ENERGY MARKET OVERSIGHT 

AND ENFORCEMENT: 

ACCOMPLISHMENTS AND PROPOSAL FOR ENHANCED PENALTY 

AUTHORITY 

Prepared by the Staff of the 

Federal Energy Regulatory Commission 

March 2005
1

 Energy Market Oversight and Enforcement: Accomplishments and Proposal for 

Enhanced Penalty Authority 

I. Executive Summary

In this report, the Federal Energy Regulatory Commission (the Commission or 

FERC) staff sets forth a proposal for amendments to the Federal Power Act (FPA), the 

Natural Gas Act (NGA), and the Natural Gas Policy Act of 1978 (NGPA) that will give 

the Commission enhanced civil and criminal penalty authority for violations of these laws 

and the Commission’s rules and regulations based on them. This enhanced penalty 

authority would allow the Commission to better address market manipulation and other 

misconduct that is damaging to competitive markets. Moreover, it would lead to greater 

certainty for market participants, thereby encouraging increased participation and 

liquidity in those markets. Notwithstanding the limited remedies currently available to 

the Commission, the Commission has accomplished much of what it sought to achieve 

with the establishment of its Office of Market Oversight and Investigations (OMOI), the 

Commission’s “cop on the beat.” The enforcement and audit capacity of the Commission 

has expanded significantly. That expansion has resulted in roughly three times as many 

completed investigations and audits as prior to OMOI’s formation and numerous multimillion dollar settlements. However, due to the Commission’s narrow penalty authority, 

the Commission’s enforcement and audit efforts often lack the most effective means of 

addressing serious misconduct such as market manipulation or the provision of undue 

preferences to affiliates. 

Currently, the Commission has few remedies to address misconduct by market 

participants. The Commission may require that a company issue a refund or disgorge any 

profits earned as a result of the wrongful conduct. However, application of these 

remedies is restricted to situations in which an actual profit is earned as a result of the 

wrongful activity. Where a market participant engages in misconduct but no profit can 
2

be proven to have resulted from that misconduct, the violative conduct may go 

unpunished. In addition, refunds and the disgorgement of unjust profits serve only to 

return the company that committed the violation to the status quo before the misconduct 

occurred; the remedy cannot be said to be a true penalty since it merely requires the 

return of any ill-gotten gains. While those remedies are important because they return 

monies to persons adversely affected by misconduct, they are not a highly effective 

means of deterring misconduct. 

As an alternative to ordering refunds or disgorgement of profits, the Commission 

may revoke a company’s authorization to charge market-based rates. Unlike the former 

remedies, revocation of a company’s market-based rate authority can have a dramatic 

impact on both markets and companies participating in those markets. By revoking a 

company’s authorization to sell at market-based rates, the Commission may effectively 

eliminate that company’s ability to act as a seller in the competitive energy market. 

Because such an action may have far-reaching effects, not only for the company at issue, 

but also for the market in which the company operates, the Commission must take into 

account myriad potential ramifications to the market in deciding whether to revoke a 

company’s market-based rate authority. In many situations, a more targeted approach in 

the form of civil penalties would better accomplish the twin objectives of deterring 

misconduct while ensuring the continued vitality of the energy markets. For example, a 

modest civil penalty may be more appropriate than suspending market-based rates for 

relatively minor violations of the rules. 

 

In other regulated environments, such as the securities and commodities futures 

trading industries, Congress has long recognized that civil penalty authority is the most 

effective means of deterring conduct that may harm markets. Civil penalties are also 

necessary in the markets regulated by the Commission. Appropriate civil penalties would 

enhance the Commission’s ability to enforce the statutes, rules, and regulations governing 

jurisdictional energy markets by allowing the Commission to appropriately tailor the 
3

penalty to reflect the gravity of the act or omission at issue. To that end, Commission 

staff recommends that the Commission seek the following statutory changes: 

• An amendment of the FPA to expand civil penalty authority to cover violations of 

any provision (and Commission regulations and orders under any provision) in 

Parts II and III of the FPA and to increase the maximum civil penalty for any such 

violation from not more than $11,000 per day for each violation1 to not more than 

$1,000,000 per day per violation; 

• An amendment of the NGA to create civil penalty authority to cover violations of 

any provision (and Commission regulations and orders under any provision) of the 

NGA up to a maximum civil penalty of not more than $1,000,000 per day per 

violation; 

• An amendment to the NGPA to increase available civil penalty amounts up to a 

maximum civil penalty of not more than $1,000,000 per day per violation; 

• Amendments to the FPA, the NGA and the NGPA increasing criminal penalties 

from a fine of up to $5,000 per day for each violation and two years imprisonment 

to a fine of up to $1,000,000 per day per violation and up to five years 

imprisonment under both statutes, and 

• Amendments to the FPA, the NGA and the NGPA adding a separate civil penalty 

for intentional, material false statements made in any matter or filing before the 

 

1

 FPA section 316A provides for penalty authority up to $10,000 per day per 

violation. However, this amount is subject to inflation adjustment and is now $11,000 

per day per violation. 18 C.F.R. § 385.1602(d) (2004). 
4

Commission, including false statements made to Commission staff during the 

course of an investigation or audit. 

Specific language for this proposed legislation is set out in Appendix B to this report. 

II. Background and Overview 

The Commission’s Chairman established OMOI in August 2002. OMOI’s 

mission is to guide the evolution and operation of energy markets to ensure effective 

regulation and to protect customers through understanding markets and their regulation, 

timely identification and remediation of market problems, and assured compliance with 

Commission rules and regulations. To those ends, OMOI seeks to provide vigilant 

oversight and vigorous enforcement of proper market rules to ensure dependable, 

affordable, competitive energy markets to benefit end use customers and other 

participants. OMOI’s investigatory team of more than 70 attorneys, auditors, analysts, 

and engineers monitors the energy marketplace for potential problems and works to 

achieve corporate compliance. OMOI’s analytic team of another 50 staff probes market 

developments to detect anomalous or suspicious activity, such as attempts at market 

manipulation or inappropriate communications or improper cooperation between market 

participants. 

A. The Commission’s Accomplishments

Since the inception of OMOI, the Commission has made significant progress in 

improving the Commission’s enforcement and market monitoring capabilities. The 

Commission’s enforcement efforts in 2004, led by OMOI, facilitated settlements in the 

California refund proceedings that will lead to a return of more than $1 billion to 

consumers. In addition, the Commission completed more than 90 separate investigations, 

and completed 27 financial audits that (1) uncovered over $10 million of pipeline 
5

assessment and testing costs that were improperly capitalized, (2) affirmed FERC 

formula rate refund calculations totaling approximately $2.2 million, and (3) will 

generate about $7.3 million in refunds by seven public utilities that improperly billed 

costs through FERC formula rates. 

The Commission has recovered through OMOI some of the largest dollar 

settlements in its history and has instituted stringent compliance plans in cases where 

companies have committed violations. In January 2005, for example, OMOI obtained 

agreement from a company to pay $21 million in civil penalties – the largest civil penalty 

ever obtained by the Commission. The Commission also has greatly increased the 

numbers and market relevance of investigations and audits completed. The Commission 

currently has underway more than three times the number of investigations that were 

open at FERC prior to OMOI’s inception. The overall speed of these investigations, in 

terms of opening and closing them, has also increased. 

The following are summaries of just a few of the noteworthy accomplishments in 

the past two years: 

• In 2001, the Commission found that sales through the California centralized 

markets were unjust and unreasonable from October 2, 2000 to June 21, 2001.2

 In 

an effort to facilitate distribution of funds and to resolve remaining issues without 

protracted litigation, OMOI has assisted in resolving the matter with several large 

sellers and the California Parties.3

 Under these settlements, approved by the 

 

2 See San Diego Gas & Electric Co. 95 FERC ¶ 61,115 (2001); San Diego Gas & 

Electric Co. 95 FERC ¶ 61,418 (2001) (Refund Proceedings). 

3

 The California Parties include the California Attorney General, the California 

Electricity Oversight Board, the California Department of Water Resources, Southern 

California Edison, Pacific Gas and Electric, San Diego Gas and Electric, and the 

California Public Utilities Commission. 
6

Commission, over $1 billion began flowing back to California.4

 To date, the 

following settlements have been achieved: 

-- Williams Power Co. – Settlement for $140 million was approved on July 

2, 2004. 108 FERC ¶ 61,002 (2004). 

-- Dynegy, Inc. – Settlement for $281 million was approved on October 25, 

2004. 109 FERC ¶ 61,071 (2004). 

-- Duke Energy Corporation – Settlement for $207 million was approved 

December 7, 2004. 109 FERC ¶ 61,257 (2004). 

-- Mirant Corporation – Settlement for approximately $458 million pending 

approval by the Commission. 

• Reliant Energy Services, 105 FERC ¶ 61,008 (2003). OMOI discovered that 

Reliant had violated its California Independent System Operator (Cal ISO) and 

California Power Exchange (Cal PX) tariffs as a result of submission of certain 

bids above $250 per megawatt hour (MWh) in the California markets between 

May 1, 2000 and October 2, 2000. Such conduct qualified as “economic 

withholding.”5

 As a result, OMOI obtained in a settlement, approved by the 

Commission, a total of $50 million in disgorgement of profits including: $25 

million in cash and $25 million from an auction of capacity from certain of the 

entity’s gas-fired electric generation units. All the monies recovered are to be 

 

4

 However, the California Independent System Operator has not yet determined 

the amounts of refunds owed by the sellers using a Commission-specified methodology 

and is not expected to have those final sums available until at least mid-2005. Further, 

multiple appeals have been taken by numerous parties from several Commission orders in 

the Refund Proceeding that are currently pending in the Ninth Circuit. 

5

 “Economic withholding” is defined as “bidding available supply at a sufficiently 

high price in excess of the supplier’s marginal costs so that it is not called on to run and 

where, as a result, the market clearing price is raised.” Investigation of Terms and 

Conditions of Public Utility Market-Based Rate Authorization, 107 FERC ¶ 61,175 at p. 

61,705 n.22 (2004). 
7

paid into an account established by the U.S. Treasury for distribution for the 

benefit of California and Western electricity customers. The Commission also 

instituted a compliance plan to prevent future problems. The settlement further 

required that Reliant submit to increased oversight by OMOI for one year, 

including random reviews by OMOI of emails and taped telephone conversations. 

• American Electric Power Co., et al. (2005). OMOI’s investigation uncovered 

that AEP’s Jefferson Island Storage & Hub improperly entered into a non-public 

agreement putting AEP Energy Services in control of natural gas injections and 

withdrawals. This allowed AEP Energy Services to improperly receive 

confidential information about non-affiliated customers. OMOI also learned that 

AEP’s Louisiana Intrastate Gas provided undue preferences in transportation 

services to AEP Energy Services. Neither pipeline company is currently owned 

by AEP. The settlement calls for AEP to pay a $21 million civil penalty under the 

NGPA, the largest civil penalty ever assessed by the Commission. In addition, 

the agreement requires AEP, AEP Energy Services, American Electric Power 

Service Corp. and any AEP intrastate pipeline company, to follow a four-year 

compliance plan providing for continued monitoring by Commission staff for 

compliance with Standards of Conduct and Market Behavior rules. OMOI also 

shared information from its investigation of AEP with the Commodity Futures 

Trading Commission (CFTC) and the Department of Justice, leading to their 

obtaining an additional $61 million in civil and criminal penalties for AEP’s 

illegal activities. 

• Transco, et al., 102 FERC ¶ 61,302 (2003). OMOI found violations of the NGA, 

the NGPA and the Standards of Conduct by Transco. Those violations included 

giving undue preference to affiliates, allowing an affiliate access to computer 

databases in order to optimize its transportation nomination on Transco’s 

pipelines, and disclosing to its marketing affiliate information about a non-
8

affiliated shipper. Transco agreed to civil penalties of $20 million under section 

311 of the NGPA. In addition, Transco was required to implement a four-year 

compliance plan designed to ensure marketing affiliates are not given preferential 

access and to ensure compliance with other Commission regulations. Limitations 

were also imposed on transportation that could be obtained by affiliates from 

Transco. 

• Dominion, Northern Illinois Gas Co., Columbia Gas Transmission, 108 FERC ¶ 

61,110 (2004). OMOI discovered that these companies had violated the 

Commission’s Standards of Conduct and other regulations by providing nonpublic gas storage information that was not provided to the public at large to 

affiliates, as well as to select entities and individuals. The Commission obtained 

total refunds of $4.5 million and total fines of $3.6 million under section 311 of 

the NGPA, which were paid by the companies. The Dominion entities and 

Northern Illinois Gas Company were also required to implement extensive 

employee training to deter similar violations in the future. Columbia Gas 

Transmission was required to record and maintain for a period of one year 

conversations between its customer service representatives and its customers. 

On other fronts, during 2004, 12 operational audits resulted in over 100 

recommendations to remedy deficiencies found that were adopted and implemented by 

the audit targets. The Commission implemented Order 2004 relating to the new 

Standards of Conduct for Transmission Providers,6

 including reviews of compliance for 

 

6 See Standards of Conduct for Transmission Providers, Order No. 2004, FERC 

Stats. & Regs., Regulations Preambles ¶ 31,155 (2003), order on reh’g, Order No. 2004-

A, III FERC Stats. & Regs. ¶ 31,161 (2004), 107 FERC ¶ 61,032 (2004), order on reh’g, 

Order No. 2004-B, III FERC Stats. & Regs. ¶ 31,166 (2004), 108 FERC ¶ 61,118 (2004), 

order on reh’g, Order No. 2004-C, 109 FERC ¶ 61,325 (2004). 
9

over 200 companies. The Commission terminated market-based rate authority of 90 

companies that are no longer active in power marketing and to provide guidance on 

electric and natural gas price reporting to publications for purposes of indexing.7

 Finally, 

the Commission handled over 286 Hotline calls.8

 

The chart below summarizes the Commission’s accomplishments since the 

establishment of OMOI in 2002.9 

0

100

200

300

400

500

600

700

OMOI OMOI OMOI

8/02-4/03 4/03-12/03 12/03-12/04

Count

Resolutions/Settlements

Open Investigations

 

7 See also Foster’s Natural Gas Report, December 16, 2004. 

8

 The Enforcement Hotline is an informal means available to market participants 

to resolve disputes and to ask questions of Commission staff. 

9

 Attached, as Appendix A to this report, is a more detailed chart summarizing 

OMOI’s accomplishments. 
10

 

In addition to its enforcement and investigative activities, the Commission, through 

OMOI, has worked to enhance market integrity in other ways. First, OMOI provides 

regular reports to the Commission to ensure that the Commission has a comprehensive 

understanding of the current state of the energy markets. Last year, OMOI provided 15 

market surveillance reports to the Commission and published assessments identifying 

areas of concern for each upcoming season. OMOI also frequently interacts with industry 

and the public to explain market monitoring at FERC, including making over 150 

presentations last year. 

OMOI provides to the Commission special purpose reports in response to events 

such as the January 14-16, 2004, New England cold snap that resulted in record spot 

market gas prices and strained electric generation resources and power and gas delivery 

systems. In that instance, OMOI conducted an investigation to determine whether 

markets reacted rationally to the weather event or whether any price manipulation 

occurred, including whether any electric generators improperly sold natural gas supplies 

rather than generating electricity. OMOI’s investigation determined that the energy 

markets functioned appropriately to avoid curtailments of natural gas deliveries while 

still avoiding power blackouts. OMOI’s findings were reported to the New England 

Council of Public Utility Commissioners and released publicly. 

The Commission, through OMOI, has also focused on building the capability to 

respond quickly to potentially troublesome market events and to safeguard the energy 

markets. For example, OMOI was able to expeditiously investigate and report on the 

unexpected high level of storage withdrawals reported by the Energy Information 

Administration (EIA) on November 24, 2004, which prompted a sharp run-up in 

NYMEX prices upon the EIA’s release of the information. Within a week of the 

precipitating event’s occurrence, OMOI determined that misreporting by Dominion 

Transmission, Inc. (Dominion) to EIA caused by a Dominion contract employee’s 
11

clerical error, resulted in the company’s provision of incorrect data indicating a 

substantially larger natural gas storage withdrawal for the week ending November 19, 

2004 than had in fact occurred. The Commission apprised the market of OMOI’s 

findings and EIA is currently soliciting comments on proposed changes in the way it 

reports errors. 

B. Civil Penalty Authority

As the foregoing illustrations demonstrate, the Commission has accomplished much 

of what the Commission sought to achieve when OMOI was established. These 

achievements notwithstanding, the Commission, with its limited civil penalty authority, 

lacks a critical tool. 

At present, in most circumstances the Commission can only order a company that 

breaks the rules either to disgorge any profits that resulted from that violation or to return 

monies paid as the result of the imposition of an unjust and unreasonable rate. Such 

remedies are important because they return money to people and entities adversely 

affected by the conduct. However, these remedies serve only to return the company that 

perpetrated the wrongdoing to the status quo that existed before the wrongdoing 

occurred, and as such are not the most effective means of deterring misconduct. 

Congress has long recognized civil penalty authority for federal regulatory agencies 

as the most effective means of deterring conduct detrimental to free and open markets. 

The Commission’s enforcement efforts would be further enhanced if its statutory 

authority allowed it to impose appropriate civil penalties for violations of the FPA and 

the NGA. For most violations of these statutes, the Commission currently does not have 

sufficient - - or in many instances, any - - civil penalty authority that would assist it in 

regulating its jurisdictional markets and entities. Remedies currently available to the 

Commission in the form of refunds and disgorgement of profits do not deter 
12

anticompetitive or manipulative market behavior to the same degree as civil penalties. 

As stated in a report to the Administrative Conference of the United States: 

[T]he civil fine has assumed a place of paramount importance in the 

compliance arsenal of most federal regulatory agencies. It is today 

almost inconceivable that Congress would authorize a major 

administrative regulatory program without empowering the enforcing 

agency to impose civil monetary penalties as a sanction. It has become 

commonplace for observers of the administrative process, disillusioned 

with traditional criminal, injunctive and license-removal sanctions, to 

urge greater reliance on civil fines as an enforcement device.10 

Appropriate civil penalties would allow the Commission to be even more effective 

in enforcing the statutes, rules and regulations governing its jurisdictional markets. The 

discrepancy in the settlements obtained by the Commission as compared to the CFTC in 

connection with the investigation of market manipulation during the California energy 

crisis of 2000–2001 demonstrates the need for the Commission to have effective civil 

penalty authority.11 The Commission and CFTC each based their settlements on conduct 

that was brought to light in the Western Markets Report, which was prepared by 

Commission staff. In other words, both agencies’ settlements were based on actions 

engaged in to attempt to manipulate the energy markets. Although the Commission was 

able to obtain the full amount of revenues associated with the alleged misconduct from 

the majority of the twenty-four wrongdoers, estimated at just over $28 million, the 

 

10 Colin S. Diver, Report to the Administrative Conference of the United States 

Concerning the Assessment and Mitigation of Civil Money Penalties by Federal 

Administrative Agencies 1 (May 1979) (as cited in H. Rpt. 101-616 (July 1990)). 

11 In its June 25, 2003 Order to Show Cause Concerning Gaming and/or 

Anomalous Market Behavior, 013 FERC ¶ 61,346, the Commission declared various 

types of gaming activities that had been conducted by Enron and others to be violations 

of applicable tariffs, entitling the Commission to obtain all unjust profits received as the 

result of those gaming activities. 
13

Commission lacked the authority to obtain civil penalties. In contrast, the CFTC was 

able to obtain approximately $268 million in civil penalties from 23 parties.12 In short, 

because it had civil penalty authority, the CFTC was able to obtain settlement amounts 

that were approximately ten times greater than those obtained by the Commission. The 

chart below further illustrates the wide gap between the Commission’s and the CFTC’s 

available remedies. 

FERC and CFTC Gaming/Anomalous Bidding Settlements

0

5

10

15

20

25

30

35

Aquila Coral Duke Dynegy Mirant Reliant Williams

Settlements ($MM)

FERC

CFTC

The Commission’s limited civil penalty authority under the FPA regarding electric 

markets was conferred in the Energy Policy Act of 1992, but it does not address the needs 

of the greatly changed electric energy markets since that time. Expansion of civil penalty 

authority would modernize the Commission’s powers and allow it to address problems in 

 

12 From the seven parties that were investigated by and settled with both the 

Commission and CFTC, the Commission was able to obtain $12.6 million while the 

CFTC was able to obtain $139.5 million. 
14

today’s energy markets. In addition, Congress should increase the Commission’s 

criminal penalty authority to levels that will serve as effective deterrence and punishment 

in today’s economy. It is worth noting that at least some of the Commission’s success to 

date is attributable to the fact that the Enron debacle and the California energy crisis, 

which were the impetus for the formation of OMOI by Chairman Wood, are still 

prominent in the minds of investors and the public. Thus, the possibility of negative 

publicity and reputation risk for companies found to have engaged in misconduct has 

undoubtedly helped motivate companies to negotiate settlements with Commission staff, 

even given the limitations on the Commission’s ability to penalize certain conduct. 

During the last several years, a public pronouncement that a company may have engaged 

in market manipulation and, thus, may lose its ability to charge market-based rates, has 

posed a serious threat to both the company’s reputation and its stock price. Nonetheless, 

the most effective long-term deterrent to abusive misconduct by companies is expanded 

civil penalty authority. 

Specifically, Commission Staff recommends that the Commission seek the 

following statutory changes to enhance its civil and criminal penalty authority: 

• An amendment of the FPA to expand civil penalty authority to cover violations of 

any provision (and Commission regulations and orders under any provision) in 

Parts II and III of the FPA and to increase the maximum civil penalty for any such 

violation from not more than $11,000 per day for each violation13 to not more than 

$1,000,000 per day per violation; 

• An amendment of the NGA to create civil penalty authority to cover violations of 

 

13 FPA section 316A provides for penalty authority up to $10,000 per day per 

violation. However, this amount is subject to inflation adjustment and is now $11,000 

per day per violation. 18 C.F.R. § 385.1602(d) (2004). 
15

any provision (and Commission regulations and orders under any provision) of the 

NGA up to a maximum civil penalty of not more than $1,000,000 per day per 

violation; 

• An amendment to the NGPA to increase available civil penalty amounts up to a 

maximum civil penalty of not more than $1,000,000 per day per violation; 

• Amendments to the FPA, the NGA and the NGPA increasing criminal penalties 

from a fine of up to $5,000 per day for each violation and two years imprisonment 

to a fine of up to $1,000,000 per day per violation and up to five years 

imprisonment under both statutes, and 

• Amendments to the FPA, the NGA and the NGPA adding a separate civil penalty 

for intentional, material false statements made in any matter or filing before the 

Commission, including false statements made to Commission staff during the 

course of an investigation or audit. 

Specific language for this proposed legislation is set out in Appendix B to this report. 

III. Remedies Currently Available to the Commission 

A. Electric Power

Electric energy markets in the United States have changed dramatically since 1935, 

the year in which Part II of the FPA was enacted into law. Before then, the “regulatory 

compact” between the government and utilities, which were viewed as natural 

monopolies, was the basis for all regulation. Under that system, almost all sales of 

electricity were made by traditional utilities to their retail customers at rates set by state 

regulatory commissions. The rates charged were based upon cost of service and 

relatively few sales of electricity were made in interstate commerce. 
16

Part II of the FPA is the Commission’s principal grant of authority for regulating the 

transmission and sale of wholesale electric power in interstate commerce. However, 

under the FPA, civil penalty authority is available only for violations of sections 211 

through 214 of Part II.14 The limited sections of the FPA to which civil penalties apply 

are generally insufficient for enforcement in a market environment. The Commission is 

rarely able to invoke the civil penalties for sections 211 through 214 of Part II and most 

violations of Part II involve violations of other provisions.15 Moreover, even in these 

limited circumstances where civil penalties are available, the amounts of civil penalties 

assessable pursuant to the FPA are inadequate because they are limited to not more than 

$11,000 per day per violation, a nominal amount when compared to the size of most 

energy companies. 

The Commission’s May 2003 Order approving a settlement agreement involving 

Idaho Power Co., IDACORP Energy, L.P., and IDACORP, Inc., provides a useful 

illustration of the limitations on the Commission’s civil penalty authority. The 

Commission’s investigation revealed evidence that Idaho Power violated the 

Commission’s Standards of Conduct and a code of conduct, including giving preferential 

access to non-public transmission information to its own wholesale marketing 

employees.16 The company also violated sections 20317 and 20518 of the FPA by failing 

 

14 Those sections apply only in very limited circumstances involving either the 

transmission or “wheeling” of power through utilities’ transmission systems or 

inappropriate preferences granted by public utilities to a certain type of generation plant 

as defined under the Public Utility Holding Company Act of 1935 (PUHCA). 

15 However, the Commission has been able to use section 214 in one case. See

CLECO, 104 FERC ¶61,125 (2003), as set forth in attached Appendix A. 

16See 18 C.F.R. § 37.4 (2002) (setting forth standards of conduct for public utilities). 

A power marketer (such as IDACORP Energy) that is affiliated with a public utility (such 

as Idaho Power) must provide a code of conduct for the Commission’s approval in order 
17

to file a large number of contracts to provide jurisdictional transmission service. The 

evidence against Idaho Power was strong, and the company admitted to many violations 

and subsequently refunded $6.1 million to customers, but because the Commission 

cannot impose civil penalties for that conduct, violations which the Commission views as 

serious and to which the violating entity had admitted, were left essentially unpunished.19 

As a result of these limitations on civil penalties under the FPA, the principal 

remedy available to FERC under the FPA is the ordering of a refund for unjust or 

unreasonable rates or disgorgement of profits. The Commission may also order penalties 

identified in Commission-approved tariffs (e.g., imbalance penalties). However, these 

remedies are limited. Section 206 of the FPA provides for refunds where a rate charged 

is deemed to be unjust and unreasonable, but the refund effective date may be no earlier 

than 60 days following the filing of a complaint or the initiation of a proceeding by the 

Commission. In addition, although the Commission may order disgorgement of profits 

when a Commission-approved tariff is violated (in addition to any specific penalties 

identified within the tariff), this remedy may also have limitations. Some courts have 

held that in applying the disgorgement of profits remedy, the Commission must calculate 

 

to obtain market-based rate authority from the Commission. The code of conduct is 

meant to deter affiliate abuse by, among other things, addressing the concern that profits 

earned from intra-affiliate transactions not accrue at the expense of the captive customers 

of investor-owned utilities. 

17 Section 203 of the FPA requires that public utilities obtain authorization from 

the Commission before disposing of facilities, including agreements, with a value of 

greater than $50,000. 16 U.S.C. § 824b (1994). 

18 Section 205 of the FPA provides in pertinent part: “every public utility shall file 

with the Commission, within such time and in such form as the Commission may 

designate . . . schedules showing all rates and charges for any transmission or sale subject 

to the jurisdiction of the Commission . . . .” 16 U.S.C. § 824d(c) (1994). 

19 See Idaho Power, et al. 103 FERC ¶ 61,182 (2003). 
18

profits exclusive of the entity’s costs for the violative conduct.20

 In November 2003, to prevent manipulation of the electricity markets in the future, 

the Commission enacted the Market Behavior Rules. The Market Behavior Rules are six 

specific behavioral rules designed to prohibit forms of market manipulation and other 

market misconduct. Among them, for example, is Market Behavior Rule 2 which 

prohibits “[a]ctions or transactions that are without a legitimate business purpose and that 

are intended to or foreseeably could manipulate market prices, market conditions, or 

market rules for electric energy or electricity products.”21 The Market Behavior Rules 

Order amended all then-existing market-based rate tariffs, and applied to all new marketbased rate tariffs. In the Market Behavior Rules Order, the Commission provided that in 

connection with any such violation, the seller would be subject to disgorgement of unjust 

profits associated with the tariff violation, and the Commission held that the seller may 

also be subject to the suspension or revocation of its authority to sell at its market-based 

rates or to other appropriate non-monetary remedies. 

The Market Behavior Rules monetary remedy of disgorgement of profits is limited 

by the fact that if no actual profits are realized from the market manipulation, the 

company is required to pay nothing, even though its market manipulative behavior has 

undermined the operation of the markets. For example, a manipulative scheme may fail 

to affect price. The Commission may still want to sanction the behavior because even 

unsuccessful attempts to manipulate markets undermine the integrity and/or operation of 

 

 20 Coastal Oil & Gas Corp. v. FERC, 782 F.2d 1249 (5th Cir. 1986). 

21 See Investigation of Terms and Conditions of Public Utility Market-Based Rate 

Authorizations, 105 FERC ¶ 61,218 (2003). There are similar Market Behavior Rules 

prohibiting market manipulation in the natural gas markets. See Amendments to Blanket 

Sales Certificates, 105 FERC ¶ 61,217 (2003). 
19

markets. 22 Similarly, when a company engages in misconduct in order to “cut its losses,” 

no actual profit is nominally earned. In such situations, where the gain to the company is 

in the form of a mitigated loss, rather than a realized monetary profit, there is no profit to 

disgorge.23 In sum, providing the Commission with the ability to impose civil penalties 

in a broader array of situations would serve as a better deterrent to market abuse and give 

the Commission the ability to appropriately sanction egregious behavior. 

B. Gas 

The NGA is the Commission’s principal grant of authority for regulating the 

transportation and resale of natural gas in interstate commerce. The NGA regulates the 

interstate transportation of gas, imposing various rules, including requirements for entry 

into and exit from natural gas transportation. However, the Commission lacks statutory 

authority under the NGA to impose civil penalties of any kind. The NGA contains 

minimal criminal penalty authority: up to $5,000 per day per violation and two years 

imprisonment. 

 

22 However, as previously stated, the Commission also has the option of 

suspending or revoking a company’s authority to make sales at market-based rates, 

although that remedy may not be appropriate in certain situations. 

23 In American Electric Power Co., et al., 103 FERC ¶ 61,345 (2003) (the 

“Gaming Order”), the Commission described the practice of underscheduling load as 

conduct violating the California Power Exchange’s (“Cal PX”) and the California 

Independent System Operator’s (“Cal ISO”). By engaging in underscheduling load, the 

utilities may have submitted inaccurate information and taken advantage of tariff rules in 

violation of the Commission-approved Cal PX and Cal ISO tariffs and caused a 

demonstrable detriment to the efficiency of California’s power markets. Although the 

Commission noted its disapproval of the practice in the Gaming Order, 103 FERC at 

62,338, because underscheduling load was a price-reducing purchasing strategy for which 

there were no profits, the Commission could not order disgorgement of unjust profits. 
20

Although the Commission has no civil penalty authority under the NGA, the 

Commission may impose civil penalties for conduct that violates section 311 of the 

NGPA. The NGPA covers transportation of gas on behalf of local distribution gas 

companies or gas pipelines and relieves intrastate pipeline companies that provide this 

transportation from the regulatory requirements of the NGA. 24 As noted above (at pages 

3-6 and in the attached Appendix A), although the Commission has been successful to 

date in obtaining section 311 penalties, its continuing ability to do so is diminishing 

because section 311 transportation contracts with interstate pipelines have become 

relatively uncommon. Since the early 1990s, blanket transportation certificates have 

allowed interstate pipelines to provide transportation under the NGA with features similar 

to section 311 transportation. Thus, civil penalties are available in increasingly fewer 

instances as section 311 transactions become a smaller part of the interstate natural gas 

market. 

Due to the lack of civil penalty authority in the NGA, some of the Commission’s 

investigations have been curtailed because, even if wrongdoing were uncovered, it could 

not be punished because no section 311 transaction was involved. In other cases, 

companies that are the subjects of the investigations receive disparate treatment, based 

upon whether or not they perform services under section 311 of the NGPA. The 

Commission’s settlement of Enogex, et al., 105 FERC ¶ 61,308 (Enogex), exemplifies 

such differing treatment for the same conduct. Enogex and Ozark failed to comply with 

regulations requiring them to obtain advance approval for certain pipeline construction 

projects. Because Enogex operated an intrastate natural gas pipeline pursuant to section 

311 of the NGPA, the Commission was able to obtain a civil penalty against Enogex. 

However, because Ozark operated under a blanket construction certificate pursuant 

 

24 Section 311 was enacted in 1978 as part of an effort to increase the sales of 

natural gas in the interstate market by reducing the amount of red tape needed for 

pipelines to transport natural gas on behalf of others. Commission regulations allow 

local distribution companies to provide this type of transportation as well. 
21

section 7 of the NGA, the Commission could not assess a civil penalty against Ozark for 

the same misconduct. The two companies committed the same violations on different 

parts of the same pipeline, but because Enogex was operating intrastate under NGPA 

section 311 and Ozark was operating under the NGA, they were not subject to the same 

penalty. See Appendix A. 

IV. Amending Civil and Criminal Penalty Authority under the Federal Power Act 

The Commission’s narrow civil penalty authority under the FPA leaves it with an 

insufficient foundation for strong enforcement of the electric power market regulations. 

As discussed above, and as illustrated in the chart comparing FERC and CFTC 

settlements for similar conduct (see page 11, above), the Commission’s limited remedial 

authority in the electric power markets is readily apparent. To remedy this situation, the 

Commission proposes expanding its civil penalty authority to: (1) include all of Parts II 

and III of the FPA, and (2) increase the maximum civil penalties applicable to each 

violation of the FPA from no more than $11,000 per day for each violation, to no more 

than $1,000,000 per day for each violation. Part II contains the statutory provisions that 

are the most relevant to the Commission’s regulation of its jurisdictional electric markets. 

For example, section 205 provides, in part, that rates and charges “shall be just and 

reasonable” and prohibits “any undue preference or advantage to any person”; and 

section 206 gives the Commission authority to “determine a just and reasonable rate, 

charge, classification, rule, regulation, practice, or contract,” if it determines, after a 

hearing, that any of the foregoing were unjust and unreasonable. Because Part II is also 

the basis for the Market Behavior Rules, the proposed amendment would mean that civil 

penalties in addition to disgorgement of profits would be available for market 

manipulation. 

Part III of the FPA covers numerous administrative and substantive requirements, 

including provisions mandating compliance with the Commission’s operational and 
22

financial audit functions25 and prohibiting certain interlocking directorates without 

Commission approval.26 Provisions included in Part III give the Commission the 

authority to request that entities provide information, documents and other materials 

during investigations and audits.27 Under the existing statutory scheme, without 

applicable civil penalties, entities that are undergoing an audit face no direct penalties for 

failure to comply with requests by the Commission’s auditors for information, documents 

and other materials. 

 

Similarly, although the FPA clearly prohibits serving in interlocking directorates 

without seeking prior authorization, the Commission can impose no civil penalties on 

anyone who violates this prohibition. In the situation of interlocking directorates, which 

occurs when a person simultaneously serves as a director or officer of more than one 

public utility, or serves as an officer of a public utility and a securities underwriter or an 

equipment supplier for a public utility, the Commission’s inability to impose civil 

penalties for violations of FPA section 305 can have troubling implications. The 

legislative history of this provision indicates that “Congress exhibited a relentless interest 

in . . . the evils of concentration of economic power in the hands of a few individuals” 

and it “recognized that the conflicts of interest stemming from the presence of the same 

few persons on boards of companies with intersecting interests generated subtle and 

 

25 FPA section 301, 16 U.S.C. §§ 825(a) and (b). 

26 FPA section 305, 16 U.S.C. § 825d. 

27 Section 307 provides that the Commission may investigate any facts, conditions, 

practices, or matters which it may find necessary or proper in order to determine whether 

any person has violated or is about to violate any provision of the FPA or any rule, 

regulation or order thereunder, or to aid in the enforcement of the provisions of the FPA 

or in prescribing rules or regulations thereunder, or in obtaining information to serve as a 

basis for recommending further legislation concerning the matters to which the FPA 

relates. 16 U.S.C. 825f(a). The comparable provision in the NGA is section 14. 15 

U.S.C. 717m. 
23

difficult-to-prove failures in the arm’s length bargaining process.”28 However, the 

Commission is without authority to punish or deter violations of the prohibition on 

interlocking directorates through civil penalties. 

To address the effects of the lack of civil penalty authority in Parts II and III of the 

FPA, we propose that section 316A be amended to include civil penalties for violations 

of these provisions within the Act. Specific language for the proposed amendment is set 

forth in Appendix B.

The Commission also proposes an increase in criminal penalties that would be 

available under any referral for criminal prosecution by the Commission to the 

Department of Justice under section 316 of the FPA for violation of the Act from a fine 

of up to $5,000 for each violation to a fine of up to $1,000,000 for each violation and a 

term of imprisonment of up to five years, increased from the current term of two years 

imprisonment. An increase in the current $5,000 maximum fine per violation to a 

$1,000,000 per violation fine was proposed in H.R. 6 during the 108th Congress. 

Finally, in addition to the expansion of the Commission’s civil penalty authority 

for violations of the FPA, the Commission also proposes including a separate penalty for 

making intentional, material false statements in any matter or filing before the 

Commission pursuant to the FPA, including false statements made to Commission staff 

during the course of an investigation or audit. In contrast with other regulatory schemes, 

the statutes under which the Commission acts do not provide it with the ability to impose 

civil penalties for making false statements or otherwise providing false information in 

filings with, or other matters before, the Commission, such as ongoing investigations, 

 

28 See Hatch v. FERC, 654 F.2d 825, 831 (D.C. Cir. 1981), citing, e.g., 79 Cong. 

Rec. 10379 (1935) (remarks of Representative Lea), 79 Cong. Rec. 8524 (1935) (remarks 

of Sen. Norris), and 15 U.S.C. § 79a(b)(2) (2000); see also Paul H. Henson, 51 FERC ¶ 

61,104 at 61,230 n.5 (1990). 
24

inquiries, or audits.

The provision proposed is comparable to the authority of other regulatory agencies 

including the Atomic Energy Act of 1954 § 234(a). See 42 U.S.C. § 2282(a) (2000) 

(authorizing civil penalties for any violation for which a license issued under that Act 

may be revoked, including material false statements). Currently, the Commission 

generally can address this type of conduct only with the revocation or suspension of 

market-based rate authorizations or blanket certificates. In cases where such revocations 

or suspension may be an overly severe remedy, the Commission’s only clear options are 

to let the false statement go unpunished, or to refer the matter to the Department of 

Justice for a possible criminal prosecution for the obstruction of justice under 18 U.S.C. § 

1001. Specific language for the proposed false statements provision is set forth in 

Appendix B. 

V. Creation of Civil Penalty Authority and Expansion of Criminal Penalty 

Authority under the Natural Gas Act 

Because the Commission’s role in regulating gas transportation and markets has 

transformed from traditional cost-based rate regulation to oversight of market-based 

rates, the Commission’s civil penalty authority should be updated to reflect the present 

reality. Moreover, Congress should grant civil penalty authority under the NGA to 

enhance the Commission’s ability to regulate the companies under its jurisdiction. 

Accordingly, the Commission proposes amendments adding civil penalty authority to the 

NGA.29 Specific language for this proposed amendment is set forth in Appendix B. 

The Commission also supports an increase in the amount of criminal penalties 

available under the NGA. Proposed amendments to the NGA that were before the 108th

 

29 The House Conference Report on the energy bill that had been pending before 

the 108th Congress, H.R. 6, H. Rept. No. 108-375, did not include an amendment adding 

civil penalties to the NGA. 
25

Congress would have expanded the Commission’s criminal penalty authority. H.R. 6 

included a proposal to amend section 21 of the NGA to increase the amount of criminal 

penalties available for violations of the NGA from not more than $5,000 to not more than 

$1,000,000; the term of imprisonment would have been increased from two years to five 

years. H.R. 6 also proposed an increase in the penalty for any willful and knowing 

violation of “any rule, regulation, restriction, condition, or order made or imposed by the 

Commission under this act” from not more than $500 to not more than $50,000 for each 

day of the offense. The Commission believes that, if enacted, these amendments would 

put the Commission’s criminal penalties in balance with the severity of willful and 

knowing violations of the NGA and promote prosecution of appropriate cases by the 

Justice Department. 

 In addition, although the NGPA provides for civil penalties as discussed herein, 

increasing the dollar amount of civil penalties available under the NGPA to comport with 

the civil penalties proposed for the NGA would further the goal of eliminating disparate 

treatment of conduct governed by those acts. Specific language for the proposed 

amendment is set forth in Appendix B. 

VI. Conclusion 

Today, OMOI serves as the Commission’s “cop on the beat” for energy markets 

that encompass numerous power sellers, interstate transmission lines, Regional 

Transmission Organizations, interstate gas pipelines, gas storage facilities and highlysophisticated financial institutions. In its first two years of existence, OMOI has proven 

successful in increasing the number of investigations the Commission has conducted and 

in resolving those investigations to the maximum extent of its ability under the 

Commission’s existing statutory authority. However, the Commission is missing a key 

tool - - effective civil penalty authority under the FPA, the NGA and the NGPA. Such 

authority would allow the Commission to more effectively deter market misconduct. 
26

The Commission has taken great strides to put in place appropriate rules, and an 

office dedicated to enforcing those rules, so that the energy markets can function 

competitively and effectively. However, it must also have the necessary authority to 

punish those who fail to follow the rules and to deter any participant that may 

contemplate deviating from the rules. For energy markets to function properly, the 

Commission needs sufficient tools to penalize participants who violate the market rules. 

 
Appendix A 

Settlement Table 

SETTLEMENT (BY NAME OF LEAD ENTITY OR PATTERN OF BEHAVIOR) 

BASIS FOR INVESTIGATION AND FOR SETTLEMENT 

COMPLIANCE TERMS OR OTHER CONDITIONS IMPOSED 

SETTLEMENT AMOBTAINED THROUDISGORGEMENT OPROFITS, REFUNDPAYMENT OF COS

RELIANT ENERGY SERVICES105 FERC ¶ 61,008 (2003) 

Violations of the entity’s California Independent System Operator (Cal ISO) and California Power Exchange (Cal PX) tariffs as a result of submission of bids above $250 per megawatt hour (MWh) in the California markets between May 1, 2000 and October 2, 2000. Conduct qualified as “economic withholding” defined as “bidding available supply at a sufficiently high price in excess of the supplier’s marginal costs so that it is not called on to run and where, as a result, the market clearing price is raised” 

Oversight by OMOI for one year, including random reviews of emails and taped telephone conversations. 

Total of $50 million disgorgement of profincluding: $25 milliocash and $25 million auction of capacity fcertain of entity’s gaelectric generation unto be paid into an accestablished by the UTreasury for distributhe benefit of CaliforWestern electricity c

AMERICAN ELECTRIC POWER CORPORATION, ET AL. (2005) 

AEP’s intrastate pipeline, Jefferson Island Storage & Hub, failed to disclose that it entered into a non-public agreement putting an affiliated marketer, AEP Energy Services, in control of injections and withdrawals. This allowed the marketer unduly preferential use of the pipeline’s NGPA section 311 storage service and continuous access to confidential storage information about other pipeline customers. Another AEP pipeline, Louisiana Intrastate Gas, also provided undue preferences in section 311 transportation 

services to the affiliated marketer. 

AEP, Energy Services, American Electric Power Service Corp. and Houston Pipe Line Co., AEP’s remaining intrastate pipeline company, are required to follow a four-year compliance plan to prevent future violations, including enhanced employee training and continued monitoring by Commission staff for compliance with Standards of Conduct and Market Behavior rules. (Neither Jefferson Island nor Louisiana Intrastate Gas are currently owned by AEP.) 

None 

DOMINION, ET AL. 

108 FERC ¶ 61,110 (2004) 

Alleged violation of the Commission’s Standards of Conduct by providing nonpublic gas storage information to affiliates, select entities and individuals that was not provided to the public at large 

Extensive employee training to deter future similar violations for employees of two involved entities; recording and maintaining the recordings of conversations between customer service representatives and customers of another entity for one year 

Total refunds of $4.5 paid by Dominion anaffiliates 
2

SETTLEMENT (BY NAME OF LEAD ENTITY OR PATTERN OF BEHAVIOR) 

BASIS FOR INVESTIGATION AND FOR SETTLEMENT 

COMPLIANCE TERMS OR OTHER CONDITIONS IMPOSED 

SETTLEMENT AMOBTAINED THROUDISGORGEMENT OPROFITS; REFUNDPAYMENT OF COS

IDAHO POWER, ET AL. 

103 FERC ¶ 61,693 (2003) 

Alleged violations of Standards of Conduct and Code of Conduct including: giving preferential access to non-public transmission information to its own wholesale marketing employees; violations of Sections 203 and 205 of the FPA by failing to file 12 agreements for sale of power and failing to timely file 1,182 contracts for off-system sale of power for resale in interstate commerce 

Parent entity agreed to adhere to a compliance plan until the Commission modified or terminated the plan for good cause shown; agreed also to retain an independent auditor to ensure compliance with entity’s standards of conduct; Commission refrained from suspending marketing affiliate’s market based rate sales authority because affiliate was terminating operations. 

Total refunds of $6.1 

CENTERPOINT

106 FERC ¶61,214 (2004) 

Alleged violations of the NGA and the Commission’s regulations by failing to report and post all of the non-conforming terms and conditions in 70 negotiated rate contracts 

Three year compliance plan; agreement to certain new tariff provisions, including one requiring Centerpoint to file each negotiated rate contract executed by the earlier of 2 days prior to execution or by the date gas is expected to flow under the contract; and posting of previously unreported non-conforming terms and conditions of negotiated rate contracts with detailed explanatory narrative 

$75,000 paid to the UTreasury as reimbursof staff’s cost of investigation. 

TRANSCO, ET AL. 

102 FERC ¶ 61,302 (2003) 

Alleged violations of the NGA, NGPA and the Standards of Conduct including: giving undue preference to affiliates; allowing an affiliate access to computer databases in order to optimize its transportation nomination on Transco’s pipelines; and disclosing to its marking affiliate information about a non-affiliated shipper 

Four year compliance plan designed to ensure marketing affiliates are not given preferential access and to ensure compliance with other Commission regulations. Limitations imposed on transportation that could be obtained by affiliates from Transco 

None 
3

SETTLEMENT (BY NAME OF 

LEAD ENTITY OR PATTERN OF BEHAVIOR)

BASIS FOR INVESTIGATION AND FOR 

SETTLEMENT

COMPLIANCE TERMS OR OTHER CONDITIONS IMPOSED

SETTLEMENT AMOUNOBTAINED THROUGDISGORGEMENT OPROFITS; REFUNDPAYMENT OF COS

CLECO, ET AL. 

104 FERC ¶ 61,125 (2003) 

Alleged violations of Section 214 of the FPA, the entities’ own Codes of Conduct and Commission regulations. Stipulation to having participated in unauthorized power sales, transmission transactions, and operational arrangements among affiliates 

Three year compliance plan; revocation of market based rate authority for one entity subject to ability to re-apply for such authority after 12 months; imposition of stringent Codes of Conduct; and limitation and conditions on power sales, transmissions and operational arrangements between lead entity and affiliates 

Disgorgement of approximately $2 miprofits 

ENOGEX, OZARK

105 FERC ¶ 61,308 (2003) 

Alleged violations of regulations requiring advance approval of pipeline construction for compliance with statutes and regulations that protect the environment and cultural resources. Enogex operated pipeline under section 311 of the NGPA; Ozark operated pipeline under NGA section 7 blanket construction certificate. 

$15,000 of $95,000 civil penalty under NGPA would be suspended if lead entity completed an outreach program to inform other intrastate and interstate natural gas pipelines about proper, timely procedures for obtaining prior approval clearances 

Ozark operating undsection 7 blanket cerpaid $20,000 toward the investigation 

NATIONAL FUEL

103 FERC ¶61,192 (2003) 

Alleged violations of NGA and relevant regulations including: the prohibition on giving an undue preference or advantage to any person regarding the provision of gas transportation information; failure to satisfy reporting requirements 

Three year compliance plan to ensure entity’s compliance with the Commission’s standards of conduct and regulations 

$300,000 to cover thof the audit and inve

TEXAS EASTERN TRANSMISSION, LP, ET AL. 

110 FERC ¶61,188 (2005)

Alleged violations of NGA, and the Commission’s Standards of Conduct, reporting and posting requirements including: the prohibition on providing an undue preference to any person regarding the provision of gas transportation information; failure to satisfy reporting requirements 

Three year compliance plan to ensure entity’s compliance in all areas in which violations were found 

$500,000 voluntary to the U.S. Treasury 
4

CORAL ENERGY RESOURCES

IN05-5 

Coral inaccurately submitted information to the Commission indicating that Coral’s traders had not engaged in reporting inaccurate information to energy pricereporting publications. 

Establishment of a task force to develop and implement a “best in class” model for regulatory compliance within the company and strengthening of Corals existing compliance program 

Payment of $3.5 millan organization provenergy assistance to income customers. Allocation of approx$500,000 for Coral tto complete its work
Appendix B 

Proposed Statutory Language

I. Increase in the criminal penalty authority under the FPA: 

The Federal Power Act is amended as follows: 

Section 316: 

Subsection 316(a) 

By striking “$5000” and inserting “$1,000,000”; and 

 by striking “two years” and inserting “five years” 

Subsection 316(b) 

By striking “$500” and inserting “$25,000” 

By striking Subsection 316(c) 

II. Addition of Civil Penalty Authority for the Federal Power Act (FPA): 

The Federal Power Act is amended as follows: 

 Section 316A: 

Subsection 316A (a) 

By striking “section 211, 212, 213, or 214” and inserting “Part II or Part III of 

this Act” 

Subsection 316A (b) 

By striking “section 211, 212, 213, or 214” and inserting “Part II or of Part III of 

this Act”; and 

 by striking “$10,000” and inserting “$1,000,000” 
2

III. Increase in criminal penalties under the NGA and the NGPA 

Section 21 of the Natural Gas Act is amended as follows: 

Subsection 21(a): 

 by striking “$5,000” and by inserting “$1,000,000”; and 

by striking “two years” and by inserting “five years” 

Subsection 21(b): 

 by striking “$500” and by inserting “$50,000” 

Section 504 of the NGPA is amended as follows: 

Subsection 504(c)(1)(A): 

 by striking “$5,000” and inserting “$1,000,000” 

Subsection 504(c)(1)(B): 

 by striking “two years” and inserting “five years” 

Subsection 504(c) (2): 

 by striking “$500 for each violation” and inserting “$50,000 for each and every 

day during which such offense occurs” 

IV. Creation of civil penalty authority under the NGA: 

The Natural Gas Act is amended as follows: 

Inserting a new Section 21A to immediately follow Section 21 
3

Section 21A to read as follows: 

Any person who violates this Act or any rule, regulation, restriction, 

condition, or order made or imposed by the Commission under authority 

of this Act, shall be subject to a civil penalty of not more than $1,000,000 

per day per violation for as long as such violation continues. Such penalty 

shall be assessed by the Commission after notice and opportunity for 

public hearing. In determining the amount of a proposed penalty, the 

Commission shall take into consideration the nature and seriousness of 

the violation and the efforts to remedy the violation. 

V. Increase in the amount of civil penalties available under the NGPA: 

Section 504 of the Natural Gas Policy Act is amended as follows: 

Subsection 504(b) (6) (i): 

By striking “$5,000” and inserting “$1,000,000” 

Subsection 504(b) (6) (ii) 

By striking “$25,000” and inserting “$1,000,000” 

VI. Addition of a false statements penalty for the FPA, Natural Gas Act (NGA) 

and the Natural Gas Policy Act (NGPA):

The Federal Act is amended to add a new Section 316B 

The Natural Gas Act is amended to add a new Section 21B 

The Natural Gas Policy Act is amended to add a new Section 504(b)(7) 

To read as follows:
4

 

If any person or regulated entity has in any matter or filing within the 

Commission’s jurisdiction under this Act, or under any rule, regulation, 

order, or license issued under this Act, made a false statement regarding a 

material fact, the Commission may, after giving notice and an opportunity 

for a response, impose a civil penalty of not more than the higher of 

$1,000,000 for each false statement or triple the monetary gain to such 

person or entity for each such violation; 

 (a) A matter as described in this section shall include any proceeding, 

hearing, investigation, audit or inquiry conducted by the Commission and/or 

its staff; 

 (b) A false statement shall include any deliberate, reckless or grossly 

negligent omission of a material fact; 

 (c) An inadvertent omission or error in factual information shall not 

constitute a false statement, except to the extent that it is determined to have 

been part of a pattern of negligent behavior.