

KGE also did not allocate various administrative and general expenses to their nonregulated 

subsidiary companies. As a result of DAA’s findings, Westar and KGE will remit approximately 

$2.3 million in refunds and recoveries and will exclude significant amounts from being 

improperly included in future wholesale formula rate calculations. 

2. Mergers and Acquisitions 

Exelon Corporation (Exelon) – PA13-15-000. DAA evaluated whether Exelon and its 

subsidiaries complied with: (1) conditions established in Commission orders issued on March 9, 

2012, July 1, 2005, and April 12, 2000 that authorized corporate mergers; (2) Commission 

regulations governing nuclear plant decommissioning trust funds; (3) Commission accounting 

regulations under the USofA; and (4) Commission financial reporting regulations.23 DAA 

identified five areas of noncompliance, made 12 recommendations, and issued one other matter. 

Of note, an Exelon subsidiary Commonwealth Edison, inappropriately included $851,000 of 

merger-related costs in transmission service cost calculations through its transmission formula 

rate, consequently overcharging transmission customers a total of $89,234. Additionally, Exelon 

and its subsidiaries did not properly comply with Commission regulations on nuclear 

decommissioning trust funds requiring proper separation of monies, filing of financial reports, 

and retention of records. As a result of DAA’s findings, Exelon issued a refund of $89,234, 

including interest, to its transmission customers, strengthened procedures and controls 

surrounding its merger condition compliance, and corrected and refiled the necessary nuclear 

decommissioning trust fund reports. 

Entergy Services, Inc. (Entergy) – FA15-13-000. DAA evaluated Entergy’s compliance with the 

Commission’s: (1) accounting regulations under the USofA and (2) financial reporting 

regulations. The audit primarily focused on examining the transactions and costs associated with 

Entergy’s attempted merger with ITC Holdings Corporation.24 DAA identified one area of 

noncompliance and made four recommendations. DAA found that Entergy operating companies 

recorded approximately $107 million in merger-related costs in operation and maintenance 

(O&M) and administrative and general (A&G) expense accounts rather than in Account No. 

426.5, Other Deductions, as required by Commission precedent. The improper accounting led to 

overstatements of O&M and A&G expenses in the Entergy operating companies’ FERC Form 

No. 1 filings. However, the Entergy operating companies excluded most of the merger-related 

costs from transmission formula rate calculations with the exception of a few costs. As a result 

 

22

 Kansas Gas and Electric Company, Docket No. FA15-15-000 (Sept. 29, 2016); Westar 

Energy, Inc., Docket No. FA15-9-000 (Sept. 29, 2016) (delegated letter orders). 

23

 Exelon Corporation, Docket No. PA13-15-000 (Dec. 22, 2015) (delegated letter order). 

24 Entergy Services, Inc., Docket No. FA15-13-000 (Apr. 19, 2016) (delegated letter order). 
2016 Staff Report on Enforcement 43 

of DAA’s findings, Entergy strengthened processes and procedures around its tracking of and 

accounting for merger-related costs. 

ITC Holdings Corporation (ITC) – FA15-14-000. DAA evaluated ITC’s compliance with the 

Commission’s accounting regulations under the USofA and financial reporting regulations. The 

audit primarily focused on examining the transactions and costs associated with ITC’s attempted 

merger with Entergy Corporation.25 DAA identified one area of noncompliance and made three 

recommendations. DAA found that ITC operating companies recorded approximately $200,000 

in merger-related costs in operating accounts included in the determination of transmission 

formula rate billings, rather than in Account No. 426.5, Other Deductions, as required by 

Commission precedent. The improper accounting led to inappropriate recovery of the mergerrelated costs in transmission formula rate billings. As a result of DAA’s findings, ITC refunded 

approximately $154,000 to wholesale transmission customers and strengthened processes and 

procedures around its tracking of and accounting for merger-related costs. 

Emera Maine (Emera Maine) – PA15-4-000. DAA evaluated Emera Maine’s compliance with 

conditions established in the Commission order authorizing its merger with Maine Public Service 

Company.

26 DAA identified four areas of noncompliance and made nine recommendations. Of 

note, DAA determined that Emera Maine inappropriately included merger-related costs through 

its formula rate recovery mechanisms without first making a compliance filing under section 205 

of the Federal Power Act. Additionally, Emera Maine inappropriately computed AFUDC on 

construction work in progress by using the annual weighted average cost of debt and computing 

its AFUDC rate monthly, instead of annually. As a result of DAA’s findings, Emera Maine 

refunded $757,324 to ratepayers for inappropriately including merger-related costs through its 

formula rate recovery mechanisms and inappropriately calculating AFUDC on construction work 

in progress. 

3. Oil 

Enbridge Energy Partners, LP (EEP) – FA15-4-000. DAA evaluated EEP’s compliance with the 

Commission’s regulations for oil pipeline companies, including the USofA and the FERC Form 

No. 6 financial reporting requirements. This audit primarily focused on North Dakota Pipeline 

Company, LLC (NDPL).27 The audit report identified 12 findings of noncompliance and made 

30 recommendations for corrective action. One particular finding noted NDPL billed its shippers 

for oil movements not nominated by the shippers, contrary to its tariff language. Consequently, 

some shippers paid more and others paid less than what was appropriate under the filed tariff 

rates. The net result was that NDPL over-collected $536,555. NDPL subsequently analyzed and 

improved its invoicing process. DAA reviewed the analysis performed by NDPL and confirmed 

that NDPL has properly resolved the billing for its shippers during this audit period. 

 

25 ITC Holdings Corporation, Docket No. FA15-14-000 (Apr. 19, 2016) (delegated letter order). 

26

 Emera Maine, Docket No. PA15-4-000 (Jan. 4, 2016) (delegated letter order). 

27 Enbridge Energy Partners, LP, Docket No. FA15-4-000 (May 9, 2016) (delegated letter order). 
2016 Staff Report on Enforcement 44 

4. Natural Gas Tariff, Accounting, and Reporting 

Destin Pipeline Company, LLC (Destin) – FA15-1-000. DAA evaluated Destin’s compliance 

with: (1) certain information reporting requirements in the FERC Form No. 2; (2) accounting 

regulations under the USofA; and (3) Destin’s FERC Gas Tariff.28 The audit identified nine 

areas of noncompliance, made 28 recommendations, and issued one other matter. Of note, 

Destin improperly accounted and reported certain items, such as gas imbalances, lost and 

unaccounted-for gas, accumulated deferred income taxes, and accruals and customer advances 

related to third-party reimbursements. As a result of DAA’s findings, Destin updated its 

accounting practices, resulting in the reclassification of gas imbalances in the amount of $5.8 

million and reclassification of accruals and customer advances related to third-party 

reimbursements in the amount of $13.4 million. Furthermore, Destin implemented accounting 

procedures to ensure that gas volumes furnished to the pipeline by its shippers for compressor 

fuel and other pipeline system use and amounts related to lost and unaccounted-for gas are 

properly classified and reported in the FERC Form No. 2. 

Empire District Electric Company (Empire District) – PA15-7-000. DAA evaluated Empire 

District’s compliance with the requirements of its MBR authorizations, EQR filing regulations, 

and the FERC Form No. 552 reporting requirements. The audit also examined Empire District’s 

wholesale electric and natural gas market activity, including compliance with applicable tariff 

provisions and Commission regulations concerning natural gas transportation and sales. The 

audit identified two findings and seven recommendations that required corrective action. The 

two findings were: (1) Empire District did not report in its EQRs its wholesale sales to four 

municipalities within Empire District’s service territory or wholesale sales made from its hydro 

facility and (2) Empire District’s EQRs during the audit period contained various errors in the 

contracts and transactions it reported, including incorrect prices, quantities, customers, points of 

delivery, and affiliate identifications. As a result of DAA’s findings, Empire District committed 

to correct and refile the necessary filings, strengthen controls surrounding the filing of complete 

and accurate information with the Commission, and enhance internal controls regarding 

compliance training and EQR reporting. 

Natural Gas Pipeline Company of America (NGPL) – PA13-5-000. DAA evaluated NGPL’s 

compliance with the Commission’s: (1) accounting regulations under the USofA; (2) certain 

reporting information in the FERC Form No. 2; and (3) select portions of NGPL’s tariff, 

including those provisions governing penalties, reservation charge crediting, capacity allocation, 

storage operations, and tracking and balancing mechanisms.29 The audit identified eight findings 

of noncompliance and made 24 recommendations for corrective action. Of note, NGPL did not 

use the inventory method approved in its tariff for valuing system gas activities. This resulted in 

an undervaluation of system gas inventory of $44.5 million and operating expenses of $28.8 

million. NPGL did not accurately apply its Commission-approved depreciation rates resulting in 

a $1.7 million understatement in depreciation expense and accumulated reserve. NGPL 

incorrectly recorded about $195 million of pipeline integrity management costs as operating 

 

28 Destin Pipeline Company, LLC, Docket No. FA15-1-000 (Mar. 30, 2016) (delegated letter 

order). 

29

 Natural Gas Pipeline Company of America, Docket No. PA13-5-000 (Oct. 30, 2015) 

(delegated letter order). 
2016 Staff Report on Enforcement 45 

rather than maintenance expense. NGPL did not properly account for certain pipeline activities 

under Order No. 581 related to shipper imbalances, cash-outs, lost and unaccounted-for gas, and 

a sale of cushion gas. NGPL incorrectly recorded activities associated with lobbying, donations, 

and penalties as above-the line-rather than below-the-line expenses. 

5. No Audit Findings 

Yankee Atomic Electric Company (Yankee Atomic) – FA15-3-000. DAA evaluated Yankee 

Atomic’s compliance with the Commission’s regulations relating to nuclear decommissioning 

trust funds and Order Nos. 580 and 658. DAA also evaluated the company’s compliance with 

the Commission’s accounting and reporting requirements associated with nuclear 

decommissioning.30 The audit resulted in no findings or recommendations that required 

corrective action to be taken. 

Portland General Electric Company (PGE) – FA15-2-000. DAA evaluated compliance with the 

Commission’s regulations relating to nuclear decommissioning trust funds and Order Nos. 580 

and 658. DAA also evaluated the company’s compliance with the Commission’s accounting and 

reporting requirements associated with nuclear decommissioning.31 The audit resulted in no 

findings or recommendations that require corrective actions to be taken. 

E. Accounting Matters 

DAA administers the Commission’s accounting programs for the electric, natural gas, and oil 

industries, which are vital components of the Commission’s strategy of setting just and 

reasonable cost of service rates. The foundation of the Commission’s accounting programs is the 

USofA, codified in its regulations for electric utilities and licensees, centralized service 

companies, natural gas companies, and oil carriers. In addition, the Commission issues 

accounting rulings relating to specific transactions and applications through orders and Chief 

Accountant guidance letters based upon a consistent application of the USofA. This body of 

accounting regulations, orders, and guidance letters comprises the Commission’s accounting 

requirements and allows for consistent, transparent, and decision-useful accounting information 

to be used by the Commission and stakeholders to set and monitor cost-of-service rates. DAA 

enables the Commission to achieve this strategic goal through insightful consideration of the 

Commission’s ratemaking policies, past Commission actions, industry trends, and outside 

influences (e.g., the economic environment, technological changes, and increased environmental 

mandates) that impact the industries under the Commission’s regulations. 

A substantial part of DAA’s accounting workload involves extensive coordination with 

Commission program offices to provide regulatory accounting advice and analysis on various 

types of filings by jurisdictional entities. Further, DAA provides accounting expertise to 

Commission program offices in developing Commission policies and rulemakings to ensure 

these initiatives fully consider and evaluate accounting and financial issues affecting 

 

30 Yankee Atomic Electric Company, Docket No. FA15-3-000 (Oct. 23, 2015) (delegated letter 

order). 

31

 Portland General Electric Company, Docket No. FA15-2-000 (Oct. 23, 2015) (delegated letter 

order). 
2016 Staff Report on Enforcement 46 

jurisdictional entities. DAA also serves jurisdictional entities by holding pre-filing and other 

periodic meetings with jurisdictional companies seeking to make filings with the Commission to 

inform them of relevant accounting requirements. To better serve the Commission and other 

stakeholders in these capacities, DAA monitors and participates in projects initiated by the 

Financial Accounting Standards Board, Securities and Exchange Commission, and International 

Accounting Standards Board to address issues that may impact the Commission or its 

jurisdictional entities. 

DAA also receives accounting inquiries and provides informal feedback on the 

Commission’s accounting and financial reporting regulations. These inquiries come directly 

from jurisdictional entities, industry trade groups, consultants, and other industry stakeholders, as 

well as through the Commission’s Compliance Help Desk, Office of External Affairs, 

Enforcement Hotline, and other Commission program offices. Further, DAA encourages 

jurisdictional entities also to seek formal guidance on accounting issues of doubtful interpretation 

to enhance compliance with the Commission’s accounting and financial reporting regulations. 

Finally, a critical part in DAA’s effort is educating the regulated entities and promoting 

compliance with the Commission’s regulations through participating in various formal speaking 

engagements and industry accounting meetings. 

1. Filings Reviewed by DAA 

DAA has advised the Commission and acted on filings submitted to the Commission 

covering various accounting matters with cost-of-service rate implications, such as accounting 

for mergers and business combinations, asset dispositions, depreciation, AFUDC, postretirement benefits, income taxes, and prior-period corrections. While DAA focused on 

accounting matters within the filings, some of the filings came from jurisdictional entities 

seeking Commission approval primarily for matters other than accounting, such as requests for 

declaratory orders, natural gas certificate applications, merger and acquisition applications, 

electric and natural gas rate filings, and securities and debt applications. In these cases, DAA 

served in an advisory role to other program offices in identifying and analyzing the accounting 

implications of those requests. Over the past five years, DAA has reviewed 1,695 Commission 

filings to ensure proper accounting is followed and to advise the Commission on potential rate 

effects. In FY2016 alone, DAA reviewed a total of 413 filings. 
2016 Staff Report on Enforcement 47 

2. Requests for Approval of the Chief Accountant 

In FY2016, DAA, through the Chief Accountant’s delegated authority, responded to 108 

accounting filings requesting approval of a proposed accounting treatment or financial reporting. 

The matters covered in these accounting requests related to various topics within the 

Commission’s accounting and financial reporting requirements for electric, natural gas, and oil 

pipeline entities. Of note in FY2016, there was an increase in filings related to adjustments to 

accumulated deferred income tax and equity accounts. There was also a large increase in filings 

during FY2016 requesting approval to record public utility asset sales. 

Also of note in FY2016 was an accounting request and related orders that approved a limited 

waiver of the Commission’s accounting regulations to permit consolidation and explained 

Commission precedent on accounting for discounts on the sales of accounts receivable with and 

without recourse. In Docket No. AC15-174-000, the Chief Accountant observed that Duke 

Energy Carolinas, LLC, Duke Energy Progress, LLC, and Duke Energy Florida, LLC 

(collectively, the Duke Companies) inappropriately recorded discounts related to the sales of 

accounts receivable without recourse in utility operating expense accounts. The Chief 

Accountant stated that Commission policy requires such discounts to be recorded in 

Account No. 426.5, Other Deductions. The Duke Companies filed a request for rehearing in 

Docket No. AC15-174-001, and in the rehearing order, the Commission affirmed the Chief 

Accountant’s finding that discounts on the sale of accounts receivable without recourse are nonoperating in nature and are appropriately recorded in Account No. 426.5.32 The Commission 

order also distinguished this accounting treatment from account receivable sales transactions 

with recourse. 

A Commission order was also issued in FY2016 related to an accounting request to use 

monthly compounding while calculating AFUDC. In Docket No. AC12-53-000, Kern River Gas 

Transmission Company (Kern River) requested approval to compound AFUDC monthly because 

 

32

 Duke Energy Carolinas, LLC, 156 FERC ¶ 61,201 (2016). 

0

20

40

60

80

100

120

140

160

180

200

Certificate Filings Merger and

Acquisition Filings

Securities Filings Rate Filings Accounting Filings

Types of Filings Reviewed by DAA

2012

2013

2014

2015

2016
2016 Staff Report on Enforcement 48 

it pays interest and principal on its debt and dividends on a monthly basis. The Commission 

denied the request reminding Kern River of the Commission’s requirement under Federal Power 

Commission Order Nos. 561 and 561-A, and the instructions in 18 C.F.R. Part 201, that the 

utility cannot use an AFUDC rate higher than that which would have resulted from semi-annual 

compounding (i.e., monthly compounding results in a higher AFUDC than semi-annual 

compounding and accordingly, is disallowed).33  

3. Rate Proceedings 

In FY2016, DAA participated in 36 rate filings with the Commission that continued to 

predominately involve electric formula rate proceedings, but also included natural gas and oil 

rate proceedings. DAA worked with other program offices to discuss many accounting and 

financial issues and their effects on rates. Since many electric and natural gas rates are derived 

from accounting information in the FERC Form Nos. 1 and 2, respectively, DAA ensured that all 

proposed accounting in the rate proceedings was consistent with the Commission’s accounting 

requirements. DAA also worked with other program offices to enhance the transparency of 

financial information affecting formula rates so that all stakeholders have an opportunity to 

review the costs included in rates. Particular items that DAA emphasized as critical information 

included plant assets’ historical cost, merger-related costs, prior-period adjustments, affiliate cost 

allocations, and correction of errors, among other items. Accounting issues associated with each 

filing ranged in number and topic. Some of the more common accounting issues in FY2016 rate 

filings included merger-related costs, regulatory assets, post-retirement benefits, deferred taxes 

and prepayments. 

 

33

 Kern River Gas Transmission Company, 154 FERC ¶ 61,186 (2016). 

0 5 10 15 20 25 30 35

Other Miscellaneous

Regulatory Assets/Liabilities

Deferred Income Taxes

Construction Period Costs

Prior Period Adjustment

Accounting Policy

Sale of Assets

Purchase of Assets

Mergers and Divestitures

Filings Submitted for Chief Accountant Approval

2014

2015

2016
2016 Staff Report on Enforcement 49 

4. Certificate Proceedings 

In FY2016, DAA reviewed 53 natural gas pipeline certificate application filings seeking 

Commission authorization to construct, own, and operate new pipeline facilities, abandon 

pipeline facilities, temporarily abandon or idle pipeline facilities, acquire pipeline facilities, or 

establish rates for new pipeline facilities in service. DAA continues to work with other 

Commission program offices to assist in the development of just and reasonable rates in the 

public interest by reviewing construction costs and all items used to determine initial rates, 

including operation and maintenance expenses, depreciation, amortization, taxes, AFUDC, and 

return on investment. DAA also continues to ensure that applicants follow Commission 

accounting requirements related to asset abandonment, construction, AFUDC calculations, 

contributions in aid of construction, regulatory assets and liabilities, leases, and system gas. 

5. Merger and Acquisition Proceedings 

In FY2016, DAA reviewed four merger applications and approximately 162 acquisition 

applications from electric utilities under section 203 of the FPA. The accounting review for 

merger transactions entails examining proposed accounting for costs to execute the transaction, 

costs to achieve integration and synergies, fair-value adjustments to assets and liabilities, and 

goodwill. DAA also ensures that the accounting is consistent with any hold-harmless or other 

rate requirements discussed in a merger order. In acquisition filings, DAA conducts an 

accounting review to ensure applicants properly account for the purchase and sale of plant assets 

consistent with Commission regulations. It ensures that jurisdictional entities maintain the 

appropriate original cost and historical accumulated depreciation of acquired utility plant and 

properly recorded acquisition premiums or discounts. DAA also reviewed merger and 

acquisition accounting entries to ensure they provide enough transparency to the Commission 

and all interested parties for evaluating the impact on rates. It also consistently reminded 

jurisdictional entities to file accounting entries timely, within six months of a finalized merger or 

acquisition transaction, in accordance with Electric Plant Instruction No. 5 and the requirements 

of Account No. 102, Electric Plant Purchased or Sold. 

6. Debt and Security Issuance Proceedings 

In FY2016, the Chief Accountant reviewed 50 electric utility security/debt applications. 

Section 204(a) of the FPA requires jurisdictional entities to receive Commission authorization 

before issuing securities or assuming liabilities as guarantor, endorser, surety, or otherwise in 

respect of any security of another person. In reviewing filings under section 204, the 

Commission evaluates an applicant’s viability based on a review of financial statements 

submitted with the application, interest coverage ratio, and debt maturities and cash-flow 

projections. DAA’s review of debt and security applications provides critical analysis that helps 

prevent public utilities from borrowing substantial amounts of money and using the proceeds to 

finance nonutility businesses. This analysis also ensures that future issuance of debt is consistent 

with public interest. 

7. Accounting Inquiries 

In FY2016, DAA responded to 91 accounting inquiries from jurisdictional entities and other 

stakeholders within the Commission’s jurisdiction on dozens of accounting and financial topics. 

Such accounting inquiries can be made through the Compliance Help Desk, the Accounting 

Inquiries phone line and email, or directly to DAA staff. The majority of those who had 
2016 Staff Report on Enforcement 50 

accounting inquiries sought accounting and financial reporting direction on topics such as 

capitalization and cost allocations. Those who had accounting inquiries also sought guidance on 

depreciation, the appropriate functional classification of costs, and record-retention requirements. 

Of particular interest in FY2016 were inquiries related to emission allowances and renewable 

generation, income taxes, and AFUDC. DAA responds to these accounting inquiries by 

providing informal accounting and financial reporting guidance based on Commission precedent 

and regulations. It also instructs individuals how to find documents and regulations using the 

Commission eLibrary system34 and the Code of Federal Regulations.35 Such informal accounting 

guidance is not binding on the Commission, and DAA does not waive any Commission 

regulation or order through such communications. 

8. Policy Statement on Hold Harmless Commitments 

As a key contributor, DAA worked with other Commission program offices in the issuance 

of the Policy Statement on Hold Harmless Commitments.36 In the Policy Statement, the 

Commission adopted policies regarding future implementation of hold harmless commitments 

offered by applicants as ratepayer protection mechanisms to mitigate adverse effects on rates that 

may result from transactions subject to section 203 of the FPA. The Policy Statement addresses 

numerous issues experienced by DAA reviews of merger applications before the Commission 

and audits of compliance with section 203 merger orders. In addition, the Commission clarified 

the scope and definition of the costs that should be subject to hold harmless commitments. For 

example, the Commission found that internal labor devoted to a merger transaction should be 

tracked and the related costs considered a cost of the transaction subject to a hold harmless 

commitment. Additionally, the Commission stated that the accounting related to merger 

transactions should not have an adverse effect on rates. The Commission also concluded that 

applicants offering hold harmless commitments should implement certain types of controls and 

procedures to track the costs from which customers will be held harmless. 

The Policy Statement provides significant guidance and transparency on the types of 

transaction-related costs and ensures strengthened internal controls and procedures, which 

greatly facilitate Commission staff, including DAA staff, in reviewing section 203 applications 

and analyzing the proper identification, accounting, and rate treatment of transaction-related 

costs. 

9. International Financial Reporting Standards 

DAA continued its work with the International Financial Reporting Standards (IFRS) 

Foundation, the International Accounting Standards Board (IASB), and their project on RateRegulated Activities (RRA) as it remains to be of special interest to the Commission and its 

 

34 The Commission’s eLibrary system can be accessed at www.ferc.gov/docs-filing/elibrary.asp. 

35 The Commission’s regulations in 18 C.F.R. can be found at www.ecfr.gov/cgi-bin/textidx?SID=03cdba1b6c896b3bd9734aab926c7b88&c=ecfr&tpl=/ecfrbrowse/Title18/18cfrv1_02.t

pl 

36

 Policy Statement on Hold Harmless Commitments, 155 FERC ¶ 61,189 (2016) (Policy 

Statement). 
2016 Staff Report on Enforcement 51 

regulated entities. In FY2016, the Chief Accountant, a Consultative Group member for the RRA 

project, participated in informal meetings with U.S.-regulated entities, state commissions, and 

international regulators to inform the development of an IFRS accounting standard that provides 

for regulatory assets and liabilities in IFRS financial statements. During this period, the IASB 

continued its consideration of the prior comment letters and discussions with the Consultative 

Group, but has yet to issue an accounting standard that for regulatory assets and liabilities in 

IFRS financial statements. In FY2017, the Chief Accountant stands ready to continue providing 

expert advice to IASB staff to develop permanent standards on rate-regulated activities. 

10.Hydro-Power Licensee Requirements under Part 1 of the FPA 

DAA became aware that granting market-based rate authority and waiving the Commission’s 

accounting requirements can be problematic for hydro-power licensees to comply with Part I of 

the FPA. Under Part I of the FPA, hydro-power licensees must maintain records that may be 

used in determining the actual legitimate original cost of and net investment in a licensed project 

in the event that the Commission opts to take over a hydro-power project or another entity wants 

to take over the license. Accordingly, DAA continued to work with other Commission program 

offices to include in orders granting market-based rate authority, language stating that hydropower licensees are required to comply with the requirements of the USofA in 18 C.F.R. Part 

101 to the extent necessary to carry out their responsibilities under Part I of the FPA.37 

Additionally, DAA worked with other program offices on the Commission’s recently-issued 

final rule on refinements to policies and procedures for market-based rates for wholesale sales of 

electric energy, capacity, and ancillary services by public utilities.38 In this rule, the Commission 

discussed the waiver of the USofA for licensees that sell power only at market-based rates and 

those that sell power at market-based rates and cost-based rates for reactive power. Specifically, 

DAA helped draft the final rule to clarify the following: (1) a Commission waiver of the USofA 

for a licensee under market-based rate authority does not waive the requirements under Part I of 

the FPA; (2) hydro-power licensees that only make market-based sales may satisfy the 

requirements of Part I of the FPA by following General Instruction No. 16 of the USofA; and 

(3) hydro-power licensees that have cost-based rates are still required to comply with the 

requirements of the USofA and the amortization reserve articles in their licenses. 

 

37 See All Dams Generation, LLC, 150 FERC ¶ 62,103 (2015); FortisUS Energy Corporation, 

151 FERC ¶ 62,109 (2015); and Balko Wind, LLC, 151 FERC ¶ 61,162 (2015). 

38 Refinements to Policies and Procedures for Market-Based Rates for Wholesale Sales of 

Electric Energy, Capacity and Ancillary Services by Public Utilities, Order No. 816, FERC Stats. 

& Regs. ¶ 31,374 (2015), order on reh’g, Order No. 816-A, 155 FERC ¶ 61,188 (2016). 
2016 Staff Report on Enforcement 52 

DIVISION OF ENERGY MARKET OVERSIGHT 

A. Overview 

The Division of Energy Market Oversight (Market Oversight) is responsible for monitoring 

and overseeing the nation’s wholesale natural gas and electric power markets. To carry out this 

responsibility, Market Oversight examines the structure and operation of the markets to identify 

anomalies, flawed market rules, tariff and rule violations, and other unusual market behavior as 

well as significant market events and trends. It also analyzes market-based rate transactions to 

determine whether entities are exercising market power and reports its various analyses and 

observations to the Commission and, as appropriate, to the public. Beyond these examinations, 

Market Oversight also collaborates with other Commission offices to develop regulatory 

strategies, focusing on the competitiveness, fairness, and efficiency of wholesale energy markets. 

In addition, Market Oversight administers, analyzes, and ensures compliance with the filing 

requirements of EQRs and various financial forms. Finally, Market Oversight advises the 

Commission on the efficacy of regulatory policies in light of evolving energy markets and 

ensures the Commission has the information needed to effectively administer and monitor those 

markets. 

B. Market-Based Rate Ex Post Analysis 

Market Oversight develops, refines, and implements tools and algorithmic screens to conduct 

ongoing analysis of transactional and other market data to detect the presence of market power 

and ensure that jurisdictional rates remain just and reasonable and not unduly discriminatory or 

preferential. This ex post analysis evaluates transactions against market fundamentals at the time 

of execution with the primary goal of identifying outcomes that may be inconsistent with 

expectations of a competitive market, and thus an indication of an exercise of market power. 

Once such outcomes are identified, Market Oversight coordinates with other Commission 

program offices to determine whether to recommend the Commission take action to remedy 

market power concerns. Market Oversight also uses these tools to analyze applications and 

filings for market-based rates, public utility mergers, and other docketed proceedings. 

C. Market Monitoring 

Market Oversight staff examines data from a variety of sources to review market 

fundamentals and emerging trends and to examine the structure, operation, and interaction of 

natural gas and electric markets. As developments warrant, Market Oversight staff initiates 

projects designed to evaluate market trends and to assess participant behavior. Staff also 

presents analyses at Commission meetings. During FY2016, such presentations included the 

following: 

1. 2015 State of the Markets Report 

Market Oversight annually presents to the Commission and makes public its State of the 

Markets report, which assesses the significant events in the energy markets during the prior 
2016 Staff Report on Enforcement 53 

year.39 Presented on March 17, 2016, the report for 2015 observed that wholesale power and 

natural gas spot prices fell across trading hubs nationwide by roughly 30-40 percent. The report 

explained that fundamental changes in the North American natural gas market drove down U.S. 

natural gas spot prices in 2015. Specifically, gas production and storage reached record levels, 

while demand rose modestly, tempered by the El Niño warm weather during the 2015-2016 

winter. Low gas prices resulted in monthly natural gas generation surpassing coal generation for 

seven months during 2015 and helped boost gas exports to Mexico. Despite low natural gas 

prices, natural gas production from the Marcellus and Utica shale plays reached record levels. 

The report also elaborated on how the generation fuel mix in the wholesale electricity markets 

changed as a result of lower natural gas prices. Besides describing natural gas developments in 

the power sector, the report provided updates on distributed energy resources and net metering 

nationwide and on the growth of renewables generation in California and New York between 

2013 and 2015. The report also noted recent price divergence in the capacity and energy markets 

of PJM and ISO-New England, and noted trends in the expanded Southwest Power Pool (SPP) 

footprint.

2. Seasonal Market Assessments 

Market Oversight prepares seasonal assessments that it presents at Commission meetings and 

makes available to the public on the Commission website. In FY2016, Market Oversight’s 

seasonal assessments included the following: 

Winter 2015/2016 Energy Market Assessment, October 15, 2015. Market Oversight staff 

presented the outlook for natural gas markets, highlighting both lower than expected demand and 

record inventories of natural gas in storage.40 Additionally, record breaking gas production was 

expected to continue despite lower rig counts, increased exports, and the collapse of oil prices. 

Market Oversight staff also explained that new natural gas pipeline expansions and projects to 

reverse flows on some pipelines would provide more transportation capacity from producing to 

market areas during the 2015-16 winter. 

In the wholesale electricity markets, staff presented information on the winter preparedness 

measures that the RTOs/ISOs were taking to ensure reliable operations. Included in this 

discussion were the steps that the regional markets have taken to enhance gas-electric 

coordination following the issuance of Order No. 787 (Communication of Operational 

Information Between Natural Gas Pipelines and Electric Transmission Operators). Additionally, 

staff described the effect of renewable generation sources on grid operations, particularly during 

the winter months, when usage fluctuates and demand changes due to shorter days with less 

daylight. The presentation concluded with a highlight of structural changes and developments in 

the power markets, notably the expansion of the SPP to include the Integrated System in parts of 

the Dakotas, Iowa, Minnesota, and Wyoming. 

 

39 See State of the Market Report 2015, available at http://www.ferc.gov/marketoversight/reports-analyses/st-mkt-ovr/2015-som.pdf. 

40

 See 2015-16 Winter Energy Market Assessment, available at http://www.ferc.gov/marketoversight/reports-analyses/mkt-views/2015/10-15-15-A-3.pdf. 
2016 Staff Report on Enforcement 54 

Summer 2016 Energy Market and Reliability Assessment, May 19, 2016. This assessment 

reviewed the outlook for the electric market for summer 2016, highlighting the plentiful fuel 

supplies and low natural gas prices during that period.41 The failure and closure of the Aliso 

Canyon gas storage field in the Los Angeles Basin was an area of particular concern in terms of 

both reliability and potential price impacts. This discussion item was complimented by a panel 

of speakers from various California entities that made presentations to the Commission. The 

speakers included representatives from the State of California, the California Independent 

System Operator (CAISO), and utilities. 

This assessment also covered recent changes to the organized wholesale electricity markets – 

including the expansion of the CAISO’s Energy Imbalance Market and the expansion of the SPP 

footprint – and discussed the market impacts that were expected for the summer. 

Market conditions going into the summer reflected the continued low natural gas prices that 

resulted from robust production and near record levels of natural gas in storage. Moreover, 

despite modest load growth, regional electric system reserve margins were forecast to be 

adequate. 

D. Outreach and Communication 

Market Oversight makes available to the public its analyses by posting reports on its website 

and hosting periodic snapshot presentations. Staff also briefs visiting industry participants, state 

and federal officials, and foreign delegations. 

1. Website 

Market Oversight publishes data and analyses on its website (http://www.ferc.gov/marketoversight/market-oversight.asp), which is organized into pages for: (1) national overviews of 

natural gas and electricity markets; and (2) ten regional electricity and five regional natural gas 

markets. The regional market pages provide charts, tables, and maps displaying market 

characteristics and outcomes. The Market Oversight website also has information on other 

relevant markets, including LNG, coal, and oil. 

2. Snapshot Calls 

Market Oversight held semi-annual conference calls with representatives of public utility 

commissions and state agencies in the eastern, central, and western states. These calls provide a 

current “snapshot” of energy markets. Regional Snapshot Reports serve as the basis for 

discussion on the calls. The reports include data on natural gas, electricity, LNG, weather, and 

other market developments. Additionally, the Snapshot Report incorporates reports on 

infrastructure development. Snapshot Reports are available on the Market Oversight website at 

http://www.ferc.gov/market-oversight/mkt-snp-sht/mkt-snp-sht.asp, and are archived back to 

2007. 

 

41

 See Summer 2016 Energy Market and Reliability Assessment, available at

http://www.ferc.gov/market-oversight/reports-analyses/mkt-views/2016/05-19-16.pdf. 
2016 Staff Report on Enforcement 55 

3. Domestic and Foreign Delegation Briefings 

Market Oversight periodically hosts visitors, including foreign and domestic delegations of 

regulators and industry participants, who are interested in energy markets and in the 

Commission’s market monitoring activities. In FY2016, Market Oversight conducted 14 

briefings in the Market Monitoring Center, including briefings to Congressional delegations, 

groups of delegates from federal and state agencies, and delegations from industry, academia, 

and foreign governments. 

4. Updated Energy Primer 

Market Oversight developed a resource manual, entitled Energy Primer: A Handbook of 

Energy Market Basics, that provides the public with a broad overview of the physical wholesale 

markets for natural gas and electricity and energy-related financial markets. The manual lays out 

information on key aspects such as source of energy, production technologies, market 

terminology, and selected experience with implementing the Commission’s anti-manipulation 

authority. 

In FY2016, Market Oversight published an updated Energy Primer that included a new 

chapter covering the U.S. crude oil and petroleum product markets. This revised Energy Primer

also included various updates such as information on SPP’s expansion of its footprint to 

incorporate the Western Area Power Administration-Upper Great Plains region, the Basin 

Electric Power Cooperative, and the Heartlands Consumer Power District. 

The Energy Primer is used by a wide range of entities interested in understanding the basic 

elements of energy markets and serves as a starting point for delving deeper into the many 

interrelationships of the energy markets. The Supreme Court recently relied on the Energy 

Primer as a resource and cited the manual multiple times in its landmark decision upholding the 

Commission’s jurisdiction with respect to demand response in the electricity markets (FERC v. 

Elec. Power Supply Ass’n, 136 S. Ct. 760 (2016)). 

The Energy Primer is available at http://www.ferc.gov/market-oversight/guide/energyprimer.pdf. 

E. Forms Administration and Compliance 

Market Oversight staff administers and ensures compliance with the Commission’s forms 

filing requirements. The Commission requires companies subject to its jurisdiction to submit 

annual and quarterly reports regarding jurisdictional sales, financial statements, and operational 

data. It uses these reports for analyses, including evaluations of whether existing rates continue 

to be just and reasonable. Other government agencies and industry participants use them for a 

variety of business purposes. Accordingly, accurate reporting is a critical aspect of monitoring 

markets. During FY2016, companies completed and submitted over 10,000 FERC forms. 

1. Electric Quarterly Reports 

Section 205 of the FPA, 16 U.S.C. § 824d (2012), and Part 35 of the Commission’s 

regulations, 18 C.F.R. Part 35 (2016), require, among other things, that all rates, terms, and 

conditions of jurisdictional service be filed with the Commission. In Order No. 2001, the 

Commission revised its public utility filing requirements requiring public utilities, including 
2016 Staff Report on Enforcement 56 

power marketers, to file EQRs summarizing the contractual terms and conditions in their 

agreements for all jurisdictional services (including market-based power sales, cost-based power 

sales, and transmission service) and provide transaction information (including rates) for shortterm and long-term power sales during the most recent calendar quarter.42 

In FY2016, the Commission received EQR submittals from over 2,000 entities. Commission 

staff assesses whether sellers have timely complied with the requirements set forth in the 

multiple orders surrounding EQR filings, and, through automated validations, whether the data is 

accurate and reliable. Market Oversight also coordinates with the Division of Audits and 

Accounting on EQR issues that arise during the audits, and submits to the Office of Energy 

Market Regulation, candidate entities that do not timely file their EQRs for possible revocation 

of Market Based Rate authority. With the assistance of Market Oversight staff, the Commission 

has taken steps to clarify definitions and concepts in the EQR Data Dictionary, which will assist 

filers in filing accurate and reliable data. 

2. eForms Refresh Project 

On April 16, 2015, the Commission directed Commission staff to begin the process of 

replacing its electronic filing format for many of the forms submitted by the industry, as the 

current filing software is no longer supported.43 The Commission noted that it believes the best 

electronic format for submission of these forms is the Extensible Mark-Up Language (XML) file 

format, which the industry is currently using for submission of other files and reports to the 

Commission, including electronic tariff filings.44 Throughout FY2016, Market Oversight staff, 

with the assistance of subject matter experts from other Commission offices and the North 

American Energy Standards Board (NAESB), have developed a robust framework of rules and 

validations for the forms included in this project. 

F. Agenda Items and Rulemakings 

Market Oversight assists the Commission in evaluating the efficacy of certain regulatory 

policies in light of evolving energy markets and ensures that the Commission has the information 

needed to administer and monitor the markets effectively. In FY2016, Market Oversight 

 

42

 Revised Public Utility Filing Requirements, Order No. 2001, FERC Stats. & Regs. ¶ 31,127 

(2002), reh’g denied, Order No. 2001-A, 100 FERC ¶ 61,074 (2002), reh’g denied, Order No. 

2001-B, 100 FERC ¶ 61,342 (2002), order directing filing, Order No. 2001-C, 101 FERC ¶ 

61,314 (2002), order directing filing, Order No. 2001-D, 102 FERC ¶ 61,334 (2003), order 

refining filing requirements, Order No. 2001-E, 105 FERC ¶ 61,352 (2003), order on 

clarification, Order No. 2001-F, 106 FERC ¶ 61,060 (2004), order revising filing requirements,

Order No. 2001-G, 120 FERC ¶ 61,270 (2007), order on reh’g and clarification, Order No. 2001-

H, 121 FERC ¶ 61,289 (2007), order revising filing requirements, Order No. 2001-I, FERC Stats. 

& Regs. ¶ 31,282 (2008). 

43 Order Instituting Proceeding to Develop Electronic Filing Protocols for Commission Forms, 

151 FERC ¶ 61,025 (2015). 

44 Phase 1 of the eForms Refresh project is limited to Forms 1, 1-F, 2, 2-A, 3-Q electric, 3-Q gas, 

6, 6-Q, FERC-60, and FERC-714. 
2016 Staff Report on Enforcement 57 

participated on approximately 40 docketed proceedings. Through its work on these matters, 

Market Oversight seeks to enhance market transparency and efficiency while balancing the 

regulatory burden on market participants. 

 In FY2016, Market Oversight staff provided support relating to the Aliso Canyon natural gas 

storage outage in Southern California. Market Oversight staff participated in industry outreach 

and Commission technical conferences discussing the effect of the outage on summer market 

operations in California.45 Market Oversight staff also participated on the White Houseestablished interagency taskforce addressing the outage at Aliso Canyon, which includes the 

Commission, the Department of Energy, the Department of Transportation, and other federal 

agencies. 

 

45

 Cal. Indep. Sys. Operator Corp., 155 FERC ¶ 61,224 (2016), order on reh’g, 156 FERC ¶ 

61,135 (2016). 
2016 Staff Report on Enforcement 58 

DIVISION OF ANALYTICS AND SURVEILLANCE 

A. Overview 

The Division of Analytics and Surveillance (DAS) develops surveillance tools, conducts 

surveillance, and analyzes transactional and market data to detect potential manipulation, 

anticompetitive behavior, and other anomalous activities in the energy markets. DAS focuses 

on: (1) natural gas surveillance, (2) electric surveillance, and (3) analytics for reviewing market 

participant behavior. The analysts and economists in DAS participate in investigations with 

attorneys from DOI, providing detailed transactional analysis, market event analysis, and subject 

matter expertise. As part of its surveillance function, DAS develops, refines, and implements 

surveillance tools and algorithmic screens to perform continuous surveillance and analysis of 

market participant behavior, economic incentives, operations, and price formation, in both the 

natural gas and electric markets. The surveillance function seeks: (1) to detect anomalous 

activities in the markets; and (2) to identify potential investigative subjects. 

Notice of Proposed Rulemaking on Data Collection for Analytics and Surveillance and MarketBased Rate Purposes. In FY2016, the Commission continued its efforts to enhance its 

surveillance of the electric markets by issuing a Notice of Proposed Rulemaking on Data 

Collection for Analytics and Surveillance and Market-Based Rate Purposes in Docket RM 16-

17-000 (Data Collection NOPR).46 The Data Collection NOPR proposes to revise the 

Commission’s regulations to collect certain information from MBR sellers and entities trading 

virtual products or holding financial transmission rights and to change certain aspects of the 

substance and format of information submitted for MBR purposes. The revisions proposed 

include new requirements for those entities to report information related to their legal and 

financial connections to other entities into a relational database for use in the Commission’s 

surveillance and MBR programs. This information would assist the Commission’s screening and 

investigative efforts to detect market manipulation by providing it with a more complete view of 

the relationships between electric market participants and the incentives underlying their trading 

activities. The Commission previously proposed to require certain market participants in the 

Commission-jurisdictional organized wholesale markets to report similar information in the 

Collection of Connected Entity Data from Regional Transmission Organizations and 

Independent System Operators Notice of Proposed Rulemaking issued in Docket No. RM15-23-

000 in FY2015 (Connected Entity NOPR).47 However, in response to comments received and 

informal outreach, the Commission withdrew the Connected Entity NOPR and reworked and 

revised its proposal in the Data Collection NOPR in order to eliminate duplication with existing 

MBR reporting requirements, ease compliance burdens, modernize its data collections, and 

render information collected through its programs usable and accessible for the Commission and 

its staff. 

 

46 Data Collection for Analytics and Surveillance and Market-Based Rate Purposes, 156 FERC ¶ 

61,045 (2016).

47

 Collection of Connected Entity Data from Regional Transmission Organizations and 

Independent System Operators, 152 FERC ¶ 61,219 (2015). 
2016 Staff Report on Enforcement 59 

B. Natural Gas Surveillance 

DAS conducts surveillance and analysis of physical natural gas market behavior to detect 

potential manipulation and anti-competitive behavior. DAS creates and uses analytical tools, 

known as screens, that detect anomalous activity by analyzing data relating to trade prices, 

volumes, times, and other transaction characteristics. In addition, DAS uses Large Trader Report 

(LTR) data from the CFTC to look for potential financial incentives that might encourage a 

market participant to engage in a manipulative scheme. The automated screens cover the 

majority of physical and financial trading hubs in the United States. DAS also employs assetbased screens that monitor cash trading around infrastructure, including natural gas storage, 

pipeline capacity, and electric generation. The screens alert staff to a variety of market 

conditions and market participant actions. 

When a screen issues an alert, staff conducts a series of analyses to gain information about 

the activity that caused it. First, staff compares the trading to that at other hubs and determines 

whether there is a fundamentals-based explanation for the activity based on a review of supply, 

demand, pipeline utilization, operational notices, and physical and financial trading. Most often, 

staff finds such an explanation. However, when the follow-up analysis fails to explain the alert, 

staff performs a more in-depth analysis of the specific trading behavior underlying the alert. 

Under some circumstances, DAS staff will contact market participants for additional 

transactional details or explanations of trading activities to better understand the purpose of the 

transactions. If staff continues to have concerns that the market activities underlying the screen 

alert could constitute manipulation, DAS refers the matter to DOI and recommends opening an 

investigation. 

C. Electric Surveillance 

DAS regularly accesses data from a variety of sources to screen for anomalies and 

potentially-manipulative behavior in the RTO/ISO and bilateral electricity markets. During 

FY2016, staff ran monthly and weekly screens to identify patterns at the hourly level by 

monitoring the interactions between bid and cleared physical and financially-settled products. In 

particular, these screens identify financial transmission rights and swap-futures that settle against 

nodes that are affected by transmission constraints where market participants also trade virtuals, 

generate electricity, or move power between RTO/ISOs. Staff continued to refine its analytic 

tools and screens for: (1) determining uneconomic virtual transactions by node, zone, and 

constraint; (2) detecting day-ahead market congestion manipulation that would benefit financial 

transmission rights and swap-futures positions; (3) identifying anomalies in physical offer 

patterns; (4) identifying abnormal out-of-market payments and; (5) identifying loss making 

physical fixed-price offer strategies in bilateral electricity markets. 

Throughout FY2016, DAS continued to develop and improve its surveillance capabilities. In 

particular, DAS increased its tools to view patterns of behavior on a portfolio basis and across 

RTO borders. DAS continues to use extensively the data from the RTO/ISOs under Order No. 
2016 Staff Report on Enforcement 60 

760,48 the e-Tag data from Order No. 771,49 and LTR data from the CFTC. In addition, staff 

continued to work closely with the Market Monitoring Units of each RTO and ISO. 

D. Analytics 

During FY2016, DAS worked on approximately 40 investigations, some of which are 

discussed above in the DOI section. Many of these investigations involve allegations of 

manipulation in the Commission-jurisdictional natural gas and electric markets or violations of 

tariff provisions that are intended to foster open, competitive markets. DAS’s investigative 

activities generally include: (1) assessing market conditions during periods of suspected 

manipulation, (2) identifying patterns of market activity that could indicate market manipulation, 

(3) identifying time periods in which potentially manipulative activities occurred, (4) fully 

reconstructing and analyzing companies’ trading portfolios, (5) supporting DOI in taking 

investigative testimony, and (6) calculating the amount of unjust profits and market harm 

resulting from violations to assist with determining a civil penalty recommendation under the 

Commission’s penalty guidelines. Upon completion of the analytical process, staff develops 

data-based explanations to inform the structure and substance of further investigation, settlement 

discussions, and Commission actions. Staff also coordinates to refine and develop new screens 

to detect improper behavior that has been identified during prior investigations. 

 

48 Enhancement of Electricity Market Surveillance and Analysis through Ongoing Electronic 

Delivery of Data from Regional Transmission Organizations and Independent System Operators, 

Order No. 760, FERC Stats. & Regs. ¶ 31,330 (2012). 

49

 Availability of E-Tag Information to Commission Staff, Order No. 771, 141 FERC ¶ 61,235 

(2012). 
2016 Staff Report on Enforcement 61 

CONCLUSION 

The information in this Report is provided to promote transparency and to encourage entities 

subject to Commission requirements to develop strong internal compliance programs. As 

discussed in this Report, Enforcement promotes compliance with the Commission’s statutes, 

rules, orders, regulations, and tariff provisions by investigating a wide variety of matters, 

auditing regulated entities for both compliance and performance issues, and actively overseeing 

the gas and electric markets to assist the Commission in ensuring reliable, efficient, and 

sustainable energy for consumers. DOI will continue to focus its efforts on keeping markets 

transparent and competitive and helping to ensure the reliability of the bulk power system. DAA 

will work closely with entities to improve compliance, while Market Oversight will examine and 

monitor the structure and operation of natural gas and electric markets. DAS will conduct 

surveillance and analyze transactional and market data to detect potential manipulation, 

anticompetitive behavior, and other anomalous activities in the energy markets. 
2016 Staff Report on Enforcement 

APPENDIX A: OFFICE OF ENFORCEMENT ORGANIZATION C

Division of Audits and Accounting

Bryan Craig, Dir and Chief Accountant

Timothy Smith, Dep Dir

Steven Hunt, Dep Chief Accountant

Stephen Flanagan, Sr. Economist

Office of the Director

Larry Parkinson, Director 

Lee Ann Watson, Deputy Director

Roger Morie, Reliability Enforcement Counsel

A

Market Oversight Branch 1

Donald Callow, Chief

Investigations Branch 1

Demetra Anas, Chief

Audits Branch 2

Christopher Handy, Chief 

Investigations Branch 2

Jay Matson, Chief

Investigations Branch 3

Nicole Brisker, Chief

Audits Branch 1

Nicholas Coughlin, Chief

Audits Branch 3

Sylvia Anderson, Chief

Division of Investigations

Courtney Spivey Urschel, Acting Director

Courtney Spivey Urschel, Dep Dir

Division of Energy

Market Oversight

Janel Burdick, Director

Melissa Lozano, Dep Dir 

Christopher Ellsworth, Sr. Market Advisor 

MaryBeth Tighe, Sr. Market Advisor

Laura Vallance, Legal Counsel to the Dir

Audits Branch 4

Brian Harrington, Chief

Investigations Branch 4

Gabriel Sterling, Chief

Regulatory Accounting Branch 

Gerald Williams, Chief

Market Oversight Branch 4 

Maria Vouras, Acting Chief

Market Oversight Branch 2 

Erin Mastrangelo, Chief

Market Oversight Branch 3

Jason Stanek, Chief

An

An

An

D

S

Ja

Tim

An

An

OFFICE OF ENFORCEMENT

An
2016 Staff Report on Enforcement 63 

APPENDIX B: FY2016 CIVIL PENALTY ENFORCEMENT 

ACTIONS50 

Subject of Investigation 

and Order Date Total Payment Explanation of Violations 

Maxim Power 

Corporation, Maxim 

Power (USA), Inc., Maxim 

Power (USA) Holding 

Company Inc., Pawtucket 

Power Holding Co., LLC, 

and Pittsfield Generating 

Company, LP, Order 

Approving Settlement, 156 

FERC ¶ 61,223. 

$4 million civil 

penalty; $4 million 

disgorgement. 

The Commission approved a settlement 

that resolved the Federal District Court 

action it had filed to enforce its May 1, 

2015 Order Assessing Penalties (151 

FERC ¶ 61,094) for the Maxim entities’ 

violation of section 222 of the FPA, and 

the Commission’s Anti-Manipulation and 

Market Behavior Rules. The settlement 

also resolved findings that the Maxim 

entities had gamed the ISO-NE mitigation 

procedures to maximize uplift payments 

when the generating unit was dispatched 

for reliability purposes. 

BP America Inc., BP 

Corporation North 

America Inc., BP America 

Production Company, BP 

Energy Company, Order 

on Initial Decision and 

Rehearing, 156 FERC ¶ 

61,031. 

$20.16 million civil 

penalty; $207,169 

disgorgement. 

The Commission issued an order affirming 

an Administrative Law Judge’s August 13, 

2015 Initial Decision finding that BP had 

violated the Commission’s AntiManipulation Rule. The Commission 

ordered BP to pay $20,160,000 in civil 

penalties and disgorge unjust profits in the 

amount of $207,169. It also denied 

rehearing of the Commission’s earlier 

order setting the matter for hearing before 

an ALJ. 

National Energy & Trade, 

L.P., Order Approving 

Stipulation and Consent 

Agreement, 156 FERC ¶ 

61,154. 

$1,155,225.91 civil 

penalty; $305,780.50. 

The Commission issued an order that 

approved a settlement resolving findings 

by Enforcement that National Energy & 

Trade had violated the Commission’s AntiManipulation Rule by manipulating 

physical natural gas prices between 

January 1, 2011 and September 30, 2015 at 

the Houston Ship Channel, Tetco M3, 

Transco Zone 6 (New York), and Henry 

Hub in order to benefit its related financial 

positions. 

 

50 A list of all EPAct 2005 civil penalty orders is available at 

http://www.ferc.gov/enforcement/civil-penalties/civil-penalty-action.asp. 
2016 Staff Report on Enforcement 64 

In re David Silva, Order 

Approving Stipulation and 

Consent Agreement, 156 

FERC ¶ 61,155. 

$40,000 civil penalty 

and a one-year ban 

from participating in 

any FERCjurisdictional natural 

gas markets 

The Commission issued an order that 

approved a settlement resolving findings 

by Enforcement that David Silva had 

violated the Commission’s AntiManipulation Rule by manipulating 

physical natural gas prices in January 2012 

in order to benefit his related financial 

position. 

Saracen Energy Midwest, 

LP, Order Approving 

Stipulation and Consent 

Agreement, 156 FERC ¶ 

61,122 (August 22, 2016) 

$25,000 civil penalty 

and new reporting and 

compliance measures 

The Commission issued an order that 

approved a settlement resolving findings 

by Enforcement that Saracen had violated 

Southwest Power Pool, Inc.’s Tariff by 

submitting bids for Transmission 

Congestion Rights at Electrically 

Equivalent Settlement Locations for 

auctions in September and October 2014, 

and March and April 2015. 

ETRACOM LLC and 

Michael Rosenberg, Order 

Assessing Penalties, 155 

FERC ¶ 61,284. 

$2.5 million civil 

penalty; $315,072 

disgorgement. 

The Commission issued an order assessing 

penalties for violating its AntiManipulation Rule by submitting virtual 

supply transactions at the New Melones 

intertie at the border of the CAISO market 

in order to affect power prices and 

economically benefit ETRACOM’s CRR 

positions sourced at that location. 

Lincoln Paper and Tissue, 

LLC, Order Approving 

Stipulation and Consent 

Agreement, 155 FERC ¶ 

61,228. 

$5 million civil 

penalty; $379,016.03 

disgorgement. 

The Commission approved a settlement 

that resolved the Federal District Court 

action it had filed to enforce its August 29, 

2013 Order Assessing Penalties (144 

FERC ¶ 61,162) for violation of its AntiManipulation Rule. 

Coaltrain Energy, L.P., 

Peter Jones, Shawn 

Sheehan, Robert Jones, 

Jeff Miller, Jack Wells, 

Order Assessing Penalties, 

155 FERC ¶ 61,204. 

$38 million civil 

penalty; $4,121,894 

disgorgement. 

The Commission issued an order assessing 

civil penalties against Coaltrain Energy, 

and the named defendants for violating the 

Commission’s Anti-Manipulation Rule by 

engaging in fraudulent Up To Congestion 

(UTC) transactions in PJM Interconnection 

L.L.C.’s energy markets. 
2016 Staff Report on Enforcement 65 

Berkshire Power Company 

LLC and Power Plant 

Management Services 

LLC, Order Approving 

Stipulation and Consent 

Agreement, 154 FERC ¶ 

61,259. 

$2,030,000 civil 

penalty; $1,012,563 

disgorgement; 

compliance monitoring.

The Commission approved a settlement 

that resolved findings by Enforcement that 

Berkshire and PPPMS had violated the 

Commission’s Anti-Manipulation Rule by 

concealing maintenance work and 

associated outages. The settlement also 

resolved findings that Berkshire violated 

Commission-approved reliability standards 

by failing to provide outage and available 

generation resources information, and the 

Commission’s Market Behavior Rules and 

various provisions of the ISO-NE Tariff. 
2016 Staff Report on Enforcement 66 

APPENDIX C: FY2016 NOTICES OF ALLEGED VIOLATIONS51 

Issue Date Subject(s) of 

Investigation 

Description of Alleged Misconduct Dates of Alleged 

Misconduct 

August 3, 2016 National Energy & 

Trade, L.P. 

(National Energy) 

Violation by National Energy of 

18 C.F.R. § 1c.1 by fraudulently 

trading physical basis at Texas 

Eastern M3 (Tetco M3) during the 

January 2012 bidweek to increase 

the value of its financial basis 

position and also fraudulently 

trading physical basis at Henry 

Hub during the April 2014 

bidweek to increase the value of its 

financial exposure 

January 2012 and 

April 2014 

August 3, 2016 David Silva Violation by David Silva of 18 

C.F.R. § 1c.1 by fraudulently 

trading physical basis at Texas 

Eastern M3 (Tetco M3) during the 

January 2012 bidweek to increase 

the value of his financial basis 

position. 

January 2012

May 6, 2016 Saracen Energy 

Midwest, LP 

Violation by Saracen Energy 

Midwest, LP of Southwest Power 

Pool, Inc.’s Open Access 

Transmission Tariff § 7.4.1(4) by 

submitting bids for Transmission 

Congestion Rights at Electronically 

Equivalent Settlement Locations. 

From August 

2014 through 

March 2015 

 

51 A list of all notices of alleged violations is available at 

http://www.ferc.gov/enforcement/alleged-violation/notices.asp. 
2016 Staff Report on Enforcement 67 

October 23, 2015 Berkshire Power 

Company LLC 

(Berkshire) and 

Power Plant 

Management 

Services LLC 

Violation by Berkshire and Power 

Plant Management Services LLC 

of the Commission’s AntiManipulation Rule, 18 CFR 1c.2 

(2015) by engaging in a 

manipulative scheme to conceal 

maintenance work and associated 

outages. Berkshire is also 

separately alleged to have violated 

Commission-approved reliability 

standards by failing to provide 

outage and available generation 

resources information, and to have 

violated Commission regulations 

35.41(a) by failing to comply with 

various provisions of the ISO-New 

England (ISO-NE) Tariff and 

35.41(b) by making false and 

misleading statements to ISO-NE 

regarding its maintenance work 

and associated outages. 

Beginning at least 

as early as 

January 2008 and 

continuing 

through March 

2011.