UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

 

 

 

2017 REPORT ON ENFORCEMENT 

Docket No. AD07-13-011 

Prepared by Staff of the 

Office of Enforcement 

Federal Energy Regulatory Commission 

Washington, D.C. 

 

NOVEMBER 16, 2017 
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. 
2017 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

District Court Litigation .............................................................................................................. 7

Administrative Hearings ............................................................................................................ 10

C. Settlements ...............................................................................................................................11

D. Self-Reports .............................................................................................................................16

Illustrative Self-Reports Closed with No Action ....................................................................... 19

E. Investigations ...........................................................................................................................23

1. Statistics on Investigations ........................................................................................................ 24

Illustrative Investigations Closed with No Action ..................................................................... 29

F. Enforcement Hotline ................................................................................................................31

G. Other Matters ...........................................................................................................................31

DIVISION OF AUDITS AND ACCOUNTING ...........................................................................33

A. Overview ..................................................................................................................................33

B. Compliance ..............................................................................................................................34

Compliance Reviews ................................................................................................................. 34

Compliance Alerts ..................................................................................................................... 34

C. Significant Audit Matters .........................................................................................................37

D. Other Audit Matters .................................................................................................................40

Mergers and Acquisitions .......................................................................................................... 40

Oil .............................................................................................................................................. 40

Market-Based Rate & EQR ....................................................................................................... 41

Electric Tariff & Accounting ..................................................................................................... 42

E. Accounting Matters ..................................................................................................................42

Filings Reviewed by DAA ........................................................................................................ 43

Requests for Approval of the Chief Accountant ........................................................................ 44

Rate Proceedings ....................................................................................................................... 45

Certificate Proceedings .............................................................................................................. 45

Merger and Acquisition Proceedings ........................................................................................ 45

Debt and Security Issuance Proceedings ................................................................................... 46
2017 Staff Report on Enforcement 2 

Accounting Inquiries ................................................................................................................. 46

Accounting for Pensions and Other Postretirement Benefits .................................................... 46

International Financial Reporting Standards ............................................................................. 47

DIVISION OF ENERGY MARKET OVERSIGHT .....................................................................48

A. Overview ..................................................................................................................................48

B. Market Monitoring ...................................................................................................................48

2016 State of the Markets Report .............................................................................................. 48

Seasonal Market Assessments ................................................................................................... 49

C. Market-Based Rate Ex Post Analysis ......................................................................................49

D. Commission Orders and Rulemakings.....................................................................................50

E. Forms Administration and Compliance ...................................................................................50

Electric Quarterly Reports ......................................................................................................... 50

eForms Refresh Project ............................................................................................................. 51

F. Outreach and Communication .................................................................................................51

Technical Conference: Developments in Natural Gas Index Liquidity and Transparency ....... 51

Website ...................................................................................................................................... 52

Snapshot Calls ........................................................................................................................... 52

Domestic and Foreign Delegation Briefings ............................................................................. 52

DIVISION OF ANALYTICS AND SURVEILLANCE ...............................................................53

A. Overview ..................................................................................................................................53

B. Surveillance..............................................................................................................................53

Natural Gas ................................................................................................................................ 54

Electricity .................................................................................................................................. 55

Illustrative DAS Surveillance Inquiries Closed With No Referral ............................................ 56

C. Analytics ..................................................................................................................................56

CONCLUSION ..............................................................................................................................58

APPENDIX A: OFFICE OF ENFORCEMENT ORGANIZATION CHART ............................59

APPENDIX B: FY2017 CIVIL PENALTY ENFORCEMENT ACTIONS ................................60

APPENDIX C: FY2017 NOTICES OF ALLEGED VIOLATIONS ...........................................62

 
2017 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 2017 (FY2017),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 Enforcement’s investigative 

work 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 FY2017 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, and examples of surveillance inquiries initiated by DAS that are closed with 

no referral to DOI. 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 addition, DAA points 

out a number of areas to help companies enhance compliance programs. 

 

 

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. 

FY2017, the subject of this report, began on October 1, 2016 and ended on September 30, 2017. 
2017 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, and through 

appropriate regulatory and market means.3 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 

regarding energy infrastructure, as appropriate. Each of the divisions continues to work to bring 

entities into compliance with applicable statutes, Commission rules, orders, regulations, and tariff 

provisions. 

In FY2017, 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 2018. 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. Enforcement ensures compliance with these standards, and focuses primarily on 

violations resulting in actual harm, through the loss of load or other means. Enforcement also 

 

3

 The Federal Energy Regulatory Commission, Strategic Plan FY2014-2018 (Mar. 2014), 

available at http://www.ferc.gov/about/strat-docs/FY-2014-FY-2018-strat-plan.pdf. 
2017 Staff Report on Enforcement 5 

focuses on cases involving repeat violations of the Reliability Standards or violations that present 

a substantial risk to the bulk power system. 

In FY2017, DOI staff opened 27 new investigations, while bringing 16 pending investigations 

to closure either with no action or through a Commission-approved settlement.4 During the fiscal 

year, staff negotiated settlements allowing recovery of more than $51 million in civil penalties, 

and disgorgement of over $42 million in unjust profits.5 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 11 audits of oil pipelines, 

electric utilities, and natural gas companies, resulting in 301 recommendations for corrective 

action, and directing refunds and recoveries totaling $13.3 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 Winter and Summer Energy Market and Reliability Assessments. 

Additionally, Market Oversight led a technical conference to discuss trends, concerns, and 

potential solutions relating to the declining levels of natural gas index liquidity, and continued 

ensuring compliance with the Commission’s filing requirements for Electric Quarterly Reports 

(EQR) and various other financial forms. 

Finally, in FY2017, DAS surveillance reviewed numerous instances of potential misconduct, 

sometimes resulting in referrals to DOI. In addition, DAS worked and provided analytical support 

on approximately 50 investigations with DOI. 

 

 

4 Shortly after the conclusion of FY2017, the Commission reached a settlement with the 

respondents in the Barclays Bank, PLC matter pending in the Federal District Court for the Eastern 

District of California. See Barclays Bank, PLC, 161 FERC ¶ 61,147 (2017) (approving the 

settlement). As part of the settlement, the respondents will pay $70 million in civil penalties and 

disgorge $35 million in unjust profits. Because the settlement occurred in Fiscal Year 2018, the 

various figures cited in this report treat Barclays Bank, PLC as a pending litigation matter, with 

the civil penalties and disgorgement as originally assessed by the Commission, and do not reflect 

the matter as settled.

5

 A table of FY2017 Civil Penalty Enforcement Actions, both those resolved through settlement 

and those resolved through agency proceedings, is attached to this report as Appendix B. 
2017 Staff Report on Enforcement 6 

DIVISION OF INVESTIGATIONS 

A. Overview 

DOI conducts investigations of potential violations of the statutes, regulations, rules, orders, 

and tariffs administered by the Commission. These 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, as appropriate, with other 

Enforcement divisions and other Commission offices. If staff finds significant violations, it reports 

its findings to the Commission and attempts to settle investigations for appropriate sanctions and 

future compliance improvements. Where settlement efforts fail, DOI may seek additional 

evidence, recommend that the Commission initiate a public show cause proceeding, or both.6

 

As in previous years, DOI staff continued in FY2017 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 five notices of alleged violations (NAVs) involving conduct of six separate individuals or 

entities. The notices identified investigation subjects and included a concise description of alleged 

violations of the applicable statutes and Commission regulations and orders.7 

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 the 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 the 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. The 

Commission did not issue any OSCs or Orders Assessing Civil Penalties in FY2017. 

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

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

assessment in federal court. As of the end of FY2017, including actions filed in previous years, 

staff was litigating five such actions in federal court, seeking to enforce the Commission’s 

combined assessment of more than $575 million in penalties and disgorgement in those 

proceedings. Staff settled one FPA matter during FY2017 that was pending in federal court at the 

beginning of the fiscal year. One Natural Gas Act (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 

 

6

 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. 

7

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

Enforcement issued in FY2017. 
2017 Staff Report on Enforcement 7 

disgorgement and interest, is pending rehearing before the Commission as of the end of the fiscal 

year. 

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 federal court matter staff settled in FY2017, Enforcement staff also 

settled with: (1) a power marketer for violations of the Commission’s Anti-Manipulation Rule (18 

C.F.R. § 1c.1); (2) an investor-owned vertically integrated utility for violations of the AntiManipulation Rule and a regional transmission organization/independent system operator 

(RTO/ISO) tariff; (3) a waste-to-energy generator for violations of an RTO/ISO tariff and one of 

the Commission’s Market Behavior Rules (18 C.F.R. § 35.41(a)); and (4) a transmission provider 

for violations of FPA §§ 203 and 205, and parts 33 and 35 of the Commission’s regulations. 

Although the public NAVs, settlements, OSCs, and orders assessing penalties often receive 

the most public attention, DOI closes most of its investigations with no further action, and without 

the investigations becoming public. During the course of an investigation, if DOI concludes that 

there is insufficient evidence to establish a violation or otherwise concludes that further 

proceedings are not warranted, it will close the matter promptly. DOI closed 11 investigations in 

FY2017 either because staff found no violation or because there was not enough evidence to 

conclude that a violation had occurred. Adding those 11 closed investigations to the five 

investigations that DOI closed through settlement brings the total investigations closed in FY2017 

to 16. 

In addition to its investigation-related work, DOI continued its rigorous analysis of self-reports, 

Enforcement Hotline calls, referrals, and other matters within 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 FY2017 preparing reports, briefs, and other public filings 

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

Enforcement staff continues litigating five FPA matters in United States District Courts, and 

settled one litigation matter that was pending in United States District Court at the beginning of 

the fiscal year. 

Staff also continued its work on an NGA OSC proceeding, and awaits the Commission’s 

decision on the respondent’s motion for rehearing in another NGA OSC proceeding. 

In total, as of the end of FY2017, counting all pending federal court matters and the two NGA 

OSC proceedings before the Commission, staff sought to recover $806,865,000 in civil penalties 

and $53,987,678 in unjust profits through seven litigation proceedings. 

District Court Litigation 

In FY2017, excluding matters that settled, Enforcement staff litigated five matters in United 

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

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

Total Gas & Power North America, Inc. and two of its traders. Those District Court litigation 

matters are: 
2017 Staff Report on Enforcement 8 

a) FERC v. Silkman, et al., 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. 

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, $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 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, the court 

specifically rejected the 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. 

On January 26, 2017, after briefing and oral argument, the United States District Court for 

Maine granted the respondents’ motion to treat the proceeding as an ordinary civil action subject 

to the Federal Rules of Civil Procedure. The parties participated in mediation before Magistrate 

Judge John H. Rich III in Portland, Maine on March 31, 2017, and were unable to reach an 

agreement on resolution. The parties have been engaged in discovery since that time. 

b) FERC v. Powhatan Energy Fund LLC, et al., 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 (PJM), 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”). 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, $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, which was filed in January 2016, followed by oral 

argument in April 2016. The court has not yet issued an order on this preliminary procedural 

matter. 
2017 Staff Report on Enforcement 9 

c) 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 (ETRACOM) and its majority owner and primary trader, 

Michael Rosenberg. The Commission determined that ETRACOM and Rosenberg 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 congestion revenue rights 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, and 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. 

On March 8, 2017, following briefing on the scope of de novo review and applicable 

procedural rules, the court directed the parties to stipulate to a discovery schedule consistent with 

the Federal Rules of Civil Procedure. The parties’ stipulated discovery schedule was approved on 

April 17, 2017, and the parties are currently engaging in discovery.

d) FERC v. Coaltrain Energy L.P, et al., 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. (Coaltrain), 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 violated the Commission’s AntiManipulation 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 the 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: (1) trading between export and import 

points (SOUTHIMP and SOUTHEXP) that had 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. In 

each type of trade, the purpose was not to profit from spread changes, but instead to increase 

transmission volumes in order to collect MLSA payments. 

The Commission also found that the respondents violated section 35.41(b) of the 

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

Coaltrain’s communications with Enforcement staff during the investigation, in order 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 civil penalties of $38 million on Coaltrain, $5 million each on Peter Jones 

and Shawn Sheehan, $1 million on Robert Jones, and $500,000 each on Jeff Miller and Jack Wells. 

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. The respondents filed reply briefs on November 7, 2016. The motions to 

dismiss are pending. 
2017 Staff Report on Enforcement 10 

e) 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 the United States District Court for the Western District of Texas seeking to prevent the 

Commission from adjudicating the violations identified by staff in the subsequently issued OSC 

regarding Total. The plaintiffs sought a declaratory judgment that: (1) the Commission 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 before 

issuance of the OSC 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, which 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, 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, which on June 8, 2017, affirmed 

the dismissal. The Plaintiffs subsequently sought rehearing in the Fifth Circuit en banc, which 

was denied on August 8, 2017. On October 27, 2017, the Plaintiffs filed in the United States 

Supreme Court a request for an extension of time to determine whether to petition for certiorari. 

Administrative Hearings 

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

On August 5, 2013, the Commission issued an OSC in Docket No. IN13-15-000, directing BP 

America Inc., BP Corporation North America Inc., BP America Production Company, and BP 

Energy Company (collectively, BP) to demonstrate why they 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 (HSC). 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 HSC natural gas prices. The Commission later 

ordered that an ALJ 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 flooding 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 
2017 Staff Report on Enforcement 11 

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. 

b) Total Gas & Power North America, Inc., et al., Docket No. IN12-17-

000

On April 28, 2016, the Commission issued an OSC directing Total Gas & Power North 

America, Inc. (TGPNA), Aaron Hall, and Therese Tran (together, the respondents) to show the 

Commission why they should not be found to have violated section 4A of the NGA and the 

Commission’s Anti-Manipulation Rule, by engaging in a scheme to manipulate the price of natural 

gas at four locations in the southwest United States between June 2009 and June 2012. The OSC 

further directs TGPNA’s ultimate parent company, Total, S.A. (Total), and TGPNA’s affiliate, 

Total Gas & Power, Ltd. (TGPL), to show cause why they should not be held liable for TGPNA’s, 

Hall’s, and Tran’s conduct and held jointly and severally liable for their disgorgement and civil 

penalties based on Total’s and TGPL’s significant control and authority over TGPNA’s daily 

operations. Finally, the OSC directs the respondents to show cause why disgorgement and civil 

penalties should not be assessed in the following amounts: $9,180,000 in disgorgement and 

$213,600,000 in civil penalties against TGPNA, Total, and TGPL, jointly and severally; 

$1,000,000 civil penalty against Hall (jointly and severally with TGPNA, Total, and TGPL), and 

$2,000,000 civil penalty against Tran (jointly and severally with TGPNA, Total, and TGPL). 

Respondents filed their answer to the OSC on July 12, 2016, staff replied on September 

23, 2016, and the parties have submitted additional pleadings in the proceeding. 

C. Settlements 

In FY2017, the Commission approved five settlement agreements between Enforcement and 

six separate subjects to resolve pending matters. The settlements totaled almost $52 million in 

civil penalties and disgorgement of just over $42 million. Since 2007, Enforcement has negotiated 

settlements allowing for the recovery of approximately $693 million in civil penalties (excluding 

pending proceedings and the proceedings against Brian Hunter) and total disgorgements of almost 

$444 million. 

Since the 2010 issuance of the Revised Penalty Guidelines,8

 most Commission-approved 

settlements subject to the Penalty Guidelines have 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 

 

8

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

Guidelines). 
2017 Staff Report on Enforcement 12 

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.9 

In FY2017, the Commission approved settlement agreements that resolved investigations 

concerning violations of the Anti-Manipulation Rule, tariff provisions, the market behavior rules, 

and FPA sections 203 and 205. Some settlements concerned multiple types of violations. 

The charts below illustrate the types of violations settled in the last five fiscal years, Fiscal 

Years 2013-2017. 

 

9

 Revised Penalty Guidelines, 132 FERC ¶ 61,216 at P 109. 

Types of Violations Settled, FY2017

OATT/Tariff

Market Manipulation

and/or False Statements

Merger/Consolidation

Authorization

Filing Requirements
2017 Staff Report on Enforcement 13 

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
2017 Staff Report on Enforcement 14 

 

The Commission approved the following settlement agreements in FY2017: 

GDF Suez Energy Marketing NA, Inc., Docket No. IN17-2-000. On February 1, 2017, the 

Commission issued an order approving the settlement of an investigation of GDF Suez Energy 

Marketing NA, Inc. (GSEMNA), relating to lost opportunity cost credits (LOCs) in the PJM 

market. Following an investigation, staff concluded that GSEMNA violated the Commission’s 

Anti-Manipulation Rule by targeting and inflating its receipt of LOCs paid to combustion turbine 

units that cleared the day-ahead market and were not dispatched in the real-time market. During 

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
2017 Staff Report on Enforcement 15 

the period May 2011 to September 2013, GSEMNA offered the units in the day-ahead market with 

below-cost offers when the units otherwise would be out of the money, and when GSEMNA 

expected that they would not be dispatched in real time. In settling, GSEMNA stipulated and 

agreed to the facts, but neither admitted nor denied the violations. GSEMNA agreed to pay a civil 

penalty of $41 million and disgorgement to PJM of $40.8 million, and to submit a compliance 

monitoring report in one year, with a second annual report at Enforcement’s option. 

Covanta Haverhill Associates LP, Docket No. IN17-3-000. On February 1, 2017, the Commission 

issued an order approving the settlement of an investigation into Covanta Haverhill Associates LP 

(Covanta Haverhill) regarding real time meter reporting obligations under the ISO New England 

Tariff. Under the terms of the settlement, Covanta Haverhill stipulated to the facts, but neither 

admitted nor denied the violations. It agreed to pay a civil penalty of $36,000 and implement 

certain procedures to improve compliance, subject to monitoring via submission of semi-annual 

reports for at least two years. 

FERC v. City Power Marketing, LLC, No. 1:15-cv-01428-JDB (D.D.C.). On August 22, 2017, 

the Commission issued an order approving the settlement of an investigation of City Power 

Marketing, LLC (City Power) and its owner, K. Stephen Tsingas. In March 2015, the Commission 

issued an OSC, and in July 2015 issued an Order Assessing Civil Penalties, in which it determined 

that City Power and Tsingas placed fraudulent financial trades designed to extract improper 

payments from PJM, and made false and misleading statements to conceal the existence of highly 

relevant instant messages. In September 2015, the Commission filed suit in federal district court 

in Washington, D.C. to enforce the penalty order. Following the Court’s rulings on preliminary 

motions, defendants and staff agreed to a settlement in March 2017, which the Commission 

approved on August 22, 2017. Under the agreement, Tsingas will pay $1.3 million in 

disgorgement to PJM, and a civil penalty of $1.42 million. City Power will pay a civil penalty of 

$9 million. Finally, Tsingas agreed to a ban from trading in Commission jurisdictional markets 

for three years. 

Westar Energy, Inc., Docket No. IN15-8-000. On August 24, 2017, the Commission issued an 

order approving the settlement of an investigation into violations by Westar Energy, Inc. (Westar), 

of Southwest Power Pool (SPP) Tariff provisions related to the submission of mitigated energy 

offer curves, including: (1) section 2.13 of Attachment AE by failing to update its mitigated energy 

offer curves on a daily basis; (2) section 2.13 of Attachment AE and sections 3.2 and 3.2(C) of 

Attachment AF, by submitting offers that did not reflect the short run marginal cost of producing 

energy; (3) section 3.5 of Attachment AF and section 3.2(D) of Attachment AF by not providing 

sufficiently detailed responses to the SPP’s Market Monitoring Unit’s data requests; and (4) 18 

C.F.R. § 35.41(b) by submitting mitigated energy offer curves that did not reflect actual costs or a 

reasonable estimate thereof. In the settlement agreement, Westar admitted the violations, paid a 

civil penalty of $180,000, and agreed to implement procedures to improve compliance going 

forward, subject to monitoring through the submission of annual reports for two years, with a 

potential one-year extension at Enforcement’s discretion. 

American Transmission Company, LLC, Docket No. IN17-5-000. On August 28, 2017, the 

Commission approved a stipulation and consent agreement between Enforcement and American 

Transmission Company, LLC (ATC). Following an investigation, staff determined that ATC 

violated: (1) section 203 of the FPA by transferring 21 jurisdictional assets prior to obtaining 

Commission authorization; and (2) section 205 of the FPA by commencing or terminating 

jurisdictional services without providing the Commission with the requisite notice on 42 occasions. 

ATC sought and obtained the proper approvals from the Commission. ATC paid $1,401,575 in 
2017 Staff Report on Enforcement 16 

time-value refunds to its customers for services commenced prior to making the filings required. 

In settling this matter, ATC admitted the violations, agreed to pay a civil penalty of $205,000, 

agreed to make compliance reports to Enforcement for one year, and implemented measures to 

ensure future compliance. 

D. Self-Reports 

Over the past five fiscal years (Fiscal Years 2013-17), staff has received approximately 452 

self-reports. The vast majority of those self-reports were concluded without further enforcement 

action because, for example, there was no material harm (or the reporting 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 FY2017, staff received 80 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 121 self-reports, which included some carried 

over from previous fiscal years. 

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

can significantly mitigate penalties if a self-report was made.10 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 

Fiscal Years 2013 through 2017. Some self-reports include more than one type of violation. In 

FY2017, RTO/ISO self-reports and regulatory filing violations accounted for the majority of selfreports received. 

 

10 Revised Penalty Guidelines, 132 FERC ¶ 61,216, at P 127 (2010). 
2017 Staff Report on Enforcement 17 

0

10

20

30

40

50

60

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2017 by Type of Violation

0

10

20

30

40

50

60

70

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2016 by Type of Violation
2017 Staff Report on Enforcement 18 

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
2017 Staff Report on Enforcement 19 

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 FY2017 without conversion to an investigation. In determining whether to 

close a self-report or open an investigation, staff considers the factors set forth in the Commission’s 

Revised Policy Statement on Enforcement.11 The summaries below 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. 

Shipper Must Have Title and the Prohibition on Buy-Sell Transactions. A large public utility selfreported, on behalf of certain recently-acquired retail natural gas marketing subsidiaries, violations 

of the Commission’s prohibition against Buy-Sell transactions and the Shipper Must Have Title 

Requirements. The violations were discovered by employees of the self-reporting company due 

to compliance training provided to these employees, which enabled them to identify the 

problematic transactions when they observed them during the integration process. Staff closed the 

matter with no further action because the violations: (1) were inadvertent; (2) involved modest 

volumes of gas; and (3) did not result in harm to other market participants. 

 

11 Revised Policy Statement on Enforcement, 123 FERC ¶ 61,156 at P 25 (2008).

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
2017 Staff Report on Enforcement 20 

Qualifying Facilities. Several owners of small generating facilities separately self-reported that 

they made jurisdictional sales of electricity without first self-certifying as a qualifying facility (QF) 

by filing Form No. 556. The sales violated FPA section 205 because the facilities had not selfcertified as QFs, which exempts some sales from the requirement under FPA section 205 to obtain 

Commission authorization prior to commencing jurisdictional sales of electricity. In each of these 

instances, upon self-reporting, the entities self-certified, made time-value refunds to customers of 

the money collected from the unauthorized sales, and implemented policies and procedures to 

prevent similar violations in the future. Because prompt remedial measures were taken, and 

because each such instance was limited in scope and voluntarily self-reported, these matters were 

closed without further action. 

Oil Tariff Violation. A jurisdictional common carrier oil company self-reported that it owned and 

operated a crude oil pipeline for approximately two years prior to filing a tariff or obtaining a 

waiver of the relevant tariff filing provisions of the Interstate Commerce Act (ICA) and the 

Commission’s related regulations. In addition to self-reporting, the Company filed a request for a 

temporary waiver of the filing requirements and the ICA, which the Commission subsequently 

granted. The order, however, noted that the company did not have a tariff on file and reminded 

the company to submit filings in a timely manner or face possible sanctions by the Commission. 

Enforcement closed the self-report without further action because there was no harm to the market, 

the company promptly self-reported and remedied the violation, and put measures in place, 

including training its employees, to prevent future similar violations. 

Natural Gas Transportation. A formerly intrastate pipeline made jurisdictional sales without first 

receiving a Blanket Certificate from the Commission. The pipeline had previously operated 

entirely intrastate, but began transporting a small quantity of gas across state lines when the flow 

of the pipeline was reversed. The pipeline was unaware of the interstate sales and filed an 

application for a Blanket Certificate upon learning of them. Given the small volume of sales, the 

lack of intent to avoid Commission jurisdiction, and the pipeline’s remedial steps (namely the 

filing of an application with the Commission), staff closed the self-report without further action. 

Violation of the Standards of Conduct. A vertically-integrated utility with an affiliated power 

marketer self-reported a violation of the Standards of Conduct under Part 358 of the Commission’s 

regulations. A non-marketing function employee who had received information about an 

upcoming outage forwarded that information to a distribution list that included marketing function 

employees. Unbeknownst to the non-marketing function employee, the outage information was 

not publicly available at the time, and thus the disclosure to marketing function employees was 

prohibited by the Commission’s Standards of Conduct, which generally prohibits transmission 

function employees from conveying non-public information to marketing function employees. 

The error was promptly discovered, remedied, and self-reported. Because the violation was 

isolated, inadvertent, limited in scope and potential impact, and was promptly reported, 

Enforcement took no further action. 

Electricity Trading Violation. A company self-reported that due to manual error, it placed 

erroneous offers by entering Economic Minimum and Economic Maximum parameters with the 

same value (zero or one) for three hours on one day. Because of the erroneous parameters, the 

offers were not in the dispatchable range. The offers violated the RTO/ISO tariff and section 

35.41(b) of the Commission’s regulations, which provides, in relevant part, that sellers must 

provide accurate and factual information to Commission-approved independent system operators. 

Staff closed the matter without further action because the company implemented procedures to 

prevent future occurrences, and the violation was limited in scope, inadvertent, promptly selfreported, and did not result in any discernable harm to the market. 
2017 Staff Report on Enforcement 21 

Demand Response Registration. An energy consulting company self-reported that it violated an 

RTO/ISO’s tariff by incorrectly registering some of its generators in the RTO/ISO’s demand 

response program. The company represented in its registration that the generators complied with 

certain emissions standards, but later determined that they did not. Upon discovering the erroneous 

registrations, the company promptly withdrew the generators from the demand response program. 

The violation caused no market harm because the company had sufficient MWs registered to cover 

its obligation in the demand response program, even without the withdrawn generators. Staff 

closed the matter with no action because (1) the violation did not result in any market harm; and 

(2) the violation was unintentional, isolated, and promptly self-reported upon discovery. 

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; failing to post information, 

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

applicable tariff-mandated periods; permitting market participants to take actions not permitted by 

the tariff or inconsistent with the RTO/ISO’s business practices; and inadvertently forwarding 

market participants’ confidential information to other companies or individuals (but promptly 

notifying the recipients about the disclosures and directing them to destroy the confidential 

information). In all such instances, the harm from the self-reported violations were 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. 

FPA Section 203 Violation. An investor-owned utility (IOU) self-reported that it failed to seek 

Commission approval prior to receiving a free, non-energized, and unused conductor from a 

neighboring public utility, in violation of FPA section 203(a)(1)(B), which requires public utilities 

to obtain Commission authorization to “merge or consolidate, directly or indirectly, . . such 

facilities or any part thereof with those of any other person, by any means whatsoever.” The 

neighboring public utility was no longer using the conductor, and the IOU used it for overhead 

transmission lines it was reconfiguring. Due to simple oversight, the IOU neglected to first seek 

Commission authorization. Staff closed the matter with no action because the violation did not 

result in any market harm, was unintentional, and the IOU filed to obtain Commission approval. 

Violation of the Standards of Conduct. A utility self-reported that when informing its employees 

of the removal of a high-voltage transmission line from service, the distribution list used 

erroneously included six marketing function employees, who consequently received the 

information before it was made public on its Open Access Same-Time Information System. Part 

358 of the Commission’s regulations prohibits transmission function employees from 

preferentially conveying non-public transmission function information to marketing function 

employees. The utility immediately conducted an internal review, requested that the marketing 

function employees delete the email, and submitted a self-report. Staff closed the matter without 

further action because the violation was limited to a single instance, was unintentional, and did not 

result in any identifiable harm. 

Shipper Must Have Title Violation. A natural gas pipeline self-reported a violation of the Shipper 

Must Have Title rule when it incorrectly transported gas owned by third parties using a shipping 

contract controlled by a different entity. An employee of the pipeline erroneously transported 

volumes not controlled by a third party on the third party’s contract. Immediately upon realizing 

the error, the operator’s employees notified compliance and senior management personnel, and 

reimbursed the third party for the incorrect use of its shipping contract. Because the violation 

lasted less than 24 hours, was not intentional, and was quickly identified through the pipeline’s 

internal compliance processes, staff closed the matter without further action. 
2017 Staff Report on Enforcement 22 

Demand Response Violation. A company self-reported the submission to an RTO/ISO of incorrect 

meter readings from a Load Management Demand Response resource over a period of months, in 

violation of the RTO/ISO Tariff and 18 C.F.R. § 35.41(a). The meter, owned by the local electric 

utility serving the facility, was giving faulty readings due to a blown fuse, which was not 

discovered until the utility upgraded its substation switchgear. All parties involved jointly agreed 

to provide interval meter data for periods when those loads were estimated, and to rebill using an 

agreed upon methodology for estimating the company’s actual load during the relevant period. 

Because of the prompt self-reporting of the violation upon discovery, the remedial action taken, 

and the inadvertence of the conduct, staff closed the matter without further enforcement action. 

Natural Gas Transportation Billing Violations. A natural gas pipeline self-reported that it billed 

customers incorrectly for their firm transmission service. Specifically, it had charged two 

customers incorrectly for multiple years based on manual selection of an incorrect delivery point 

due to poor labeling. Upon discovery, it immediately corrected the labeling errors, made a 

customer whole which had been overbilled through refunds, and released another customer from 

any obligation to pay amounts owed for instances where the customer had been under-billed. 

Although the errors lasted for most of two years, the violations were isolated and inadvertent 

events, and the pipeline corrected the underlying issue promptly upon becoming aware. 

Accordingly, staff closed the matter without further action. 

Interlocking Directors Violations. Multiple companies reported that they had created interlocking 

positions with a subsidiary by appointing their parent company’s officers as officers of the 

subsidiaries without prior authorization. Section 305(b) of the FPA generally prohibits such 

interlocking positions absent a prior Commission finding that neither public nor private interests 

will be adversely affected. The companies had not identified the potential violations 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 these matters without further action. 

Tariff/OATT Violation. An electric utility self-reported a violation of tariff provisions related to 

lost opportunity cost (LOC) credits, which a generator receives when it clears the day-ahead energy 

market but the system operator either does not dispatch the unit in real-time, or directs the unit to 

reduce output. The system operator notified the company that it had erroneously received a 

significant amount of LOC credits over two years when some of the relevant units were not able 

to run, and requested repayment. The utility reviewed its records and determined the amount of 

LOC credits at issue were even greater than the system operator knew, and voluntarily refunded 

all the erroneously received payments. Although the violations occurred over a substantial time, 

staff closed the matter without further action because: (1) any harm done to the market was 

remedied by the company; (2) the company voluntarily refunded the erroneous payments and 

located additional such payments on its own; and (3) the company adopted reforms which make it 

unlikely that additional violations will occur. 

Regulatory Filing Violation. A natural gas company self-reported that it failed to file FERC Form 

552, Annual Report of Natural Gas Transactions, based on inaccurate advice of counsel. Some 

months after the company was advised that it did not need to file Form 552, it learned the advice 

had been incorrect, and immediately submitted a Form 552 out-of-time. Staff took no further 

action because the company put in place procedures to prevent future occurrences, and the 

violation occurred over a limited period of time, caused no harm to the market, was quickly 

rectified, and was not intentional.
2017 Staff Report on Enforcement 23 

Regulatory Filing Violation & Electric Quarterly Reports. An electric utility self-reported that it 

failed to file four transmission interconnection agreements and two generation dispatch 

agreements, as required by Section 205 of the FPA and 18 C.F.R. § 35.1, and also did not include 

the agreements in its EQR submissions. The utility filed the agreements simultaneously with its 

submission of the self-report, will include them in future EQRs and will amend past EQRs. In the 

self-report and the filings, the utility stated that it would make refunds pursuant to Commission 

precedent, and that it was conducting a comprehensive review to identify other contracts that 

should have been filed, but were not. Given the utility’s remedial measures and the lack of market 

harm, staff closed this self-report with no further action. 

Regulatory Filing Violation. A public utility holding company self-reported that it had 

inadvertently failed to file Form FERC-65, Notice of Holding Company Status, within 30 days of 

becoming a holding company after acquiring indirect downstream ownership of an electric utility, 

as required by section 366.4 of the Commission’s regulations. The failure was discovered while 

the company was engaged in due diligence for a potential sale of a related subsidiary. Upon 

discovery, the holding company self-reported the violation, and the electric utility took steps to 

self-certify as a Qualifying Facility by filing Form 556, Certification of Qualifying Facility Status 

for a Small Power Production or Cogeneration Facility, making the holding company an exempt 

holding company under section 366.3(a), and therefore relieving it of the obligation to file Form 

FERC-65. Staff closed the matter with no action, because the violation was isolated, inadvertent, 

promptly remedied, and caused no harm. 

Natural Gas Transportation Postings Violation. A natural gas pipeline self-reported that for several 

years it had failed to post a substantial amount of excess capacity, and incorrectly estimated its 

peak-day capacity in its annual Commission filings, in violation of 18 C.F.R. §§ 284.13(d) (1) and 

(2). Staff determined that the errors were unintentional and unlikely to reoccur. Staff closed the 

matter without further action because the entity took action as soon as the violations were 

uncovered by initiating an internal investigation, promptly self-reporting, and instituting 

compliance training for its employees. 

FPA Section 205 Violation. An electric transmission provider self-reported that it had 

inadvertently failed to file certain jurisdictional agreements relating to its charges for construction 

of a new transmission line, as required by FPA section 205. Upon learning that the filings may be 

overdue, the company retained outside counsel to perform an in-depth review of its compliance 

with the filing requirements. At the conclusion of the internal investigation, the company promptly 

filed the agreements and reported the late filings to Enforcement. It also provided enhanced 

training to the personnel responsible for making the filings. The late filing did not adversely affect 

ratepayers or the other parties to the agreements. Given the lack of harm, the company’s prompt 

self-report, and the additional training that the company provided, staff closed the self-report with 

no further action. 

E. Investigations 

During FY2017, DOI staff opened 27 investigations, as compared to 17 investigations opened 

in Fiscal Year 2016 (FY2016). The vast majority of these new investigations arose from referrals 

by DAS and/or RTO/ISO market monitors, with several others coming from the Commission or 

other program offices. Staff closed 16 investigations in FY2017 through a settlement or closure 

without further action, as compared to 11 investigations closed in FY2016. 
2017 Staff Report on Enforcement 24 

1. Statistics on Investigations 

Of the 27 investigations staff opened this fiscal year (some of which involve more than one 

type of potential violation or multiple subjects), 15 involve potential market manipulation, 16 

involve potential tariff violations, four involve potential violations of a Commission order, and 

two involve potential violations of a Commission filing requirement. 

DOI staff closed 16 investigations in FY2017. 11 investigations were closed without further 

action because staff concluded that the evidence did not support finding a violation, with the 

remaining five closing through settlement. The Commission-approved settlements of 

investigations are summarized above in section C, and illustrative examples of investigations 

closed without enforcement action are discussed below. 

Among the closed investigations in FY2017 is one that was publicly announced by the 

Commission in its OSC to ISO New England, Inc. (ISO-NE) in 2014.12 Enforcement conducted an 

investigation into certain bidding behavior in ISO-NE’s eighth annual Forward Capacity Auction 

(FCA 8), following a non-public referral from ISO-NE and its market monitor for potential tariff 

violations and market manipulation. Staff has concluded its investigation and determined that 

there was insufficient evidence of intent to manipulate and insufficient evidence to substantiate a 

tariff or rule violation. 

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

past five years (FY2013-2017) and the aggregate disposition of investigations that closed in fiscal 

years 2007 through 2017. 

 

 

12 ISO New England Inc., 148 FERC ¶ 61,201, at P11 (2014). 

Disposition of Investigations, FY2017

Closed ‐ Insufficient

Evidence or No

Violation

Settlement
2017 Staff Report on Enforcement 25 

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, FY2016

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Proceeded to Order to Show

Cause
2017 Staff Report on Enforcement 26 

Disposition of Investigations, FY2014

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Other

Disposition of Investigations, FY2013

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Proceeded to Order to Show Cause

Other
2017 Staff Report on Enforcement 27 

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

that were closed without action in Fiscal Years 2013-2017. 

 

Disposition of Investigations ‐ All to Date,

FY2007 ‐ FY2017

Closed ‐ Finding of Violation/No

Sanctions

Closed ‐ Insufficient Evidence or

No Violation

Settlement

Proceeded to Order to Show

Cause

Other

0

1

2

3

4

5

6

7

8

9

10

Tariff Violation Manipulation Standards of

Conduct

Violation of

Commission Order

Misrepresentation

Types of Alleged Violation in Investigations Closed

With No Action, FY2017
2017 Staff Report on Enforcement 28 

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

With No Action, FY2016

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

With No Action, FY2015
2017 Staff Report on Enforcement 29 

Illustrative Investigations Closed with No Action 

The following summaries of investigations that Enforcement closed without action in FY2017 

are intended to provide guidance to the public while preserving the non-public nature of DOI’s 

investigations. 

 

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

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
2017 Staff Report on Enforcement 30 

Market Manipulation (Natural Gas). Acting on a referral from DAS’s Surveillance Group, staff 

opened an investigation to determine whether an energy trading firm had violated the 

Commission’s Anti-Manipulation Rule by engaging in high-concentration bid-week sales at two 

trading hubs where the company also held significant financial short positions that would benefit 

from such sales. In the same months, these traders had made repeated next-day gas purchases at a 

loss against index where the traders had similar-sized financial long positions. Staff took 

testimony from the relevant traders who claimed that the suspect positions were the product of 

independent strategies that had evolved over several years. The traders directed staff to documents 

and data that they believed would corroborate their legitimate explanations for their trading activity 

in these markets. Staff’s review of the contemporaneous documents confirmed important aspects 

of the traders’ testimony, and staff’s independent data analysis also showed that the financial 

spread positions appeared to have been profitable primarily based upon the movement of the price 

at the hub where the company had the long financial position, not where they had engaged in heavy 

bid-week selling. In addition, the evidence revealed that initially suspicious next-day purchases 

were directly tied to an independent transportation strategy by which the company had been able 

to make significant profits by transporting the purchased next-day gas to an even higher priced 

location. The investigation was closed because the evidence and the traders’ credible testimony 

demonstrated that the trading had been done for non-manipulative reasons. 

Market Manipulation, Misrepresentations to the Commission and Index Publishers (Natural Gas). 

Following a self-report, staff investigated whether a natural gas company engaged in market 

manipulation by improperly and selectively reporting natural gas transactions to an index 

publisher. Staff commenced an investigation to determine whether the company’s behavior was 

part of a manipulative scheme based on staff’s analysis of the self-report, which revealed that the 

company had either failed to report or erroneously reported thousands of reportable natural gas 

trades over a period of several years. In conjunction with DAS’s analysis of market data and data 

from the company regarding its trades and exposures to various indices, staff determined that while 

the company’s reporting behavior fell short of the parameters set forth in the Commission’s various 

policy statements on indices, the observed behavior was the result of sloppiness and a lack of 

internal controls, not an intent to manipulate. Because of this, the company’s voluntary self-report, 

its implementation of changes that would prevent future occurrences, and the small amount of 

market harm that resulted, staff closed the investigation without further action. 

Market Manipulation (Electric). Acting on a referral from an RTO/ISO market monitor, DOI staff 

investigated whether an electric cooperative violated the Commission’s Anti-Manipulation Rule 

by engaging in physical withholding in the RTO/ISO’s Day Ahead market. The referral alleged 

that the cooperative might have been withholding part of its capacity at one resource to increase 

the prices it received for its partial output at that resource. After taking testimony and reviewing 

data and documents, staff closed the investigation with no further action, based on findings that 

(1) the cooperative limited its Day Ahead offers due to non-manipulative purposes related to the 

resource’s operational issues and fuel supply restrictions; and (2) the cooperative lacked the 

financial incentive to withhold capacity at the relevant resource. 

Market Manipulation, Misrepresentation, Tariff Violation (Electric). In response to a referral from 

an RTO/ISO market monitor, staff opened an investigation into whether a utility had violated the 

RTO/ISO Tariff and corresponding Commission rules and regulations when it informed the 

RTO/ISO of potential unavailability in response to a dispatch instruction. After receiving a realtime dispatch, the utility contacted the RTO/ISO to advise that if the utility operated in response 

to the instruction, it might be unavailable later in the week because of potential fuel unavailability 

issues. As a result, the RTO/ISO rescinded the dispatch instruction. Staff investigated the utility’s 
2017 Staff Report on Enforcement 31 

fuel supply arrangements and the related communications with the RTO/ISO, and concluded there 

was not sufficient evidence of scienter to find a violation. Staff closed the investigation with no 

further action. 

Market Manipulation (Electric). Acting on a referral from an RTO/ISO market monitor, staff 

investigated whether some or all of a group of entities that submitted bids into various Financial 

Transmission Rights (FTR) auctions engaged in a scheme intended to defeat a rule by that 

RTO/ISO that was designed to preclude certain zero-cost FTRs, in the hopes of profiting from 

predictable positive spreads when the FTRs paid out. Based on the testimony, interviews, and 

documents obtained from market participants, and on DAS’s detailed analysis of market data, staff 

concluded that there was insufficient evidence of wrongful intent. Accordingly, staff closed the 

matter with no action. 

F. Enforcement Hotline 

DOI staff fields calls and other inquiries made to the Enforcement Hotline (Hotline).13 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, Hotline calls lead to investigations by DOI. 

In FY2017, Enforcement received 182 Hotline calls and inquiries, 174 of which were promptly 

resolved within the fiscal year through advice provided by staff or otherwise, and eight 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. 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 the callers where they may find the 

information they need, or directing them to the appropriate Commission office or docketed 

proceeding. 

G. Other Matters 

In addition to its investigative work, DOI staff worked on other important matters in FY2017, 

including: 

Revision of Maximum Civil Penalties. The Federal Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015 requires all Federal agencies to make annual inflation adjustments to 

the maximum civil penalties that may be assessed under the laws administered by those agencies.14 

Pursuant to that statutory obligation, DOI proposed for Commission approval an instant final rule 

increasing the civil penalties that the Commission may assess under the FPA, the NGA, the Natural 

 

13 See 18 C.F.R. § 1b.21 (2017). 

14 See Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. 114-

74, § 701, 129 Stat. 584, 599 (2015).
2017 Staff Report on Enforcement 32 

Gas Policy Act of 1978, and/or the Interstate Commerce Act.15 The Commission adopted that rule 

on January 9, 2017, and the revised maximum penalties took effect on January 24, 2017. 

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 over 150 such 

late filings in FY2017. Such collaboration also includes assisting with the Commission’s 

Compliance Help Desk. Regulated entities can submit questions to the Compliance Help Desk to 

reduce their risk of subsequent findings of noncompliance and potential enforcement actions.16 

Staff assisted in six Compliance Help Desk inquiries in FY2017. 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 FY2017, DOI staff 

reviewed approximately eight such requests for waivers. 

 

15 See Civil Monetary Penalty Inflation Adjustments, Order No. 834, Docket No. RM17-9-000, 

158 FERC ¶ 61,017 (2017), 82 Fed. Reg. 8,137 (Jan. 24, 2017).

16 See Interpretive Order Modifying No-Action Letter Process and Reviewing Other 

Mechanisms for Obtaining Guidance, 123 FERC ¶ 61,157 (2008). 
2017 Staff Report on Enforcement 33 

DIVISION OF AUDITS AND ACCOUNTING 

A. Overview 

DAA administers the Commission’s audit and accounting programs to support the 

Commission’s mission to assist consumers in obtaining reliable and efficient energy service, at a 

reasonable cost, through appropriate regulatory and market means. DAA is composed of four 

audit branches and one regulatory accounting branch. 

DAA’s audit branches perform various types of audits that respond to the needs of the 

Commission, the public, and industry, and also advise the Commission on compliance and other 

matters. The regulatory accounting branch: (1) helps the Commission establish just and reasonable 

rates, terms, and conditions; (2) acts as a resource for interpretive guidance concerning the 

Commission’s financial accounting and reporting rules, orders, regulations and statutes; and (3) 

advises the Commission and industry on accounting and other financial issues. In conducting its 

audit and accounting activities, DAA’s primary goal is to increase compliance with Commission 

regulations and policies. 

DAA’s audit program supports Commission strategic objectives through the implementation 

of public risk-based audits. The audit program enables the Commission to examine risk areas 

within the regulated industries, and informs the Commission’s actions regarding rates, tariffs, 

financial and operational transparency, policy initiatives, law, reliability, and other areas in the 

electric, natural gas, and oil industries. DAA’s audits also provide jurisdictional entities an 

opportunity to work with audit staff to evaluate and improve their overall compliance, and to 

identify potential areas of noncompliance before they escalate. For the Commission’s regulated 

industries, the publicly published commencement letters and audit reports provide insight into 

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 efforts to establish just 

and reasonable rates. It ensures the consistency of financial information affecting rate design, and 

that accounting outcomes present an entity’s operations in a manner to best support ratemaking 

analysis. DAA’s accounting program also provides accounting expertise to the Commission’s 

program offices to assist in the development of Commission policies and proposed rulemakings, 

to ensure these initiatives properly consider and evaluate the related accounting and financial 

issues. 

DAA’s programs, through their outreach and guidance, inform the industry, public, and others 

about what constitutes effective compliance, accountability, and transparency. 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 in response to 

accounting requests filed with the Commission. Informal accounting guidance may also be 

requested and obtained from DAA via email (accountinginquiries@ferc.gov) and phone ((202) 

502-8877), and informal guidance on all other compliance matters may be obtained through the 

Compliance Help Desk (www.ferc.gov/contact-us/compliance-help-desk.asp). The goal of 

DAA’s outreach efforts is to provide jurisdictional entities with ample opportunity to achieve 
2017 Staff Report on Enforcement 34 

compliance and avoid noncompliance that may result in harm to jurisdictional customers and 

energy markets. 

B. Compliance 

Compliance Reviews 

Assessing internal compliance programs related to the scope of the audit remains a key activity 

in DAA’s audit program. This evaluation serves to help identify and understand the presence of 

risks that internal compliance efforts may fail to detect, helps prevent noncompliance, and factors 

into audit fieldwork, e.g., the level of required testing. Assessing compliance programs generally 

entails a review of the entity’s compliance culture related to specific audit scope areas. The results 

of this assessment are communicated to the entity under audit to help it achieve a more robust 

compliance program. Providing such feedback 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, Fiscal Years 

2014-2018, continues to encourage strong compliance programs, and places emphasis on timely 

implementation of corrective actions within six months of audit completion. In FY2017, DAA 

achieved a 98 percent success rate of audit recommendations implemented within six months. 

Compliance Alerts 

DAA continues to observe certain areas where compliance has been problematic for some 

entities, and believes that highlighting these areas will increase awareness and facilitate 

compliance efforts. The topics presented below represent areas where DAA has found consistent 

compliance concerns or noncompliance. 

Allowance for Funds Used During Construction (AFUDC). Recent audit activity has shown 

deficiencies in how jurisdictional entities have calculated AFUDC, resulting in excessive accruals. 

Short-term debt is always regarded as the first source of funding construction activities in the 

AFUDC calculation, and the short-term debt rate is derived using an estimate of the cost of shortterm debt for the current year. DAA has found instances where a company used fees-committed 

lines of credit in the calculation of the short-term debt rate; while this might be permitted in certain 

circumstances, it is not automatic, and Commission approval is required to include such fees as 

part of the short-term rate derivation. Other common findings during audits include: failure to 

exclude goodwill-related equity from the equity component of the AFUDC rate, absent 

Commission approval; 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. 

Formula Rate Matters. Compliance with the Commission’s accounting and FERC Form No. 1 

requirements 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 jurisdictional entities’ accounting and rate staffs to prevent the recovery of 

costs that should be excluded from the formula rate. Additionally, formula rate audits in recent 

years have identified patterns of noncompliance in the following areas: 
2017 Staff Report on Enforcement 35 

 Income Tax Overpayments – 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. This 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. 

 Storm Damages – Utilities have collected excess amounts for storm damages from 

wholesale customers by either recovering estimates that do not reflect actual experience or 

recovering both estimated and actual storm damage expenses. 

 Investment Tax Credits (ITCs) – Utilities have improperly accounted for ITCs associated 

with utility plant as income tax prepayments in Account 165. ITCs are generated as a result 

of investments made in utility plant. DAA found instances in which tax credits were used 

to reduce taxable income, but not all of the ITCs were used at once and resulted in an ITC 

carry-forward. DAA found the ITC carry-forwards were recorded in an incorrect account 

and factored into formula rate billings, leading to customer overbillings. 

 Internal Merger Costs – Utilities have included merger-related costs in operating accounts, 

contrary to the directives of the Merger Order and long-standing Commission policy that 

such costs be recorded in non-operating accounts. This accounting resulted in companies 

misrepresenting utility operating income and expenses reported in their FERC Form No. 

1, Annual Reports (Form No. 1). In these cases, utilities were subject to hold-harmless 

commitments to exclude merger-related costs from rates unless the Commission approves 

recovery of such costs and were required to have appropriate controls and procedures to 

ensure that merger-related costs are tracked and excluded from formula rates. 

 Asset Retirement Obligation (ARO) – Utilities have included ARO amounts in formula 

rates without explicit Commission approval, including 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. 

 Commitment Fees – Utilities improperly accounted for commitment fees in Account 165, 

Prepayments, which led to excess recoveries through formula rate billings. 

 Formula Rate Errors – Utilities’ transmission formula rates contained errors, omissions, 

and miscalculations related to various accounts. Some accounts that should have been 

added were incorrectly subtracted. In other instances, the formula pulled information from 

the wrong Form No. 1 line. Finally, there were instances where items specifically excluded 

by formula rate protocols were included in the formula rate. 

 Merger Goodwill – Utilities have included goodwill in the equity component of the capital 

structure, absent Commission approval. It is the Commission’s long-standing policy that 

goodwill should be excluded from rates. 

 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 to transmission 

projects. 
2017 Staff Report on Enforcement 36 

 Administrative and General (A&G) Expenses – Utilities have recorded non-operating 

expenses and functional operating and maintenance expenses in A&G expense accounts, 

leading to 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 transmission is to 

support efficient and competitive markets. During recent OATT audits, DAA noted instances 

where company actions did not support this goal due to 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 pipelines’ 

compliance with the Commission’s accounting and 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 approved gas tariffs. In recent comprehensive natural gas audits, 

DAA has found noncompliance in the following areas: 

 Gas Tariff – Natural gas pipelines did not comply with FERC gas tariff procedures, 

specifically with regard to: using the method specified in the tariff for valuing system gas 

activities; enforcing stipulations in operational balancing agreements to manage and 

monitor gas imbalance activities between interstate and intrastate pipelines; updating 

reservation credit procedures for force majeure and non-force majeure events to be 

consistent with Docket No. RP11-1538-000; and reporting operational available capacity 

data consistent with North American Energy Standards Board requirements. 

 Accounting and Reporting – Natural gas pipelines did not comply with Commission 

accounting requirements, specifically with regard to: penalty revenues assessed to 

noncompliant shippers; transmission mains and compression station expenses; line pack 

inventory changes; shipper imbalances and cash-outs; lost and unaccounted-for gas; and 

fuel used in compressor stations. Other common areas of noncompliance included: 

derivation of allowance for funds used during construction; classification of non-operating 

activities associated with donations, fines, penalties and lobbying activities; and capital 

project reimbursements and advances from customers. Regarding FERC Form No. 2 

reporting, there was inaccurate or incomplete information for affiliate transactions and 

other subsidiary investment activities. There were also omissions and incomplete 

information from various schedules supporting the financial statements. 

 Pipeline Integrity Management Costs – Certain natural gas pipelines have misclassified 

integrity management costs that should be recorded as maintenance expenses. Commission 

accounting requirements, including the 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. 
2017 Staff Report on Enforcement 37 

 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 more competitive and efficient use of such capacity. 

Recent audits identified deficiencies in reporting available pipeline capacity because 

quantities were omitted or incorrectly reported. This means some shippers may not have 

been aware or able to avail themselves of operational opportunities for use of available 

pipeline capacity. 

Oil Pipelines (Page 700). An essential part of oil pipeline audits is an examination of the 

accounting and operating data included on page 700 of FERC Form No. 6, Annual Cost of ServiceBased Analysis Schedule.17 This information is sometimes used by the Commission and interested 

parties to evaluate interstate pipeline rates. Recent oil pipeline audits have identified accounting 

errors that impact the accuracy of amounts reported on page 700, including incorrectly designating 

intrastate amounts as interstate, and misclassification of carrier property, charitable donations, 

fines/penalties, and lobbying activities. DAA also found that some companies are not conducting 

depreciation studies as required, leading to depreciation rates not aligning with the actual service 

lives of the plants, and ultimately to plants with negative book balances. 

Nuclear Decommissioning Trust Funds. The Commission’s regulations concerning nuclear 

decommissioning trust funds require utilities owning nuclear power plants to file annual trust fund 

reports. Recent audits have identified utilities that failed to submit annual decommissioning trust 

fund reports, clearly distinguish Commission-jurisdictional monies from non-jurisdictional monies 

held in the funds, and accurately report the amount of Commission-jurisdictional money in the 

trusts. 

Consolidation. Commission accounting regulations require the equity method of accounting for 

all investments in subsidiaries. Recent audits 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. 

Untimely Filing of Commission Reports. DAA identified several companies that failed to timely 

file various reports with the Commission, including decommissioning trust fund reports and 

required filings, and reports related to mergers. Failure to timely file these reports prevents the 

Commission and industry from using relevant data. It also negatively impacts transparency and 

creates doubt regarding the effectiveness of these companies’ compliance programs. 

C. Significant Audit Matters 

DAA’s audits are public, risk-based, cover a variety of audit scope areas, and typically are 

commenced without allegation of wrongdoing. DAA consults with other divisions within 

 

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.
2017 Staff Report on Enforcement 38 

Enforcement and other program offices to inform DAA’s risk-based methodology in the selection 

of audit scope areas and audit candidates. DAA also works with other program offices to support 

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; rather, it responds to the needs of the Commission 

and industry. Individual audits often contain multiple and different scope areas, but every audit 

generally includes a review of the internal compliance with respect to the audit scope area. 

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 use this information to 

be better informed, avoid noncompliance, and improve operational performance. DAA expects 

timely implementation of all audit recommendations, which demonstrates an entity’s commitment 

to improve compliance with FERC rules and precedents, and reduces the risk of future 

noncompliance. 

In FY2017, DAA completed 11 audits of oil pipeline, public utility, and natural gas companies 

covering a wide array of topics. The audits resulted in 301 recommendations for corrective action, 

all of which were accepted by the audited companies, and directed $13.3 million in refunds and 

recoveries. Specifically, DAA directed $8.2 million to be refunded to jurisdictional customers, 

and prevented $5.1 million from being inappropriately amortized and collected through future 

wholesale formula rates. These refunds and other recoveries addressed storm damages, income 

tax receivables, uplift payments, commitment fees, and formula rate errors. Audit 

recommendations also directed improvements to the audited companies’ internal processes and 

procedures, financial reporting for accuracy and transparency, web site postings, and efficiency of 

operations. Collectively, these refunds, recommendations, prevented charges (i.e., savings), and 

procedural and process enhancements benefit ratepayers and market participants. 
2017 Staff Report on Enforcement 39 

The audits below were completed in FY2017 and provide a sample of DAA findings and 

results. 

Southern Company Audits – FA15-5-000, FA15-6-000, FA15-7-000, FA15-8-000. At 

Southern Company, DAA evaluated operating companies Gulf Power, Georgia Power, Alabama 

Power, and Mississippi Power’s (collectively Southern) compliance with: (1) the approved terms, 

rates, and conditions of its transmission formula rate mechanism as provided in their OATT, and 

other jurisdictional rates on file with the Commission; (2) the accounting requirements of the 

Uniform System of Accounts Prescribed for Public Utilities and Licensees under 18 C.F.R. Part 

101; and (3) the reporting requirements of FERC Form No. 1, Annual Report, under 18 C.F.R. § 

141.1.18 Additionally, the audit of Mississippi Power evaluated its compliance with the 

Commission’s requirements for a fuel adjustment clause under 18 C.F.R. § 35.14. The audits 

identified 47 findings of noncompliance, and made 193 recommendations that require the Southern 

operating companies to take corrective actions. 

The audit reports include findings on accounting for income tax receivables that will be held in 

abeyance pending the outcome of a filing for a rate determination from the Commission. Southern 

improperly included approximately an aggregate $683 million related to income tax receivables in 

its formula rate from 2012 to 2014. This increased the revenue requirement by approximately $3.6 

million. Additional findings of noncompliance found at Southern covered the following topics: 

wholesale storm damage revenues, commitment fees, AROs, formula rate calculations, accounting 

for Southern nuclear transactions, separation of nuclear decommissioning trust fund monies, 

accounting for abandoned transmission projects, regulatory assets, accounting for subsidiary 

investment, prior period adjustments, coal handling expenses, and FERC Form No. 1 reporting. 

These additional findings led to the Southern operating companies improperly including 

approximately $451 million in their formula rate calculations, resulting in the revenue requirement 

being overstated by roughly $17 million. In total, these audits led to refunds of nearly $3.86 

million to wholesale customers. 

PacifiCorp – FA16-4-000. At PacifiCorp, DAA evaluated compliance with: (1) approved terms, 

rates, and conditions of its wholesale formula rate mechanism as outlined in PacifiCorp’s OATT, 

and other jurisdictional rates on file with the Commission; (2) the accounting requirements of the 

Uniform System of Accounts Prescribed for Public Utilities and Licensees under 18 C.F.R. Part 

101; and (3) the reporting requirements of Form No. 1, Annual Report, under 18 C.F.R. § 141.1.19 

The audit identified nine findings of noncompliance and 38 recommendations for corrective action. 

The nine areas of noncompliance include: (1) inappropriate accounting and rate recovery of storm 

damage costs; (2) inappropriate recovery of production related coal mining assets; (3) 

inappropriate recovery of certain regulatory assets; (4) inappropriate accounting and rate recovery 

of accruals for injuries and damages that were covered by insurance policies; (5) incorrect 

computation of the AFUDC rate; (6) inappropriate inclusion of AROs in rates; (7) inappropriate 

 

18 Gulf Power Company, Docket No. FA15-5-000 (Sept. 26, 2017); Georgia Power Company, 

Docket No. FA15-6-000 (Sept. 26, 2017); Alabama Power Company, Docket No. 

FA15-7-000 (Sept. 26, 2017); Mississippi Power Company, Docket No. FA15-8-000 (Sept. 26, 

2017) (delegated letter orders).

19 PacifiCorp, Docket No. FA16-4-000 (Aug. 29, 2017) (delegated letter order).
2017 Staff Report on Enforcement 40 

accounting for two coal settlement payments; (8) improper accounting for liquidated damages; and 

(9) improper accounting for employee benefit costs. 

Of note, PacifiCorp inappropriately recovered both actual and estimated costs associated with the 

same storms from its wholesale customers. Specifically, PacifiCorp accounted for transmissionrelated storm damage costs by recording the actual storm damage costs in Account 571, 

Maintenance of Overhead Lines (Major only), and at the same time recorded the estimated costs 

for the storm damages in Account 924, Property Insurance. Both accounts were used in 

PacifiCorp’s wholesale formula rates in determining billings to wholesale customers. This led to 

PacifiCorp overbilling its merchant function through interdepartmental billings by $5.8 million 

and third-party wholesale customers by $1.1 million. 

Collectively, DAA’s findings directed PacifiCorp to refund approximately $14.0 million to its 

merchant function and approximately $2.6 million to third party wholesale transmission 

customers. In addition, $36 million in accounting adjustments resulting from the audit will save 

third-party wholesale customers approximately $5.1 million in future rates.

D. Other Audit Matters 

Mergers and Acquisitions 

NV Energy, Inc. (NV Energy) – PA15-2-000. At NV Energy, DAA evaluated whether NV Energy 

and its public utility subsidiaries, Nevada Power Company (Nevada Power) and Sierra Pacific 

Power Company (Sierra Pacific), complied with conditions established in the Commission order 

authorizing the merger of NV Energy with Silver Merger Sub, Inc. DAA also evaluated Nevada 

Power and Sierra Pacific’s compliance with tariff requirements relating to their Commission 

jurisdictional rates and Commission accounting and reporting requirements.20 The audit identified 

six findings of noncompliance and 21 recommendations for corrective actions. DAA found that 

Nevada Power and Sierra Pacific inappropriately accounted for the cost of consummating the 

merger in operating accounts, incorrectly accounted for changes in expected future cash flows 

associated with certain AROs, improperly accounted for special-purpose funds held in an external 

trust and non-operating lobbying-related expenses, miscalculated their respective AFUDC rates 

using a calculation method not consistent with Commission accounting requirements, and filed 

FERC Form No. 580 two years after the due date. As a result of DAA’s findings, $17.7 million 

was prevented from inclusion in future rate cases before the Commission wherein the companies’ 

cost of service rates would have been determined. 

Oil 

Plantation Pipe Line Company (Plantation) – FA15-12-000. At Plantation, DAA evaluated 

compliance with Commission regulations for oil pipeline companies under 18 C.F.R. Parts 340-

357, including the Uniform System of Accounts in 18 C.F.R. Part 352, and FERC Form No. 6 

financial reporting requirements in 18 C.F.R. § 357.2.21 The audit identified eight findings of 

noncompliance and 20 recommendations for corrective actions. In one finding, audit staff noted 

 

20 NV Energy, Inc., Docket No. PA15-2-000 (Feb. 1, 2017) (delegated letter order). 

21 Plantation Pipe Line Company, Docket No. FA15-12-000 (Dec. 23, 2016) (delegated letter 

order). 
2017 Staff Report on Enforcement 41 

that Plantation’s composite depreciation rates to compute depreciation expenses were no longer 

applicable, and that Plantation improperly continued to accrue depreciation expenses on carrier 

property accounts after certain accounts became fully depreciated. This resulted in Plantation 

recording $16.4 million of depreciation expense in excess of the book cost of the assets in these 

accounts. The audit directed Plantation to perform a new depreciation study that accounts for the 

changes in assumptions used for physical and economic service lives of the underlying 

assets. Plantation filed a depreciation study with the Commission on May 19, 2017, which the 

Commission accepted on July 18, 2017, in DO17-14-000. 

Market-Based Rate & EQR 

Dynegy, Inc. (Dynegy) – PA15-3-000. At Dynegy, DAA evaluated compliance with: (1) tariff 

rules regarding uplift payments from organized markets in which Dynegy participated; (2) the 

requirements of its MBR authorizations under 18 C.F.R. § 35 Subpart H; and (3) EQR filing 

requirements under 18 C.F.R. § 35.10b.22 The audit identified one finding of noncompliance and 

four recommendations for corrective actions. The noncompliance concerned numerous errors in 

Dynegy’s EQR filings, some of which were significant, including uplift payments in the wholesale 

organized markets and misclassification of transactions as energy sales, as well as unreported and 

inaccurately reported capacity sales, particularly in the MISO markets. These errors hindered the 

ability of the Commission and other interested entities to monitor wholesale electricity market 

activities. As a result, Dynegy initiated an IT automation project to improve the data extraction, 

consolidation and review process. In addition, Dynegy prepared written protocols for verifying 

the accuracy and completeness of its EQRs, and added the issue to its internal audit plan. 

Calpine Corporation (Calpine) – PA15-5-000. At Calpine, DAA evaluated compliance with: 

(1) tariff rules regarding uplift payments from organized markets in which Calpine participated; 

(2) the requirements of its market-based rate (MBR) authorizations under 18 C.F.R. § 35 Subpart 

H; and (3) Electric Quarterly Report (EQR) filing requirements under 18 C.F.R. § 35.10b.23 The 

audit identified three findings of noncompliance and six recommendations for corrective actions. 

Calpine’s submission of inaccurate data to PJM resulted in overpayments of approximately $1.18 

million for Lost Opportunity Cost uplift credits as well as Day-Ahead Scheduling Reserve 

overpayments. As a result of the audit, Calpine agreed to make refunds totaling $1.78 million, 

including associated interest. Calpine has also taken steps to ensure that any future uplift costs 

from PJM are warranted. 

SESCO Enterprises, LLC (SESCO) – PA16-3-000. At SESCO, DAA evaluated its wholesale 

electric trading activity, including compliance with applicable tariff provisions of markets in which 

SESCO participates, as well as compliance with requirements of its MBR authorizations, 

including, but not limited to the Commission’s MBR and Electric Quarterly Report filing 

requirements.24 The audit did not identify any findings of noncompliance that required SESCO to 

take corrective action. 

 

22 Dynegy, Inc., Docket No. PA15-3-000 (Oct. 14, 2016) (delegated letter order). 

23 Calpine Corporation, Docket No. PA15-5-000 (Dec. 2, 2016) (delegated letter order).

24 SESCO Enterprises, LLC, Docket No. PA16-3-000 (Aug. 21, 2017) (delegated letter order). 
2017 Staff Report on Enforcement 42 

Electric Tariff & Accounting 

NorthWestern Corporation (NorthWestern) – PA15-1-000. DAA evaluated Northwestern’s 

compliance with requirements in its OATT.25 The audit identified six findings of noncompliance, 

one other matter, and 19 recommendations for corrective actions. The six findings were: (1) 

improper approval of 79 non-firm transmission redirect requests that were assigned a higher 

priority than was permitted under its OATT; (2) six instances of improperly reserved hourly 

secondary network transmission service to support off-system sales to non-network customers by 

NorthWestern’s merchant function; (3) two improper disclosures of nonpublic transmission 

information to NorthWestern merchant function employees by transmission function employees, 

contrary to the Commission’s Standards of Conduct; (4) information required by section 30.3 of 

NorthWestern’s OATT missing from the standard form provided to its network customers for 

temporarily terminating a network resource and re-designating the same resource; (5) failure to 

file 15 large generator interconnection agreements containing nonconforming terms and conditions 

with the Commission prior to commencing service and receiving customer payments under those 

agreements; and (6) failure to file reports of issued securities in a timely and accurate manner. As 

a result of DAA’s findings, NorthWestern implemented policies and procedures to strengthen its 

processes for detecting, analyzing, mitigating, correcting, and reporting issues concerning 

compliance with Commission regulatory matters, including OATT compliance, and to ensure 

compliance going forward. Further, NorthWestern implemented training for employees to further 

strengthen and support compliance with the different risk areas identified during the audit.

E. Accounting Matters 

DAA administers the Commission’s accounting programs for the electric, natural gas, and oil 

industries as a vital component of the Commission’s strategy for setting cost-of-service rates that 

are just and reasonable. The foundation of the Commission’s accounting programs are the uniform 

systems of accounts codified in its regulations for electric utilities and licensees, centralized 

service companies, natural gas companies, and oil pipeline companies. 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 uniform 

systems of accounts. This body of accounting regulations, orders, and guidance letters comprises 

the Commission’s accounting requirements and allows for consistent and transparent accounting 

information to be used by the Commission and other stakeholders to set and monitor cost-ofservice rates. DAA helps 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., economic environment, technological changes, and mandates from 

other regulatory bodies) that impact the industries under the Commission’s jurisdiction. 

A substantial part of DAA’s accounting workload involves coordination with Commission 

program offices to provide regulatory accounting advice and analysis on various types of filings. 

In addition, DAA provides accounting expertise to Commission program offices in developing 

Commission policies and rulemakings to ensure these initiatives fully consider and evaluate the 

accounting and financial implications for jurisdictional entities. DAA also holds pre-filing 

meetings with jurisdictional entities seeking to make filings with the Commission to inform them 

of relevant accounting requirements. To better serve the Commission and other stakeholders in 

 

25 NorthWestern Corporation, Docket No. PA15-1-000 (Mar. 14, 2017) (delegated letter order). 
2017 Staff Report on Enforcement 43 

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. DAA encourages jurisdictional entities to also 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 of DAA’s workload includes 

educating regulated entities and promoting compliance with the Commission’s regulations through 

participating in various formal speaking engagements and industry accounting meetings. 

Filings Reviewed by DAA 

In FY2017, DAA 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 carve-outs, asset acquisitions and dispositions, depreciation, AFUDC, pensions and 

other post-retirement benefits, income taxes, and prior-period corrections. While DAA focused 

on accounting matters within the filings, many of the filings were primarily to seek Commission 

approval over 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 other program offices in an 

advisory role, identifying and analyzing the accounting implications of the requests. Over the past 

five years, DAA has reviewed 1,900 Commission filings to ensure proper accounting is followed 

and to advise the Commission of potential rate impacts. In FY2017 alone, DAA reviewed a total 

of 451 filings. 
2017 Staff Report on Enforcement 44 

Requests for Approval of the Chief Accountant 

In FY2017, DAA, through the Chief Accountant’s delegated authority, responded to 126 

accounting filings requesting approval of or seeking guidance for proposed accounting treatment 

or financial reporting. The matters in these filings related to various topics within the 

Commission’s accounting and financial reporting requirements for electric, natural gas, and oil 

pipeline entities. Of note in FY2017, there was a sharp increase in accounting filings related to 

mergers and divestitures, including internal reorganizations. There was also a large increase in 

filings during FY2017 requesting approval to record public utility asset sales and acquisitions. 

 Because of the increase in filings related to mergers and divestitures activity, DAA has 

continued concern about accounting related to these transactions. Specifically, staff is focused on 

ensuring that companies are properly recording transaction-related costs, which include costs to 

consummate the transaction and costs to transition operations from the previous organizational 

structure to the post-transaction structure. DAA encourages all jurisdictional entities to be familiar 

with the Commission’s policy on hold harmless commitments.26 Additionally, DAA is concerned 

with the purchase accounting associated with these transactions, either originating at the 

jurisdictional entity level, or pushed down from a jurisdictional entity’s holding company. Staff 

is focused on the integrity and continuity of original cost accounting related to utility plant assets, 

and the effect of the transactions on the debt and equity accounts of the jurisdictional entity. 

Also notable in FY2017 were letters to the Chief Accountant requesting approval to adjust 

retained earnings and deferred taxes, in response to an accounting change required by the Financial 

Accounting Standards Board. The change involved the calculation of deferred taxes related to 

employee share-based payments.27 The Commission’s accounting regulations require that 

jurisdictional entities write to the Commission and receive approval before making prior period 

adjustments and using Account 439, Adjustments to Retained Earnings, for electric utilities and 

licensees, centralized service companies, and natural gas companies, and Account 705, Prior 

Period Adjustments to Beginning Retained Income Account, for oil pipeline companies. In 

reviewing these filings, DAA staff was concerned that increases in deferred tax asset balances and 

retained earnings would result in an increase in rate base and cost of capital in future rate filings. 

After careful consideration and review, the Chief Accountant concluded that the requests to make 

the prior period adjustments were reasonable and adequately supported, and issued letters 

approving the requests. DAA encourages companies making similar filings to include all relevant 

historical evidence and analyses to support the adjustments. 

 

26 Policy Statement on Hold Harmless Commitments, 155 FERC ¶ 61,189 (2016) (Policy 

Statement).

27 See FASB Accounting Standards Update No. 2016-19, Improvements to Employee Share-based 

Payment Accounting (March 2016).
2017 Staff Report on Enforcement 45 

Rate Proceedings 

In FY2017, DAA participated in 73 rate filings 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 various accounting and financial issues and their effects on 

rates. Since many electric and natural gas rates are derived from accounting information in FERC 

Form Nos. 1 and 2, 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 had an opportunity to review the costs included in rates. Particular items that DAA 

emphasized as critical information during FY2017 included plant assets’ historical costs, mergerrelated costs, AROs, and deferred taxes. 

Certificate Proceedings 

In FY2017, DAA reviewed 59 natural gas pipeline certificate applications seeking various 

Commission authorizations: to construct, own, and operate new pipeline facilities; to acquire 

pipeline facilities; to abandon pipeline facilities in place, by removal, or by sale; and to establish 

rates for new pipeline service. DAA continues to work with other program offices to assist in the 

development of just and reasonable rates by reviewing construction costs and other items used to 

determine initial rates, including operation and maintenance expenses, depreciation, amortization, 

taxes, 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. 

Merger and Acquisition Proceedings 

In FY2017, DAA reviewed three merger and divestiture applications and approximately 177 

acquisition and sales 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, purchase accounting 
2017 Staff Report on Enforcement 46 

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, staff 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. 

Debt and Security Issuance Proceedings 

In FY2017, the Chief Accountant reviewed 13 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, 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 also ensures that future issuance of debt is consistent with public interest. 

Accounting Inquiries 

In FY2017, DAA responded to 102 accounting inquiries from jurisdictional entities and other 

stakeholders on dozens of accounting and financial topics. Accounting inquiries are made through 

the Compliance Help Desk, the Accounting Inquiries phone line and email, or are sent directly to 

DAA staff. The majority of accounting inquiries during FY2017 sought accounting and financial 

reporting direction on topics such as capitalization and original cost. Other topics included 

depreciation, the appropriate functional classification of costs, deferred taxes, and record-retention 

requirements. DAA responds to these accounting inquiries by providing informal accounting and 

financial reporting guidance based on Commission precedent and regulations, in addition to 

instructing individuals how to find documents and regulations using the Commission eLibrary 

system28 and Title 18 of the Code of Federal Regulations.29 Such informal accounting guidance is 

not binding to the Commission, and cannot grant waiver of a Commission regulation or order. 

Accounting for Pensions and Other Postretirement Benefits 

DAA has received multiple inquiries from jurisdictional entities regarding the accounting for 

pensions and other postretirement benefits (jointly referred to as net benefit cost), in light of 

Financial Accounting Standards Board’s Accounting Standards Update (ASU) 2017-07, 

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit 

 

28 The Commission’s eLibrary system can be accessed at www.ferc.gov/docs-filing/elibrary.asp. 

29 The Commission’s regulations in 18 C.F.R. can be found at www.ecfr.gov. 
2017 Staff Report on Enforcement 47 

Cost (to be effective for calendar year 2018, if companies do not elect to early adopt). Prior to the 

ASU, net benefit cost was recognized on the income statement as one amount net of all the 

components that make up net benefit cost. The ASU now requires companies to separate net 

benefit cost into the service cost component and all other components. The service cost component 

will be recognized as part of operating income or loss, while the other components will be 

recognized in the non-operating section. Also, only service cost will be eligible to be capitalized. 

Under the Commission’s accounting requirements for electric utilities and licensees, 

centralized service companies, natural gas companies, and oil pipeline companies, the net benefit 

cost is recognized entirely in operating income. After deliberations and discussions amongst DAA 

and other program offices, staff finds no basis to record any portions of net benefit cost to any 

account except for the one designated specifically for that purpose in each current respective 

system of accounts. Regarding capitalization, capitalizing only a portion of the service cost 

component of net benefit costs while the other components are expensed does not conflict with the 

Commission’s current accounting requirements. Staff recommends that jurisdictional entities who 

may change their capitalization practice for benefit costs should include all relevant disclosures in 

the footnotes to the financial statements filed annually with the Commission, and be transparent in 

this accounting change in any relevant future rate filings if there is an impact on rates. 

Staff notes that changes in accounting by the Financial Accounting Standards Board, such as 

this ASU, are not to be construed as a change to, or a waiver from, the Commission’s accounting 

requirements. When necessary, the Chief Accountant or the Commission will issue guidance on 

the implementation of new changes in accounting.

International Financial Reporting Standards 

DAA continued its participation with the International Financial Reporting Standards (IFRS) 

Foundation, the International Accounting Standards Board (IASB), and their project on RateRegulated Activities (RRA) which remains of special interest to the Commission and its regulated 

entities. In FY2017, the Chief Accountant, a Consultative Group member for the RRA Project, 

participated in informal and formal 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 provides for regulatory assets and liabilities 

in IFRS financial statements. In Fiscal Year 2018, the Chief Accountant stands ready to continue 

providing expert advice to IASB staff to develop permanent standards on rate-regulated activities.
2017 Staff Report on Enforcement 48 

DIVISION OF ENERGY MARKET OVERSIGHT 

A. Overview 

In support of the Commission’s responsibility to ensure just and reasonable rates, terms, and 

conditions for consumers, Market Oversight is responsible for monitoring and analyzing the 

nation’s wholesale natural gas and electric power markets. Market Oversight performs this 

monitoring and analysis by: (1) examining and analyzing the structure and operation of the markets 

to identify significant market events and trends, inefficient market rules, tariff and rule violations, 

and other unusual market behavior; (2) analyzing market-based rate transactions to determine 

whether entities are exercising market power, and reporting its various analyses and observations 

to the Commission; (3) collaborating with other Commission offices to develop regulatory 

strategies, focusing on the competitiveness, fairness, and efficiency of wholesale energy markets; 

(4) administering, analyzing, and ensuring compliance with the filing requirements of EQRs and 

various Commission forms; and (5) conducting outreach to and communication with the public. 

B. 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 assess participant behavior. Staff also presents analyses at Commission 

meetings. During FY2017, such presentations included the following: 

2016 State of the Markets Report 

Market Oversight annually submits to the Commission, and makes public, its State of the 

Markets report, which assesses the significant events in the energy markets during the prior year.30 

Posted on April 13, 2017, the report for 2016 observed near record low wholesale power prices, 

and record low natural gas prices. Natural gas prices fell by roughly 30 percent across trading 

hubs nationwide. The report explained that changes in the North American natural gas demand 

drove down U.S. natural gas spot prices in 2016, despite decreases in natural gas production for 

the first time since large-scale shale production began in 2005. Low gas prices resulted in the 

annual share of electricity produced from natural gas surpassing electricity produced from coal for 

the first time. Besides describing natural gas developments in the power sector, the report provided 

updates on major electric capacity additions and retirements, and discussed distributed energy 

resources and net metering trends nationwide. 

 

30 See State of the Market Report 2016, available at http://www.ferc.gov/market-oversight/reportsanalyses/st-mkt-ovr/2016-som.pdf. 
2017 Staff Report on Enforcement 49 

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 FY2017, Market Oversight’s 

seasonal assessments included the following: 

Winter 2016/2017 Energy Market Assessment, October 20, 2016. Market Oversight staff 

presented the outlook for natural gas markets, highlighting both increasing expected demand and 

near record inventories of natural gas in storage.31 Additionally, declining gas production was 

expected as a result of lower natural gas and oil prices. Market Oversight staff explained that new 

natural gas pipeline expansions and projects would provide more transportation capacity from 

producing regions to market areas during the 2016-17 winter. 

Regarding the wholesale electricity markets, staff presented information on expected 

transmission expansion during winter 2016-17, as well as anticipated changes in generating 

capacity. Staff also discussed CAISO’s operational considerations with respect to the management 

of solar generation and load patterns during the winter. 

Summer 2017 Energy Market and Reliability Assessment, June 15, 2017. This assessment 

reviewed the outlook for the electric market for summer 2017, highlighting the adequacy and 

diversity of electric power supplies, trends in fuel markets, and region-specific issues.32 This 

assessment also covered details relating to capacity markets in PJM and other Eastern RTOs/ISOs, 

and discussed CAISO’s preparations for the August 21, 2017, solar eclipse. 

Market conditions going into the summer reflected the rising natural gas prices that resulted 

from a decrease in natural gas production rates. Moreover, despite modest load growth, regional 

electric system reserve margins were forecast to be adequate. 

C. 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 to 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 that 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. 

 

31 See 2015-16 Winter Energy Market Assessment, available at http://www.ferc.gov/marketoversight/reports-analyses/mkt-views/2016/10-20-16-A-3.pdf. 

32 See Summer 2017 Energy Market and Reliability Assessment, available at

http://www.ferc.gov/market-oversight/reports-analyses/mkt-views/2017/2017-summerassessment.pdf. 
2017 Staff Report on Enforcement 50 

D. Commission Orders 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 

necessary to administer and monitor the markets effectively. In FY2017, Market Oversight 

participated in over 60 docketed Commission proceedings. Through its work on these matters, 

Market Oversight seeks to enhance market transparency and efficiency while balancing the 

regulatory burden on market participants. 

E. Forms Administration and Compliance 

Market Oversight staff administers and ensures compliance with certain Commission filing 

requirements. The Commission requires jurisdictional entities to submit financial statements, 

operational data, and annual and quarterly reports regarding jurisdictional sales. It uses these 

reports for various analyses, such as evaluations of whether existing rates continue to be just and 

reasonable. Other government agencies and industry participants also use them for a variety of 

business purposes. 

Electric Quarterly Reports 

Section 205 of the FPA and Part 35 of the Commission’s regulations, 18 C.F.R. Part 35, 

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 to require public utilities, including 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 providing 

transaction information (including rates) for short-term and long-term power sales during the most 

recent calendar quarter.33 

In FY2017, the Commission received EQR submittals from over 2,000 entities each quarter. 

Market Oversight 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. It also coordinates with DAA on EQR issues that arise during the audits, 

and refers candidate entities to OEMR that do not timely file their EQRs for possible revocation 

of market-based rate authority. Market Oversight held two EQR user group meetings in FY2017 

to conduct outreach with the filing community and to discuss potential system improvements and 

enhancements. Each meeting had over 300 participants attend either in person or through 

 

33 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). 
2017 Staff Report on Enforcement 51 

webcast/phone. Staff also updated the Frequently Asked Questions section of the EQR page on 

the Commission website to provide additional assistance to filers.34 

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.35 Throughout FY2017, Market Oversight staff, with the 

assistance of subject matter experts from other Commission offices and the North American 

Energy Standards Board, have developed a robust framework of rules and validations for the forms 

included in this project. This initiative will upgrade the filing system that supports the eForms 

program, assist the Commission with processing and data management improvements, and 

enhance data quality for all users. 

F. Outreach and Communication 

Market Oversight makes some of its analyses available to the public by posting reports on its 

website and hosting periodic snapshot presentations. Staff also briefs visiting industry 

participants, state and federal officials, and foreign delegations. 

Technical Conference: Developments in Natural Gas Index Liquidity and 

Transparency 

 On June 29, 2017, Market Oversight staff led a technical conference to discuss trends, concerns 

and potential solutions related to the declining levels of natural gas index liquidity.36 The technical 

conference attracted nearly 100 attendees, including 22 panelists who spoke on a wide range of 

topics relating to natural gas indices. The purpose of the technical conference was to solicit 

feedback and develop a record regarding index robustness, and to discuss what, if anything, the 

industry and/or the Commission could do to increase transparency and support greater robustness 

in natural gas index price formation. Panelists at the technical conference discussed the following 

topics: (1) the current state of natural gas index liquidity and voluntary reporting to index 

developers; (2) the use of natural gas indices over time; and (3) possible actions that the industry 

and/or the Commission could take to increase transparency and support greater robustness in 

natural gas index formation. Following the conference, written comments were also submitted by 

15 commenters relating to these topics. 

 

34 See FERC: FAQs Electric Quarterly Reports (EQRs) for 3rd Quarter 2013 and Beyond, 

https://www.ferc.gov/resources/faqs/eqr-2013.asp4037931413.

35 Order Instituting Proceeding to Develop Electronic Filing Protocols for Commission Forms, 

151 FERC ¶ 61,025 (2015). 

36 See Notice of Technical Conference, https://elibrarybackup.ferc.gov/idmws/common/OpenNat.asp?fileID=14586688.
2017 Staff Report on Enforcement 52 

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 liquefied natural gas (LNG), coal, and oil. 

Snapshot Calls 

Market Oversight holds 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, which include data and 

information on natural gas, electricity, LNG, weather, infrastructure development, and other 

market developments, serve as the basis for discussion on the calls. Market Oversight’s Snapshot 

Reports are available on the website at http://www.ferc.gov/market-oversight/mkt-snp-sht/mktsnp-sht.asp, and are archived back to 2007. 

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 FY2017, 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.
2017 Staff Report on Enforcement 53 

DIVISION OF ANALYTICS AND SURVEILLANCE 

A. Overview 

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 

identify market participants whose conduct calls for investigation, and participate in investigations 

with attorneys from DOI, providing detailed transactional analysis, market event analysis, and 

subject matter expertise. 

To perform these functions, access to high quality, relevant, and timely data is essential. Since 

the creation of DAS in 2012, the Commission has continued enhancing its data collection through 

orders, agreements, and subscription services in a manner designed to minimize burden on market 

participants. In Order No. 760, the Commission directed the RTO/ISOs to provide, on an ongoing 

basis, and in a format consistent with how the data is collected in each market, critical information 

on bids, offers, and market outcomes.37 On average, the Commission receives, on a non-public 

basis, approximately six gigabytes of data in more than 1,000 tables each day from the six 

organized markets combined. Each RTO/ISO database is drastically different, and DAS is 

responsible for understanding the nuances of each database and preparing them for use in 

surveillance screens and analyses. 

Similarly, pursuant to Order No. 771,38 the Commission gained access to the electronic tags 

(eTags) used to schedule the transmission of electric power interchange transactions in 

jurisdictional wholesale markets by requiring that each covered eTag identify the Commission as 

a party authorized to review its contents. The Commission now has access to approximately 

15,000 new eTag requests and 5,000 new eTags each day. The Commission also routinely receives 

non-public physical electric and natural gas market data from the Intercontinental Exchange (ICE) 

and a subset of the Large Trader Report from the Commodities Futures Trading Commission 

(CFTC) through a Memorandum of Understanding. DAS surveillance and analytics staff continue 

to use these data sources, EQR data, and data from a variety of subscription-based services, 

extensively. 

B. Surveillance 

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, both in the natural gas and 

 

37 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). 

38 Availability of E-Tag Information to Commission Staff, Order No. 771, 141 FERC ¶ 61,235 

(2012). 
2017 Staff Report on Enforcement 54 

electricity markets. In the context of surveillance, DAS seeks to detect anomalous activities in the 

markets, and identify potential investigative subjects. When a surveillance screen issues an alert, 

staff conducts a series of analyses to gain information about the activity that caused it. First, staff 

evaluates the activity using available information and market data to determine whether there is a 

fundamentals-based explanation for the activity. Most often, staff finds such an explanation. 

However, when the follow-up analyses fail to explain the alert, staff performs a more in-depth 

review of the conduct, which may involve contacting the market participant to request additional 

information and explanations for the conduct. Staff classifies this enhanced review as the opening 

of a surveillance inquiry. If staff is still concerned that there is a potential violation after 

conducting a surveillance inquiry, it may recommend that DOI open an investigation into the 

matter. 

Natural Gas 

DAS conducts surveillance and analysis of the physical natural gas markets to detect potential 

manipulation and anti-competitive behavior. Automated natural gas screens cover the majority of 

physical and financial trading hubs in the United States on a daily and monthly basis. DAS also 

employs asset-based screens that monitor cash trading around infrastructure, including natural gas 

storage, pipeline capacity, and electric generation. These screens alert staff to a variety of market 

conditions and market participant actions. In addition, DAS uses Large Trader Report data from 

the CFTC to identify potential financial incentives that might relate to a manipulative scheme. 

In FY2017, DAS’s natural gas surveillance screens produced approximately 4,744 alerts. Staff 

reviewed these screen alerts by comparing the conduct that caused the alert to activity at other 

hubs, and evaluating whether there was a fundamentals-based explanation for the activity based 

on a review of supply, demand, pipeline utilization, operational notices, and physical and financial 

trading. In most cases, this follow-up analysis provided an explanation for the alert. When it did 

not, DAS began an inquiry and performed a more in-depth review of the specific trading behavior. 

In FY2017, DAS conducted 17 such natural gas surveillance inquiries. Of these inquiries, DAS 

referred two to DOI for investigation. 
2017 Staff Report on Enforcement 55 

Electricity

DAS regularly accesses data from a variety of sources to screen for anomalies and potentiallymanipulative behavior in the RTO/ISO and bilateral electricity markets. During FY2017, staff ran 

monthly and weekly screens to identify patterns at the hourly level by monitoring the interactions 

between bids and cleared physical and financially-settled electricity products. In particular, these 

screens identify FTRs and swap-futures that settle against nodes that are affected by transmission 

constraints where market participants also trade virtuals, generate electricity, purchase electricity, 

or move power between Balancing Authorities. 

During the fiscal year, staff continued to refine its analytic tools and screens for, among other 

things: (1) determining uneconomic virtual transactions by node, zone, and constraint; (2) 

detecting Day-Ahead market congestion manipulation that would benefit FTRs, swap-futures 

positions for physical load, and generation portfolios; (3) identifying anomalies in physical offer 

patterns; (4) identifying abnormal out-of-market payments; (5) detecting irregularities in capacity 

market sell offers; and (6) identifying loss making physical fixed-price offer strategies in bilateral 

electricity markets. DAS also continued to bolster its tools to view patterns of behavior on a 

portfolio basis, across Balancing Authority borders and jurisdictional commodities. 

During FY2017, DAS ran and reviewed 70 monthly electric surveillance screens, hourly and 

intra-hour sub-screens, and reports for over 37,000 hub and pricing nodes within the six 

RTO/ISOs. Additionally, DAS screened non-RTO markets and cross-RTO portfolio trades for 

potential manipulation. In reviewing screen alerts and, in some cases, after communicating with 

the RTO/ISO market monitors, DAS identified 31 instances of market behavior that required 

further analysis through a surveillance inquiry. Of the 31 electric surveillance inquiries, four were 

referred to DOI for investigation, 17 were closed with no referral, and 10 remain open with staff 

continuing its analysis. 
2017 Staff Report on Enforcement 56 

Illustrative DAS Surveillance Inquiries Closed With No Referral

Market Manipulation (Gas). DAS natural gas surveillance screens identified a market participant 

buying at elevated prices and with a high market concentration during bidweek. The price levels 

of the physical natural gas purchases exceeded valuations implied by contemporaneous financial 

transactions by more than 40 percent. In addition, the market participant held benefiting positions 

tied to the index settlement. Staff contacted the market participant, who explained both its physical 

and financial activities. Financially, the market participant bought basis going into bidweek, which 

it perceived was undervalued compared to premiums on physical index gas. Physically, the market 

participant was covering a short position and had to buy at escalating prices due to its perception 

of developing colder weather and the fact that gas was scarce. After reviewing the market 

participant’s internal documentation pertaining to weather progression and verifying the pricing 

information, the surveillance inquiry was closed with no referral to DOI. 

Market Manipulation (Gas). DAS natural gas surveillance screens identified a market participant 

in the cash market trading early, buying at elevated levels, and engaging in concentrated trading. 

The activity occurred while the market participant held financial and physical natural gas positions 

priced at the relevant index, and pipeline transportation capacity at the traded location. After the 

alerts, DAS reviewed the market participant’s trading and positions over time and perceived that 

the trading did not always align with the its index positions, and that the financial benefit was 

modest on average. Staff also concluded the market participant’s purchases were strongly 

profitable, assuming the purchased gas was shipped to a higher value zone via the pipeline capacity 

holdings. The matter was closed with no referral to DOI. 

Market Manipulation (Electric). DAS electric surveillance screens identified large, loss making 

virtual increment offers (INCs) at an RTO Hub placed by a market participant who held a leveraged 

FTR path sourcing at that same hub. DAS contacted the market participant and was informed that 

the entity held a tolling agreement with a generation facility in the RTO and that the contract priced 

against the real time locational marginal price. The market participant explained that the observed 

INCs covered a period of a planned outage, and that the virtual position shifted a non-leveraged 

real time position to the day ahead market where the market participant hedged commodity risk. 

After verifying the relevant information, the inquiry was closed with no referral to DOI. 

Market Manipulation (Electric). DAS electric surveillance screens identified elevated, early 

session sales placed by a market participant in fixed-price next-day contracts at a bilateral hub. 

The fixed-price next day sales were uneconomic when marked against the daily index. DAS 

contacted the market participant and was informed that the entity was flattening physical index 

exposure created to hedge an off-take agreement from a generation facility. With the additional 

information, it was clear that the long physical index exposure and short fixed-priced next day 

exposure were not leveraged, and that losses in the fixed-priced next day market were confined to 

a limited number of trading sessions. After verifying the relevant information, the inquiry was 

closed with no referral to DOI. 

C. Analytics 

During FY2017, DAS worked on approximately 50 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 electricity 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 
2017 Staff Report on Enforcement 57 

manipulation; (2) identifying patterns of market activity that could indicate market manipulation; 

(3) identifying time periods in which potentially manipulative activities occurred; 

(4) reconstructing and analyzing companies’ trading portfolios; (5) supporting DOI in taking 

investigative testimony and other fact finding; (6) analyzing the subject’s contentions and 

arguments; and (7) 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 internally to refine and develop new screens to 

detect improper behavior discovered in prior investigations. 
2017 Staff Report on Enforcement 58 

CONCLUSION 

The information in this Report is provided to promote transparency and to encourage 

jurisdictional entities 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, conducting surveillance to detect potential manipulation or 

violations of rules or tariffs, and actively overseeing the gas and electric markets to assist the 

Commission in ensuring reliable, efficient, and sustainable energy for consumers. As a whole, by 

monitoring jurisdictional entities and enforcing the Commission’s rules, Enforcement will 

continue to support the Commission’s core functions of ensuring just and reasonable rates, and 

promoting secure and sustainable energy infrastructure.
2017 Staff Report on Enforcement 

APPENDIX A: OFFICE OF ENFORCEMENT ORGANIZATION C

Division of Audits and Accounting

Bryan Craig, Dir and Chief Accountant

Steven Hunt, Dep Dir & Dep Chief Acct 

Timothy Smith, Dir, Audits & Acctg Ops

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

Jeffrey Sanders, Acting Chief

Investigations Branch 1

Demetra Anas, Chief

Audits Branch 2

Christopher Handy, Chief 

Investigations Branch 2

Jay Matson, Chief

Investigations Branch 3

Jeremy Medovoy, Acting Chief

Audits Branch 1

Nicholas Coughlin, Chief

Audits Branch 3

Sylvia Anderson, Chief

Division of Investigations

Geof Hobday, 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 

Audits Branch 4

Brian Harrington, Chief

Investigations Branch 4

Gabriel Sterling, Chief

Regulatory Accounting Branch 

Gerald Williams, Chief

Market Oversight Branch 4 

Adam Bednarczyk, Chief

Market Oversight Branch 2 

Erin Mastrangelo, Chief

Market Oversight Branch 3

Eric Krall, Chief

An

An

An

An

An

OFFICE OF ENFORCEMENT

An

An
2017 Staff Report on Enforcement 

60 

APPENDIX B: FY2017 CIVIL PENALTY ENFORCEMENT 

ACTIONS39 

Subject of 

Investigation and 

Order Date 

Total Payment 

Explanation of Violations 

City Power 

Marketing, LLC 

and K. Stephen 

Tsingas and 

FERC v. City 

Power Marketing, 

LLC and K. 

Stephen Tsingas, 

Order Approving 

Stipulation and 

Consent 

Agreement, 160 

FERC ¶ 61,013. 

$1,300,000 

disgorgement; $9 

million civil penalty 

against City Power; 

$1,420,000 civil 

penalty against 

Tsingas. 

The Commission approved a settlement resolving: (a) 

the Commission’s claims against Tsingas and City 

Power for violations of section 222 of the Federal 

Power Act (FPA) and the Commission’s AntiManipulation Rule, 18 C.F.R. § lc (2017), and of the 

Commission’s rule requiring truthful communications 

with (among others) the Commission, 18 C.F.R. § 

35.41(b) (2017); and (b) the Federal District Court 

action, captioned FERC v. City Power Marketing, 

LLC, No. 1:15-cv-01428-JDB (D.D.C.), that the 

Commission had filed to enforce its July 2, 2015, 

Order Assessing Penalties, 152 FERC ¶ 61,012. 

GDF SUEZ 

Energy Marketing 

NA, Inc., Order 

Approving 

Stipulation and 

Consent 

Agreement, 158 

FERC ¶ 61,102. 

$40,800,000 

disgorgement; 

$41,000,000 civil 

penalty. 

The Commission issued an Order approving a 

Stipulation and Consent Agreement between the 

Office of Enforcement (Enforcement) and GDF SUEZ 

Energy Marketing NA, Inc. (GSEMNA), resolving 

Enforcement’s investigation into whether GSEMNA 

violated the Commission’s Anti-Manipulation Rule, 

18 C.F.R. § 1c (2016), by improperly targeting and 

increasing its receipt of lost opportunity cost credits 

(LOCs) in the PJM Interconnection, L.L.C. (PJM) 

market. 

Covanta Haverhill 

Associates L.P., 

Order Approving 

Stipulation and 

Consent 

Agreement, 158 

FERC ¶ 61,105. 

$36,000 civil 

penalty. 

The Commission issued an Order approving a 

Stipulation and Consent Agreement between 

Enforcement and Covanta Haverhill Associates L.P. 

(Covanta Haverhill), resolving Enforcement’s 

investigation into whether Covanta Haverhill violated 

the ISO-New England (ISO-NE) Tariff and one of the 

Commission’s Market Behavior Rules, 18 C.F.R. § 

35.41(a) (2016), by failing to provide required 

instantaneous metered powered output data to ISONE. 

 

39 A list of all post-EPAct 2005 civil penalty orders is available at 

http://www.ferc.gov/enforcement/civil-penalties/civil-penalty-action.asp. 
2017 Staff Report on Enforcement 

61 

Westar Energy, 

Inc., Order 

Approving 

Stipulation and 

Consent 

Agreement, 160 

FERC ¶ 61,025. 

$180,000 civil 

penalty. 

The Commission approved a Stipulation and Consent 

Agreement between Enforcement and Westar Energy, 

Inc., resolving Enforcement’s investigation into 

whether Westar violated provisions of the Southwest 

Power Pool Tariff and 18 C.F.R. § 35.41(b) by 

submitting inaccurate cost inputs for its mitigated 

energy offer curves, or by intentionally targeting 

outsized make-whole payments. 

American 

Transmission 

Company, LLC, 

160 FERC ¶ 

61,030. 

$205,000 civil 

penalty. 

The Commission approved a Stipulation and Consent 

Agreement between Enforcement and American 

Transmission Company, LLC (ATC) resolving 

Enforcement’s investigation into (i) whether ATC 

violated section 203(a)(1)(B) of the Federal Power 

Act (FPA) and Part 33 of the Commission’s 

regulations, 18 C.F.R. Part 33, by acquiring certain 

Commission-jurisdictional facilities without prior 

Commission approval; and (ii) whether ATC violated 

section 205 of the FPA and Part 35 of the 

Commission’s regulations, 18 C.F.R. Part 35, by 

failing to timely file certain Commission jurisdictional 

agreements. 

 
2017 Staff Report on Enforcement 

62 

APPENDIX C: FY2017 NOTICES OF ALLEGED VIOLATIONS40 

Issue Date Subject(s) of 

Investigation 

Description of Alleged 

Misconduct 

Dates of Alleged 

Misconduct 

December 2, 2016 GDF SUEZ Energy 

Marketing NA, Inc. 

Violation of the Commission’s 

Anti-Manipulation Rule, 18 C.F.R. 

§ 1c.2 (2016), by engaging in a 

strategy to target and inflate its 

receipt of lost opportunity cost 

credits (LOCs) in the PJM 

Interconnection, L.L.C. (PJM) 

market. 

May 2011 to 

September 2013 

January 23, 2017 Covanta Haverhill 

Associates LP 

Violation of section 35.41(a) of 

the Commission’s regulations and 

various provisions of the ISO-New 

England (ISO-NE) Tariff by 

failing to provide required 

instantaneous metered output data 

to ISO-NE. 

September 2007 

through June 

2016 

March 30, 2017 Westar Energy, Inc. Violated the Southwest Power 

Pool (SPP) Tariff by including 

incorrect cost inputs in its 

mitigated energy offer curves and 

failing to timely update other cost 

inputs, as required by the Tariff. 

May 2014 

through May 

2015 

July 7, 2017 American 

Transmission 

Company, LLC 

Violation of FPA Section 203 by 

failing to seek preapproval from 

the Commission before acquiring 

22 jurisdictional facilities, and 

failing to timely file with the 

Commission 42 jurisdictional 

agreements in violation of FPA 

Section 205. 

Between 2006 

and 2014 

 

40 A list of all notices of alleged violations is available at 

http://www.ferc.gov/enforcement/alleged-violation/notices.asp. 
2017 Staff Report on Enforcement 

63 

July 13, 2017 Rover Pipeline, LLC 

and Energy Transfer 

Partners, L.P. 

Violation of section 7 of the 

Natural Gas Act, 15 U.S.C. § 717, 

et seq., and section 157.5 of the 

Commission’s Regulations, 18 

C.F.R. § 157.5 (2016), by falsely 

promising in its Application for a 

Certificate of Public Convenience 

and Necessity and supporting 

filings in Docket No. CP15-93, 

avoidance of adverse effects to a 

historic resource while 

simultaneously working to 

purchase and destroy the historic 

resource. Rover subsequently 

made several misstatements in its 

docketed response to the 

Commission’s questions about 

why it had purchased and 

demolished the resource. 

Between 

February 2015 

and September 

2016