UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

 

 

 

2020 REPORT ON ENFORCEMENT

Docket No. AD07-13-014

Prepared by Staff of the

Office of Enforcement

Federal Energy Regulatory Commission

Washington, D.C.

 

NOVEMBER 19, 2020 
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.
2020 Staff Report on Enforcement 

3

TABLE OF CONTENTS 

TABLE OF CONTENTS.................................................................................................................3

INTRODUCTION ...........................................................................................................................5

OFFICE OF ENFORCEMENT PRIORITIES.................................................................................6

DIVISION OF INVESTIGATIONS................................................................................................8

Overview....................................................................................................................................8

Significant Matters...................................................................................................................10

District Court Litigation ............................................................................................................ 10

Administrative Proceedings at the Commission........................................................................ 14

Settlements...............................................................................................................................16

Self-Reports .............................................................................................................................20

Statistics on Self-Reports........................................................................................................... 20

Illustrative Self-Reports Closed with No Action....................................................................... 24

Investigations...........................................................................................................................31

Statistics on Investigations........................................................................................................ 31

Illustrative Investigations Closed with No Action..................................................................... 37

MMU Referrals........................................................................................................................39

Statistics on MMU Referrals..................................................................................................... 41

Illustrative MMU Referrals Closed with No Action ................................................................. 41

Enforcement Hotline................................................................................................................42

Other Matters...........................................................................................................................42

DIVISION OF AUDITS AND ACCOUNTING...........................................................................44

A. Overview..................................................................................................................................44

B. Outreach and Guidance............................................................................................................45

Compliance ..............................................................................................................................45

Compliance Programs................................................................................................................ 45

Timely Remedy of Noncompliance........................................................................................... 46

Compliance Alerts..................................................................................................................... 46

Audit Matters...........................................................................................................................52

1. Formula Rates............................................................................................................................ 53

2. Gas Tariff & Accounting........................................................................................................... 55

3. Oil Tariff & Accounting............................................................................................................ 56

4. Electric Tariff & Accounting..................................................................................................... 57
2020 Staff Report on Enforcement 

4

5. Mergers & Acquisitions............................................................................................................. 59

6. No Audit Findings of Noncompliance....................................................................................... 60

Pending Contested Audit Matters............................................................................................60

Accounting Matters..................................................................................................................61

Overview of FY2020 Filings Reviewed by DAA ..................................................................... 62

Requests for Approval of the Chief Accountant........................................................................ 62

Rate Proceedings....................................................................................................................... 64

Certificate Proceedings.............................................................................................................. 64

Merger and Acquisition Proceedings ........................................................................................ 65

Debt and Security Issuance Proceedings................................................................................... 65

Accounting Inquiries................................................................................................................. 65

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement.............. 66

Accounting for Cumulative-Effect Adjustments to Retained Earnings Related to Credit Loss 

Measurement Methodology.................................................................................................................. 67

Accounting for Pipeline Testing Costs...................................................................................... 67

COVID-19 Pandemic Response ................................................................................................ 68

Commission Order No. 864 Compliance .................................................................................. 69

Forms Administration and Compliance...................................................................................70

Electric Quarterly Reports......................................................................................................... 70

eForms Refresh Project ............................................................................................................. 71

Financial Forms......................................................................................................................... 72

DIVISION OF ANALYTICS AND SURVEILLANCE...............................................................73

Overview..................................................................................................................................73

Surveillance..............................................................................................................................74

1. Natural Gas.................................................................................................................................... 74

2. Electricity....................................................................................................................................... 75

3. Illustrative DAS Surveillance Inquiries Closed with No Referral................................................. 76

Analytics..................................................................................................................................78

Market-Based Rate Ex Post Analysis......................................................................................78

Data Management ....................................................................................................................79

APPENDIX A: OFFICE OF ENFORCEMENT ORGANIZATION CHART (CURRENT)......80

APPENDIX B: FY2020 CIVIL PENALTY ENFORCEMENT ACTIONS ................................81
2020 Staff Report on Enforcement 

5

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 2020 (FY2020),2 including an overview of, and 

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

Investigations (DOI), Division of Audits and Accounting (DAA), 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. Most of the information the public receives 

about Enforcement’s activities comes from public Commission orders approving settlements, 

orders to show cause, publicly released staff reports, and audit reports. This report summarizes 

the status and resolution of various matters that were public in FY2020. However, not all of 

Enforcement’s activities result in public actions by the Commission. Like reports in previous 

years, the FY2020 report provides the public with more information regarding the nature of nonpublic Enforcement activities, such as investigations that are closed without action, self-reported 

violations, and examples of surveillance inquiries initiated by DAS that are terminated short of 

opening an investigation. This report also highlights Enforcement’s work administering the audit 

and accounting programs, 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.

While Enforcement continued its typical investigations, audits, and surveillance activities in 

FY2020, it also took steps to help regulated entities manage their potential enforcement and 

compliance-related obligations in response to the unprecedented COVID-19 pandemic. On April 

2, 2020, then Chairman Neil Chatterjee announced proactive steps by the Commission to help 

regulated entities in this regard. In accordance with then Chairman Chatterjee’s announcement, 

Enforcement staff provided several accommodations to regulated entities, including: 

• Working with the subjects of continuing non-public investigations and audits, and entities 

with continuing compliance obligations associated with completed enforcement cases, to 

provide flexibility with discovery-related or other deadlines through July 31, 2020; 

• Suspending the initiation of new audits until July 31, 2020; and

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

Policy Statement). Enforcement’s current 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. 

FY2020, the subject of this report, begins on October 1, 2019 and ends on September 30, 2020.
2020 Staff Report on Enforcement 

6

• Postponing contacting entities regarding surveillance inquiries, except those involving 

market behavior that could result in significant risk of harm to the market. 

In addition, the Commission allowed entities to delay for 60 days the submission of self-reports 

that involved inadvertent errors producing no significant harm to the markets, ratepayers or other 

market participants. The Commission also issued an extension to June 1, 2020 for the filing of 

Form Nos. 60, 61 and 552, as well as Electric Quarterly Reports (EQRs).

OFFICE OF ENFORCEMENT PRIORITIES 

The Commission’s current Strategic Plan sets forth a mission to account for significant changes 

in energy supply due to a number of factors, such as the increased availability of domestic natural 

gas and the emergence and growth of new energy technologies. As the Strategic Plan notes, both 

the nation’s energy infrastructure and energy markets must adapt to these changes to ensure that 

consumers have access to economically efficient, safe, reliable, and secure energy at a reasonable 

cost.3

 The Strategic Plan identifies three primary goals to fulfill this mission: (1) ensure just and 

reasonable rates, terms, and conditions; (2) promote safe, reliable, and secure infrastructure; and 

(3) support the mission through organizational excellence. To further those goals and assist the 

Commission in its obligation to oversee regulated markets, Enforcement gathers information about 

market rules, market participants, and market behavior through its investigations, audits and 

surveillance. 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 FY2020, Enforcement’s priorities continued 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.

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

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

3 The Federal Energy Regulatory Commission, Strategic Plan FY 2018-2022 (Sept. 2018) 

(Strategic Plan), available at https://www.ferc.gov/about/strat-docs/strat-plan.asp.
2020 Staff Report on Enforcement 

7

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 North American Electric Reliability Corporation 

(NERC), 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 focuses on cases involving repeat violations of the Reliability Standards or 

violations that present a substantial risk to the bulk power system.

In FY2020, DOI staff opened six new investigations, while bringing eight pending 

investigations to closure without further action. Additionally, during the fiscal year, staff 

negotiated three settlements totaling $553,376, which included $437,500 in civil penalties and 

$115,876 in disgorgement.4

 Two of these Commission-approved settlements also included 

provisions in which the subjects agreed to enhance their compliance programs and periodically 

report back to Enforcement regarding the results of those compliance enhancements. 

In FY2020, DAA completed ten audits of public utility, natural gas, oil, and Regional 

Transmission Organization (RTO) / Independent System Operator (ISO) companies covering a 

wide array of topics. The audits resulted in 51 findings of noncompliance and 199 

recommendations for corrective action, the majority of which were implemented within six 

months, and directed $98.4 million in refunds and other recoveries. Additionally, during the fiscal 

year, DAA acted through the Chief Accountant’s delegated authority or advised on 441 

proceedings, including acting on 104 accounting filings requesting approval of a proposed 

accounting treatment or financial reporting matter, and assisting with 337 rate, pipeline certificate, 

merger and acquisition, and debt and security issuance proceedings before the Commission. Also, 

in FY2020 the Commission received EQR submittals from nearly 2,800 entities each quarter. 

DAA assessed whether sellers had timely complied with the requirements set forth in the multiple 

orders surrounding EQR filings and, through automated validations, whether the data was accurate 

and reliable. DAA also administered and oversaw compliance with the regulations concerning 

FERC Form Nos. 1, 1-F, 2, 2-A, 3-Q (gas and electric), 6, 6-Q, 60 and FERC-61. During FY2020, 

the Commission received approximately 2,500 such financial form submittals. DAA also assisted 

the Commission in the process of adopting eXtensible Business Reporting Language (XBRL) as 

the standard for filing financial forms.

In FY2020, DAS surveillance staff identified and reviewed numerous instances of potential

misconduct, some of which resulted in DAS opening a surveillance inquiry, or an in-depth review 

of a market participant’s conduct, in order to determine whether to recommend an investigation. 

During the fiscal year, natural gas surveillance screens produced approximately 10,594 screen trips 

which resulted in 26 natural gas surveillance inquiries and no referrals to DOI for investigation. 

Electric surveillance screens produced approximately 399,755 screen trips which resulted in 39 

electric surveillance inquiries and five referrals to DOI for investigation. In total, DAS closed 28 

electric surveillance inquiries with no referral and, as of the end of the fiscal year, continued its 

analytic work on six. DAS worked and provided analytical support on approximately 50 

investigations with DOI. This year, DAS also became responsible for conducting market-based 

4 A table of FY2020 Civil Penalty Enforcement Actions is attached as Appendix B to this report.
2020 Staff Report on Enforcement 

8

rate ex post analyses. During FY2020, DAS staff reviewed over 2.6 million market-based rate 

transactions filed through the Commission’s EQRs by 187 sellers of wholesale energy.

DIVISION OF INVESTIGATIONS 

Overview

This section of the report provides details on DOI’s current investigative processes and 

practices in order to give the energy industry, energy bar, and public added insight on 

investigations and to provide investigative subjects general guidance on what to expect during an 

investigation.

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

orders, and tariffs administered by the Commission. DOI staff learns of potential violations from 

multiple sources, including referrals from other program offices within the Commission and other 

divisions within Enforcement; referrals from ISOs/RTOs in organized markets or their market 

monitoring units; referrals from other agencies; self-reports; calls to the Enforcement Hotline; 

whistleblowers; and information gathered in other investigations. After learning of a potential 

violation, DOI staff evaluates whether to open an investigation based on the factors outlined in the 

Commission’s Revised Policy Statement on Enforcement.5 

If, after opening an investigation, and gathering and reviewing relevant facts, DOI staff finds 

no violation or finds that a violation should not be subject to sanctions, DOI staff closes the 

investigation without action and so informs the subject.

6

 Most of DOI staff’s investigations are 

closed without further action.7 On the other hand, if DOI staff finds that a violation occurred that 

warrants sanctions, it provides the subject with its preliminary findings, either orally, in writing,

or both. The subject then has the opportunity to respond to staff’s preliminary findings with any 

additional information or defenses. This stage presents an important opportunity for the subject to 

supplement factual information or to point out its views and theories of the case. Where warranted, 

5 Revised Policy Statement, 123 FERC ¶ 61,156 at P 25.

6 Of the eight investigations DOI closed in FY2020, it closed six of them either because staff found 

no violation or because there was not enough evidence to conclude that a violation had occurred. 

In addition, DOI closed two investigations where DOI’s view was that violations existed but 

concluded that sanctions were not warranted due to certain mitigating circumstances.

7 In some circumstances, while DOI has determined that an investigation should be terminated, it 

has also identified broader market issues that may warrant attention. For example, the 

investigation may expose vague or ambiguous market rules that appear to undermine, distort, or 

otherwise inject uncertainty into market performance and participant obligations. To address these 

types of issues, Enforcement has a process whereby staff can share its concerns about existing 

tariffs, market rules, or business practice manuals with senior management in Enforcement and the 

Commission’s Office of Energy Market Regulation (OEMR), Office of the General Counsel 

(OGC), and Office of Energy Policy and Innovation (OEPI) and explain how the issues may be 

resulting in poor or inefficient market outcomes. 
2020 Staff Report on Enforcement 

9

staff conducts additional fact-finding after reviewing a subject’s response and may modify its 

findings based on the response and further fact-finding.

If, after reviewing the subject’s response to the preliminary findings and conducting 

supplemental fact-finding, DOI staff continues to conclude that violations occurred and that the 

violations warrant sanctions, it consults with OE management and then seeks authority from the 

Commission to enter into settlement negotiations with the subject.8 This request for settlement 

authority describes the facts and law that led to staff’s determination, recommends a range of 

settlement terms and penalty analysis under the Commission’s Penalty Guidelines, and attaches

the subject’s preliminary findings response(s). If the Commission grants settlement authority, staff 

seeks negotiated resolutions within the Commission provided settlement authority range and 

terms. Settlements are sought with terms that will transparently inform the regulated industry 

about what conduct constitutes the violation. If an agreement is reached between Enforcement 

and the subject, it will be submitted to the Commission for approval. If the settlement agreement 

is approved, the Commission issues a public order that typically states why the settlement serves

the public interest and attaches the executed settlement agreement. In FY2020, Enforcement staff 

resolved three investigations via settlements approved by the Commission: (1) an energy services 

company’s violation of the ISO New England Inc. (ISO-NE) Tariff; (2) an energy generation 

company’s violation of the ISO-NE Tariff and the Commission’s market behavior regulations (18 

C.F.R. §§ 35.41(a) and (b)); and (3) a violation of the California Independent System Operator 

(CAISO) Tariff and a NERC Reliability Standard.9 These settlements are described more fully 

below in DOI Section C. 

If a settlement cannot be reached, and Enforcement intends to recommend issuance of an order 

to show cause (OSC) to the Commission, staff will provide the subject with notice and an 

opportunity to respond pursuant to section 1b.19 of the Commission’s regulations. After reviewing 

this response, staff, if it continues to believe violations have occurred, drafts an Enforcement Staff 

Report and Recommendation, which includes its findings of fact and conclusions of law regarding 

the investigation, as well as its recommendation to issue an OSC. Following review and approval 

by OE management, this report and the subject’s response to the section 1b.19 notice are then 

submitted to the Commission for a vote on the OSC. If the Commission concurs with staff’s 

recommendation, it issues an OSC in a public docket directing the subject to explain why it did 

not commit a violation and why penalties and disgorgement are not warranted. The subject has an

opportunity to respond to the OSC, and Enforcement staff may reply to the subject’s response. 

The Commission’s issuance of an OSC triggers the Commission’s ex parte and separation of 

functions rules, because it initiates a contested on-the-record proceeding, with Enforcement and 

subjects as participants and the Commission as a neutral adjudicator.10 The Commission therefore 

issues a public notice designating Enforcement as “non-decisional,” with the exception of the 

8 Investigative subjects are free to raise and explore potential resolution of an investigation, 

including through settlement, at any time during an investigation. 

9 The Commission’s regulations can be found at www.ecfr.gov.

10 See 18 C.F.R. §§ 2201, 2202 (2020) (outlining the Commission’s rules governing off-the-record 

communications and separation of functions). See also 5 U.S.C. § 554(d) (2014).
2020 Staff Report on Enforcement 

10

specific Enforcement staff designated as “decisional,” who had no prior involvement in the 

underlying investigation. 

After considering the factual record and legal arguments submitted by the subject and 

Enforcement, the Commission issues a decision, which will take different forms depending on the 

relevant statute. Under the Natural Gas Act (NGA) and under a default process under the Federal 

Power Act (FPA), the Commission can either rule on the pleadings or set the matter for hearing 

before an Administrative Law Judge (ALJ), assuming genuine issues of material fact exist. In 

matters set for an ALJ hearing, the ALJ holds a hearing and issues an initial decision, which is 

followed by a final Commission decision that can be appealed to an appropriate United States court 

of appeals. Alternatively, if a civil penalty is proposed in an FPA matter, a subject can elect a 

process different from the ALJ route described above. A subject has 30 days following the OSC 

issuance in which to affirmatively elect a penalty assessment by the Commission followed by 

“review de novo” of the assessment before a district court. If such an election is made, the 

Commission follows its OSC paper hearing procedures but determines whether a violation 

occurred and, if so, assesses penalties through an order. If the subject does not pay the civil penalty 

within 60 days of the penalty assessment, the Commission is required by statute to file an action 

in district court for an order affirming the civil penalty. As of the end of FY2020, staff is litigating 

four such actions in federal court (one of which was filed this year), seeking to enforce the 

Commission’s combined assessment of more than $89 million in penalties and disgorgement. Two

NGA-related proceedings remain pending before the Commission as of the end of the fiscal year.

11

Significant Matters

DOI staff spent substantial time in FY2020 preparing briefs, reports, and other public filings 

related to litigation in federal courts and administrative proceedings before the Commission. In 

addition, staff filed a complaint in federal court in California seeking to enforce a penalty 

assessment made by the Commission as well as the disgorgement of unjust profits assessed in the 

OSC proceeding. 

DOI staff now represents the Commission in four litigation matters in United States district 

courts. Currently pending at the Commission is one NGA-related OSC proceeding and one NGA 

trial-type proceeding, in which the respondent’s motion for rehearing is under consideration. 

As of the end of FY2020, a total of approximately $79 million in civil penalties and $10.2

million in disgorgement of unjust profits, plus interest, remains pending in the federal court 

matters. 

District Court Litigation

Over the past seven years, Enforcement has filed nine enforcement actions in district courts 

across the country, including four that are still pending. In those proceedings, district courts have 

issued rulings to address a variety of procedural and substantive legal issues, including: (1) 

11 For a more detailed discussion of the processes by which Enforcement conducts and concludes 

investigations, see Revised Policy Statement, 123 FERC ¶ 61,156 at PP 23-40.
2020 Staff Report on Enforcement 

11

whether the Commission has five years from the date of the violation or from the date it assesses

civil penalties for the violation to file an action in district court to enforce the assessed penalties; 

(2) whether the Commission’s civil actions seeking to enforce its penalty assessments should 

follow the Federal Rules of Civil Procedure; (3) the sufficiency of the Commission’s notice of 

fraud and deceptive conduct pleadings; (4) what constitutes individual culpability under the FPA; 

(5) particular activity that establishes manipulation; and (6) what evidence satisfies the scienter 

requirement under Section 222 of the FPA. In addition, in FY2020, a United States court of 

appeals issued an opinion on the construction and application of the federal statute of limitations 

to FPA civil penalty actions, as discussed below.

In FY2020, Enforcement staff continued litigating four matters in United States district courts 

to enforce the Commission’s penalty assessments under the FPA. Those district court litigation 

matters were:

a) FERC v. Silkman, et al., No. 1:16cv00205 (D. Maine)

On August 29, 2013, in Docket Nos. IN12-12-000 and 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) (collectively, Respondents) violated the 

Commission’s Anti-Manipulation 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 and $1.25 

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

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 Respondents. The 

Respondents filed a motion to dismiss the petition, which the District Court denied on April 11, 

2016. In its order denying the Respondents’ motion 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 (finding that it has five years after the order assessing penalty to make such a filing), as 

well as the argument that the Commission cannot assess penalties against individuals for violating 

the Commission’s 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 Maine District Court 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 a magistrate judge in Portland, 

Maine on March 31, 2017, and were unable to reach an agreement on resolution. Fact discovery 

then commenced and was completed on November 30, 2017. Expert discovery was completed on 

April 30, 2018. 

On January 29, 2018, upon agreement of the parties, the Maine District Court ordered summary 

judgment briefing on the applicability of the statute of limitations. Briefing on the cross-motions 

for summary judgment was completed on April 20, 2018. On January 4, 2019, the Maine District 

Court issued an order finding that the Commission’s action was not time-barred; therefore, the 

Commission’s motion was granted and Respondents’ motion was denied. Respondents 
2020 Staff Report on Enforcement 

12

subsequently sought certification of the Maine District Court’s decision to the First Circuit Court 

of Appeals. Following briefing of the matter, the Maine District Court denied Respondents’ 

motion for certification on June 26, 2019. 

On August 23, 2019, the Maine District Court issued a Final Pretrial Order setting dates for 

the trial and various pre-trial matters. On August 27, 2019, the Commission filed a motion to 

strike Respondents’ expert, Thomas Welch, which was denied on December 2, 2019. On 

December 24, 2019, Respondents moved to withdraw their jury demand. On January 14, 2020, 

the Commission filed a response consenting to Respondents’ withdrawal of their jury demand, 

withdrawing its own jury demand, and requesting a conference with the Court to discuss changes 

to the scheduling order necessitated by the parties’ withdrawals of their jury demands. The Maine 

District Court issued an amended final pretrial order following a January 28, 2020 telephone 

conference with the parties. Since February 2020, the parties have been engaging in mediation 

before a magistrate judge and, as reflected in the Court’s September 25, 2020 minute order, a 

tentative settlement has been reached, pending review and approval by the Commission.

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) (collectively, Respondents) had violated 

the Commission’s Anti-Manipulation 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 

Commission found that Respondents had placed fraudulent round-trip trades (trades in opposite 

directions on the same paths, in the same volumes, during the same hours) that involved no 

economic risk and constituted wash trades. The Commission assessed civil penalties of $16.8 

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

million against CU and ordered disgorgement of unjust profits, plus interest, in the amounts of 

$3,465,108 from Powhatan, $173,100 from HEEP, and $1,080,576 from CU. 

On July 31, 2015, Enforcement staff filed a petition in the United States District Court for the 

Eastern District of Virginia (EDVA) to enforce the Commission’s Order. Following briefing, the 

EDVA held that the Defendants are entitled to a trial de novo under section 31(d)(3) of the FPA. 

The Commission filed an amended complaint on January 29, 2018, and Defendants moved to 

dismiss in part on February 28, 2018, based on statute of limitations grounds. On September 24, 

2018, the court found that the Commission had met the statute of limitations established in 28 

U.S.C. § 2462, but authorized Defendants to seek interlocutory appeal. On October 4, 2018, 

Defendants petitioned the United States Court of Appeals for the Fourth Circuit to review the 

order, and the Commission did not oppose the appeal. The Fourth Circuit granted the petition for 

review on November 5, 2018. Following briefing, the Fourth Circuit scheduled oral argument for 

December 11, 2019.

On February 11, 2020, the Fourth Circuit issued an opinion affirming the District Court and 

endorsing the Commission’s construction and application of the statute of limitations to civil 

penalty actions arising under section 31 of the FPA. In upholding the District Court’s opinion, the 
2020 Staff Report on Enforcement 

13

Fourth Circuit recognized that “Congress plainly conditioned FERC’s right to bring an action in 

federal district court on the occurrence of a number of statutorily-mandated events,” and that 

“[o]nly upon satisfaction of these requirements . . . did § 2462’s statutory limitations period for 

filing suit commence.” Federal Energy Regulatory Commission v. Powhatan Energy Fund, LLC, 

949 F.3d 891, 899 (4th Cir. 2020). The Fourth Circuit remanded the case to the District Court, 

underscoring the importance of enforcement to the Commission’s regulatory mission: “the FPA 

delegates responsibility to FERC to regulate the interstate wholesale market for electricity, and to 

ensure that all rates charged in that market are ‘just and reasonable.’ Given the tangible harms 

visited on consumers by fraudulent conduct in the energy markets, Congress realized that tasking 

FERC with monitoring those markets is not enough—FERC must have the tools to act when 

markets fail, and it must use those tools to ensure that customers pay only just and reasonable 

rates.” Id. at 904 (internal citations omitted).

The Fourth Circuit denied Defendants’ rehearing request and issued its mandate to the District 

Court on April 17, 2020. Upon Defendants’ determination not to seek review of the Fourth 

Circuit’s opinion in the Supreme Court, and following a stay of cases during the COVID-19 

pandemic, the District Court held a pretrial conference on October 22, 2020, and, on October 23, 

2020, issued an order setting a deadline for written discovery requests. 

c) FERC v. Coaltrain Energy L.P, et al., No. 2:16-cv-00732 (S.D. Ohio)

On May 27, 2016, in Docket No. IN16-4-000, 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 relevant 

trading strategy (collectively, Respondents). The Commission found that the Respondents violated 

the Commission’s Anti-Manipulation Rule by engaging in fraudulent UTC trades in the PJM 

market during the summer of 2010. In so doing, it determined that Respondents’ “over-collected 

loss” or “OCL” trading strategy, 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 Coaltrain 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 coowners Peter Jones and Shawn Sheehan, to disgorge $4,121,894 in unjust profits, plus interest. It 

also imposed civil penalties of $26 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. The Respondents filed motions to 
2020 Staff Report on Enforcement 

14

dismiss or transfer, which were denied by order of the court on March 30, 2018. Discovery 

commenced shortly thereafter and concluded in November 2019. Initial expert reports were 

exchanged by both sides on September 19, 2019, with rebuttal expert reports exchanged on 

November 18, 2019. The parties conducted a two-day mediation in October 2019 with a private 

mediator but reached an impasse regarding a potential settlement. Summary judgment briefing 

was completed in March 2020. No trial date has been scheduled.

d) FERC v. Vitol Inc. and Federico Corteggiano, No. 2:20-CV-00040-KJM-AC 

(E.D. Cal.)

On October 25, 2019, in Docket No. IN14-4-000, the Commission issued an order assessing 

civil penalties in which it determined that Vitol Inc. and its trader Federico Corteggiano 

(collectively, Respondents) violated the Commission’s Anti-Manipulation Rule and section 222 

of the FPA by selling physical power at a loss in October and November 2013 in the CAISO day

ahead market for the purpose of eliminating congestion costs that they expected to cause losses on 

Vitol’s Congestion Revenue Rights (CRR) positions. The Commission assessed a penalty of 

$1,515,738 against Vitol and $1,000,000 against Corteggiano. The Commission also ordered Vitol 

to disgorge $1,227,143 in unjust profits, plus interest. Respondents failed to pay the assessed 

amounts within the sixty-day period provided by the statute. 

On January 6, 2020, Enforcement filed a complaint in the United States District Court for the 

Eastern District of California to enforce the penalty assessment order against Respondents. 

Respondents filed motions to dismiss the complaint on March 6, and Enforcement filed a 

consolidated opposition to the motions on April 21. Respondents filed their replies to the 

opposition on June 12. Respondents also filed a motion on April 10, 2020 seeking a stay of 

discovery pending the Court’s ruling on their motions to dismiss. Enforcement filed its opposition 

to that motion on May 1 and Respondents filed their reply on May 8. The parties filed a Joint 

Status Report on May 1, 2020. On May 4, 2020, three energy industry trade associations filed a 

motion for leave to submit an amicus curiae (“friend of the court”) brief. The motion included a 

proposed brief supporting Respondents’ position that the Commission’s claims are time-barred 

under the applicable statute of limitations. Enforcement filed a response to the amicus motion and 

proposed brief on June 12, 2020. 

On August 27, 2020, the Court held a status conference and hearing on the motions to dismiss

and took the motions under advisement. 

Administrative Proceedings at the Commission

a) 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 (collectively, Respondents) to show cause 

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

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 the Respondents’

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 
2020 Staff Report on Enforcement 

15

OSC directed 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). This matter is pending before the 

Commission.

In advance of the OSC, on January 27, 2016, Respondents filed a lawsuit in the United States 

District Court for the Western District of Texas, challenging (among other things) the 

Commission’s authority to assess penalties for violations of the NGA.12 After the case was 

transferred to the United States District Court for the Southern District of Texas, that Court rejected 

the Respondents’ challenge on multiple grounds. The Respondents appealed that dismissal to the 

United States Court of Appeals for the Fifth Circuit on September 26, 2016, which on June 8, 2017 

affirmed the dismissal. The Respondents subsequently sought rehearing in the Fifth Circuit en 

banc, which was denied on August 8, 2017. The Respondents then petitioned the United States 

Supreme Court for certiorari, which the Court denied on June 18, 2018. 

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

On August 5, 2013, the Commission issued an OSC to several BP entities directing BP to show 

cause why the Commission should not: (1) find that BP violated the Commission’s AntiManipulation Rule and section 4A of the NGA by manipulating the next-day, fixed-price natural 

gas market at Houston Ship Channel from September 2008 to November 2008; (2) impose a civil 

penalty in the amount of $28,000,000; and (3) require BP to disgorge $800,000 of unjust profits. 

On August 13, 2015, Judge Carmen Cintron issued her Initial Decision finding that BP violated 

the Anti-Manipulation Rule and section 4A of the NGA. On July 11, 2016, the Commission issued 

an Order affirming Judge Cintron’s Initial Decision and ordered BP to pay $20,160,000 in civil 

penalties and disgorge unjust profits in the amount of $207,169 to the Low Income Home Energy 

Assistance Program (LIHEAP) of Texas for the benefit of its energy consumers. The Commission 

also denied BP’s motion for rehearing of the Commission’s initial order setting the case for 

hearing. On August 10, 2016, BP moved for rehearing of the Commission’s July 11, 2016, 

decision. 

On September 7, 2016, BP moved for modification of the portion of the Commission’s Order

directing BP to pay the disgorgement to the Texas LIHEAP, alleging that Texas LIHEAP 

communicated to BP that it was unable to receive such a payment. The Commission responded 

with two orders. First, on September 8, 2016, the Commission granted rehearing for the limited 

purpose of further consideration of the matters raised by BP in its motion for rehearing of the July 

11, 2016, decision. Second, on September 12, 2016, the Commission issued an order staying the 

payment directive of the disgorgement order until the Commission issues an order on BP’s request 

12 Additional details about this District Court matter and subsequent appeals can be found in the 

2018 Staff Report on Enforcement (Docket No. AD07-13-012), available at

https://www.ferc.gov/legal/staff-reports/2018/11-15-18-enforcement.pdf.
2020 Staff Report on Enforcement 

16

for rehearing. On September 9, 2016, BP separately filed a Petition for Review in the United

States Court of Appeals for the Fifth Circuit only on the procedural issues ripe for appeal. 

On December 11, 2017, BP filed a motion with the Commission for rehearing or to dismiss 

based on two recent court decisions, FERC v. Barclays Bank PLC, 2017 WL 4340258 (E.D. Cal. 

Sept. 29, 2017) and Kokesh v. SEC, 137 S.Ct. 1635 (2017). BP contends that Barclays holds that 

a Commission order to show cause does not initiate a “proceeding” under the applicable federal 

statute of limitations, 28 U.S.C. § 2462, and therefore, this case was not timely brought and should 

be dismissed. BP also argues that it cannot be ordered to repay its unjust profits because the same 

statute of limitations applies to actions for disgorgement under Kokesh. OE staff’s response was 

filed on January 25, 2018. This matter is pending before the Commission.

Settlements 

In FY2020, the Commission approved three settlement agreements to resolve pending 

enforcement matters. The settlements totaled $437,500 in civil penalties and disgorgement of 

$115,876. Since 2007, Enforcement has negotiated settlements totaling approximately $784 

million in civil penalties and approximately $518.1 million in disgorgement.

In 2010, the Commission issued revised Penalty Guidelines.

13 Under the Penalty Guidelines, 

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 personnel involvement, prior history 

of violations, compliance programs, self-reporting of the violation, acceptance of responsibility, 

and cooperation with Enforcement’s investigation. For example, under the Penalty Guidelines, an 

organization’s culpability score can be reduced to zero through favorable culpability factors, 

lowering the base penalty by as much as 95 percent.14 

In FY2020, the Commission approved settlement agreements that resolved investigations 

concerning violations of 18 C.F.R. §§ 35.41(a) and (b), the ISO-NE Tariff, the CAISO Tariff, and 

a NERC Reliability Standard.

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

Years 2016-2020. Some settlements concerned multiple types of violations.

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

Guidelines), available at https://www.ferc.gov/whats-new/comm-meet/2010/091610/M-1.pdf. 

14 Id. P 109.
2020 Staff Report on Enforcement 

17

Types of Violations Settled, FY2020

OATT/Tariff

Reliability Standards and

OATT/Tariff

False Statements and

OATT/Tariff

Types of Violations Settled, FY2019

Violation of Commission

Order

Market Manipulation

and/or False Statements
2020 Staff Report on Enforcement 

18

Types of Violations Settled, FY2018

OATT/Tariff

Reliability Standards

Market Manipulation

and/or False Statements

Types of Violations Settled, FY2017
2020 Staff Report on Enforcement 

19

The Commission approved the following settlement agreements in FY2020:

Emera Energy Incorporated, Docket No. IN20-2-000 

On January 10, 2020, the Commission issued an order approving the settlement of 

Enforcement’s investigation of Emera Energy Incorporated (Emera) regarding the company’s use 

of Fuel Price Adjustments in the ISO-NE market. Enforcement’s investigation found that Emera 

submitted Fuel Price Adjustments that did not reflect an arm’s length fuel purchase transaction in 

contravention of ISO-NE Tariff Market Rule 1, Appendix A § III.A.3.4(b). The company selfreported that in some instances where no natural gas was available for sale at the relevant pricing 

node on the Intercontinental Exchange (ICE), Emera’s gas desk would generate a price for natural 

gas and post it to ICE for the purpose of creating a benchmark for Emera’s power desk to use when 

requesting Fuel Price Adjustments from ISO-NE. Staff found that Emera’s prices did not 

accurately reflect market prices on some occasions. Under the terms of the settlement, Emera 

admitted to the facts, but neither admitted nor denied the violation. Emera agreed to pay a civil 

penalty of $5,000 and disgorgement of $14,120.

Exelon Generation Company, LLC, Docket No. IN20-3-000 

On January 10, 2020, the Commission issued an order approving the settlement of 

Enforcement’s investigation of Exelon Generation Company, LLC (Exelon) regarding the 

company’s submission of data to ISO-NE. Enforcement’s investigation found that Exelon violated 

18 C.F.R. §§ 35.41(a) and (b) and ISO-NE Tariff Market Rule 1 § III.1.7.20(b) and Tariff § 

III.13.6.1.1.2, when it erroneously reported the type and quantity of fuel it needed to start up the 

company’s Mystic 7 generating unit. This error caused Exelon to be overcompensated when the 

Types of Violations Settled, FY2016

OATT/Tariff

Reliability Standards

Market Manipulation

and/or False Statements
2020 Staff Report on Enforcement 

20

unit was dispatched for reliability purposes. Under the terms of the settlement, Exelon admitted 

the facts and violation. Exelon agreed to pay a civil penalty of $32,500 and disgorgement of 

$101,756, and to submit to a two-year annual compliance reporting requirement. 

Calpine Corporation, Docket No. IN17-1-000 

On November 1, 2019, the Commission issued an order approving a settlement between 

Enforcement, Texas Reliability Entity, Inc. (Texas RE), NERC, and Calpine Corporation 

(Calpine), regarding Enforcement’s investigation into whether Calpine violated Reliability 

Standard PRC-005-1 R2, related to protection system maintenance and testing, as well as CAISO 

Tariff section 9.3.10.3.1, related to forced outages. Enforcement’s investigation found 215 

instances of noncompliance with PRC-005-1 R2 for either failing to perform a battery test, failing 

to retain testing records, or creating falsified testing records. Enforcement concluded that seventynine of the 215 instances involved falsified records. Enforcement further found two violations of 

CAISO Tariff section 9.3.10.3.1 because Enforcement found that employees were aware that a 

generator was unable to run but did not report an outage to CAISO. Under the terms of the 

settlement, Calpine admitted to the facts, but neither admitted nor denied the violations. Calpine

agreed to pay a civil penalty totaling $400,000, to follow a detailed mitigation plan, and to submit 

annual compliance monitoring reports for two years, with a potential one-year extension at 

Enforcement’s discretion. 

Self-Reports 

Over the previous five fiscal years (Fiscal Years 2016-20), staff received approximately 650

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

action because, among several factors, 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. 

Statistics on Self-Reports

In FY2020, staff received 126 new self-reports from a variety of market participants, including 

public utilities, natural gas companies, generators, and ISOs/RTOs. The majority of these selfreports (71) were from ISOs/RTOs and involved relatively minor violations of tariff provisions. 

Staff closed 105 self-reports in FY2020, 23 of which were carried over from the previous fiscal 

year. Of the self-reports received in FY2020, 44 remained pending at the end of the fiscal year. 

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

can significantly mitigate penalties if a self-report is made.15 Staff continues to encourage the 

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

compliance.

15 Revised Penalty Guidelines, 132 FERC ¶ 61,216 at P 127.
2020 Staff Report on Enforcement 

21

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

Fiscal Years 2016 through 2020.

16 Some self-reports include more than one type of violation.

16 Consistent with the FY2018 and FY2019 Annual Reports, the FY2020 Self-Reports Closed chart 

includes the substantive violation reported by an ISO/RTO and replaces the ISO/RTO category 

used in previous years.

0

10

20

30

40

50

60

70

80

Number of Self-Reports

Type of Violation

Self-Reports Closed in FY2020 by Type of Violation
2020 Staff Report on Enforcement 

22

0

10

20

30

40

50

60

70

80

90

Number of Self-Reports

Type of Violation

Self-Reports Closed in FY2019 by Type of Violation

0

10

20

30

40

50

60

70

80

90

Number of Self-Reports

Type of Violation

Self-Reports Closed in FY2018 by Type of Violation
2020 Staff Report on Enforcement 

23

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
2020 Staff Report on Enforcement 

24

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 FY2020 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.17 As examples, in FY2020 several ISOs/RTOs and 

market participants reported minor tariff and reporting violations, two market participants reported 

potential market manipulation, three public utilities reported standards of conduct violations, and 

several companies reported notice and regulatory filing violations resulting from inadvertent 

oversight or changes in ownership. The illustrative 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.

Tariff/OATT Violation (Electric). A utility self-reported that, due to a clerical error, it 

inadvertently failed to acquire the full amount of replacement capacity needed to cover the 

obligation of a capacity resource that had been prematurely retired. As a result, the utility received 

the retired unit’s full capacity payment even though it did not have the full equivalent amount of 

replacement capacity available. Immediately upon learning of the violation, the utility timely 

alerted both the relevant ISO/RTO and DOI, offered to resettle the overpayment, and fully 

cooperated with both the ISO/RTO and DOI staff in returning the overpayment. Because of the 

inadvertent nature of the violation, the small amount of the overpayment, and the company’s strong 

efforts to timely resettle the overpayment, staff closed this self-report without further action. 

Tariff/OATT Violation (Electric). A demand response services company self-reported that some 

of its demand response customers were registered as using Behind-The-Meter (BTM) generators 

in an ISO/RTO’s Emergency Demand Response Program (EDRP) despite the fact that those BTM 

generators may not have met applicable Environmental Protection Agency (EPA)

requirements. The violation was the result of miscommunication during a period of staffing 

changes that resulted in the registration of customers that used BTM generators that may have met 

past EPA requirements, but did not meet current, more stringent EPA requirements. To remedy 

the potential violation, the company self-reported the issue to its ISO/RTO and Enforcement and 

provided the ISO/RTO with a list of names of affected customers, updated its procedures to include

additional screening and regulatory reviews, revised its software system to maintain 

documentation of all BTM eligibility determinations, and updated related procedures and trainings. 

Staff closed this self-report without further action based on several factors, including the steps the 

company took to remedy the potential violation and the fact that the harm caused by the alleged 

violation, if any, was likely minimal. 

Tariff/OATT Violation (Electric). An energy management services company self-reported an 

inadvertent tariff violation for failing to meet an ISO/RTO’s “must offer” obligation for a single 

day. The company submitted energy bids on behalf of a capacity resource into the ISO/RTO’s 

market portal via an automated software application and several of the bids were rejected. The 

company took several corrective actions as a result of this issue, including creating a tool to 

17 Revised Policy Statement, 123 FERC ¶ 61,156 at P 25.
2020 Staff Report on Enforcement 

25

automatically attempt to resubmit failed offers and enlarging the team who receives the bid 

rejection notices. Additionally, the company contacted the ISO/RTO to alert it to the issue. 

Staff closed this self-report without further action based on several factors, including the 

inadvertent nature of the violation, the lack of known market impact or harm, and the remedial 

steps taken by the company. 

Tariff/OATT Violation (Electric). An electric cooperative self-reported its submission of 

incorrect operating capacity data for four of its generators in possible violation of the relevant

ISO/RTO tariff. After discovering the violations, the entity implemented process improvements 

that included revising its offer template form in ways designed to prevent a reoccurrence and

developing a process for improving coordination between the relevant units in the organization 

when submitting the data. Staff closed this self-report without further action based on several 

factors, including the inadvertent nature of the violations and the lack of market harm.

Tariff/OATT Violation (Electric). An investor-owned utility self-reported that it inadvertently 

failed to undesignate a network resource prior to selling the resource’s energy to a third party. 

Because the utility did not undesignate the power prior to selling it, the energy could not be called 

upon to meet the utility’s network load on a non-interruptible basis as required by the utility’s 

Open Access Transmission Tariffs (OATT). This failure to undesignate was a result of ongoing 

IT troubleshooting for an unrelated issue on the IT systems used to undesignate network resources. 

The utility took several steps to remedy the violation, including working to correct the issue and 

restore the automatic undesignation ability in the system. Further, the utility is expanding the 

number of personnel with application-level knowledge of the undesignating program so that 

additional employees are capable of addressing issues in the future. Staff closed this self-report 

without further action based on several factors, including the lack of market harm and the steps 

taken by the utility to remedy the violation.

Tariff/OATT Violation (Electric). An investor-owned wholesale power generator operating a 

multi-turbine wind farm self-reported that it had failed to timely file derate outage reports in 

connection with two unplanned outages of multiple turbines that occurred within 90 minutes of 

each other on the same date in 2019, in violation of the relevant ISO/RTO tariff. The ISO/RTO 

tariff required that such reports be filed within 30 minutes of an outage when a facility’s “available 

output” is reduced by at least 10 percent if the reduction is greater than 5 MW. The day after the 

events, the company began an investigation and identified the causes of the violations. The 

company corrected its software and provided training to the responsible employee. In addition, 

the company modified its reporting procedures in connection with derate outages. Staff 

determined that the company did not obtain any financial benefit from these violations and that 

there was no harm to the market or third parties. For these reasons, and because the company 

acted quickly to address the violations, staff closed this self-report without further action. 

Tariff/OATT Violation (Electric). An independent power producer self-reported that it 

submitted inaccurate data with its energy market offers for several of its generation resources. The 

inaccurate data affected its offer prices and related to the resources’ heat rate, fuel prices, start-up 

costs, and other costs associated with the offers. Staff determined that the violations were 

inadvertent and resulted in little or no market impact. The company paid penalties to the ISO/RTO 

for the violations that had a market impact, as required under the ISO/RTO tariff. The company 

also corrected, on a prospective basis, all of the errors that led to the inaccurate data 
2020 Staff Report on Enforcement 

26

submissions. In addition, it implemented new policies to highlight the importance of utilizing the 

most up-to-date operational parameters in its offers and provided training to relevant employees 

on this topic. For these reasons, staff closed this self-report without further action. 

Tariff/OATT Violation (Electric). A public utility self-reported that it utilized an incorrect 

depreciation rate for certain software assets in calculating its annual transmission revenue 

requirement. The utility corrected the depreciation rate and refunded customers for the overcollected depreciation. Staff also determined that the company was unlikely to repeat the error. 

For these reasons, staff closed the self-report without further action. 

Tariff/OATT Violation (ISOs/RTOs). Multiple ISOs/RTOs in organized markets self-reported 

what staff determined upon factual review to be relatively minor violations of their tariffs, resulting 

from either software or human error. Such errors included: failing to maintain confidentiality of 

market participant project documents; failing to conceal the identity of interconnection customers 

in public documents; failing to publish bid data for certain resources; the incorrect inclusion or 

exclusion of costs in a manner inconsistent with the tariff; failure to clear supplemental reserves 

in the real time market; software errors that created the potential for incorrect market participant 

compensation; missing deadlines for informational filings; data adjustment errors that resulted in 

inaccurate modeling inputs; and miscalculating credit requirements for market participants. The 

ISOs/RTOs also reported certain other potential errors stemming from alleged ambiguity in their 

tariffs or mistakes in implementing tariff provisions. In all such instances, the violations were 

inadvertent, resulted in minimal harm, and were promptly and effectively remedied to mitigate the 

harm and prevent future violations. Accordingly, staff closed these self-reports without further 

action.

Regulatory Filing Violation (Certificates of Public Convenience and Necessity). A natural gas

company self-reported that it failed to obtain certain environmental clearance documents required

for a disposal pipeline project. The error occurred because the company did not consult with the 

relevant environmental offices following completion of the company’s environmental analysis for 

the project. After discovering the omission, the company gathered information to determine how 

the failure to consult occurred, arranged for consultations with the relevant agencies, and addressed 

the lapses that resulted in the failure to complete the consultations. The company’s parent 

company also conducted a refresher training session on the requirements governing jurisdictional 

natural gas project construction. Enforcement staff consulted with Office of Energy Projects 

(OEP) staff and determined that OEP was not aware of any other noncompliance issues related to 

the company. Because the violation appeared to be an anomaly and the company took steps to 

correct the violation, staff closed this self-report without further action. 

Regulatory Filing Violation (Electric Quarterly Reports). A hydroelectric company selfreported that it had mistakenly failed to submit EQRs at any point in the unit’s history. The 

company had incorrectly concluded that it did not need to submit EQRs because the Power 

Purchase Agreements under which it sold the unit’s output had been filed with, and approved by, 

the Commission in the mid-1980s, before there was an EQR requirement. The company 

determined that a violation occurred while doing due diligence in conjunction with an ownership 

transaction. Notwithstanding the length of the violation, staff closed the matter without further 

action based on several factors, including the good faith nature of the mistake and the lack of any 
2020 Staff Report on Enforcement 

27

economic harm. In addition, the company worked with DAA staff to bring the company into 

compliance. 

Regulatory Filing Violation (Failure to Request Category 1 Seller Status). An entity that owns 

a wind-powered generation facility self-reported that it failed to file (1) a request for Category 1 

Seller status after it qualified for that status and (2) two prior triennial updated market power 

analyses by the filing deadlines. Upon learning of the oversight, the entity filed a request for 

designation as a Category 1 Seller with the Commission. Enforcement determined that the 

oversights were inadvertent, there was no market harm, and the entity retained counsel to 

coordinate its future filing obligations and updated its compliance program to ensure that all 

aspects of its market-based rate requirements are addressed. For these reasons, staff closed this 

self-report without further action. 

Regulatory Filing Violation (FERC Form No. 552). A manufacturing company that engaged in 

natural gas transactions self-reported that it failed to submit FERC Form No. 552 (Annual Report 

of Natural Gas Transactions) for 2017 and 2018 in violation of section 260.401 of the 

Commission’s regulations. Pursuant to this regulation, unless otherwise exempted, each natural 

gas market participant, i.e. any buyer or seller that engaged in physical natural gas transactions the 

previous calendar year, must prepare and file with the Commission a Form No. 552, which 

addresses its natural gas transactions. The form must be filed by May 1 for the previous calendar 

year. Given what Enforcement determined to be the relatively limited nature of the violation and 

the fact that it caused no discernable harm, staff closed the matter without further action and 

referred the company to OEPI, which assisted with the submission of the missing forms for the 

years in question, thereby bringing the company into compliance. 

Regulatory Filing Violation (FERC Form No. 556). The owner of a biomass anaerobic digester 

facility self-reported its failure to self-certify this project as a Qualifying Facility (QF) before it 

began making wholesale power sales in violation of section 205 of the FPA. To remedy this 

violation, the owner submitted a FERC Form No. 556 to certify the project as a QF and sought a 

declaratory order waiving its time value refund obligation. When the declaratory order was denied, 

the company, consistent with Commission precedent, paid the time value refunds it owed on the 

revenues collected from sales made during the period that the facility was without QF status. 

Because the violation was inadvertent and refunds were paid, staff closed this self-report without 

further action. 

Regulatory Filing Violation (FERC Form No. 561). The owner of two public utilities selfreported that the Form No. 561 filings (Annual Interlocking Directorate Reports) it filed in 2017 

for four individuals deemed officers or directors of the utilities were in error because the utilities 

did not have officers or directors. The company uncovered the error in the process of attempting 

to belatedly file Form No. 561 filings for 2018 and 2019. The error resulted from 

miscommunication between counsel from different law firms. The company represented to staff 

that, going forward, all compliance matters will be tracked and routed through a single point of 

contact in order to avoid similar mistakes. The company also enhanced its compliance training 

program to include Commission regulations, including interlocking directorates. For these and

other reasons, including the lack of economic harm, staff closed the self-report without further 

action.
2020 Staff Report on Enforcement 

28

Qualifying Facility Violation (Unauthorized Power Sales – One Mile Rule). A solar company 

self-reported its failure to self-certify 44 projects as QFs before these projects began making 

wholesale power sales in violation of section 205 of the FPA. Though the projects at issue each 

had a net power production capacity of 1 MW or less, they were not exempt from affirmatively 

obtaining QF status because they were located at the same site as another project (i.e. within one 

mile) and the combined production capacity of these projects exceeded the 1 MW threshold for 

exemption from QF certification (“One Mile Rule”). See 18 C.F.R. § 292.204(a)(1)-(a)(2). The 

company was unaware of the Commission’s One Mile Rule as it developed these projects. To 

remedy this violation, the company submitted FERC Form No. 556 filings to certify each of the 

projects as a QF. Though the company recognized its obligation to make time value refunds, it

sought a declaratory order to decrease the amount owed. When this was denied, the company, 

consistent with Commission precedent, paid time value refunds on the revenues collected from 

sales made during the period that the projects were without QF status. For these reasons, and 

because the company took steps to prevent recurrence, staff closed this self-report without further 

action. 

OASIS Posting Violation. A public utility self-reported that it failed to include in its list of current 

designated network resources on the Open Access Same-Time Information System (OASIS) a

hydro generator that provided designated capacity to the utility pursuant to a Public Utility 

Regulatory Policies Act (PURPA) sales agreement. The omission was a violation of section 

37.6(e)(1)(vi) of the Commission’s regulations, which requires transmission providers to post a 

list of their current designated network resources on OASIS. The company discovered the error 

during the course of renewing the sales agreement with the resource. Staff concluded that the error 

was inadvertent, was promptly corrected by the company when discovered, and did not result in 

any economic harm. Based on these and other factors, staff closed the self-report with no further 

action. 

Standards of Conduct Violation (Initial Training). An investor-owned utility self-reported that 

several contract employees had not received their required Standards of Conduct training within 

30 days of beginning work, as required by section 358.8(c)(1) of the Commission’s regulations. 

Upon identifying the violation, the utility immediately provided the required training to the 

affected employees and changed its internal training tracking procedures to ensure this oversight 

would not reoccur. In addition, the utility now removes IT system access for any employee who 

does not complete the required training within the required 30-day window. For these reasons, 

staff closed this self-report without further action.

FPA Section 204 Violation (Failure to Obtain Prior Approval for Intercompany Loan). A 

public utility self-reported that it failed to seek Commission approval before obtaining an 

intercompany loan from an affiliate in violation of section 204 of the FPA. The intercompany loan 

was the second such loan, and at the time of the first loan the company was not a public utility and 

thus not subject to FPA section 204. In between the first and second loans, the company became 

a public utility subject to the prior approval requirements of section 204. After discovering the 

violation, the company immediately investigated the circumstances, self-reported the violation, 

sought guidance whether it should make a belated section 204 filing, provided training to the 

relevant employees on the requirements of FPA section 204, and updated its compliance 
2020 Staff Report on Enforcement 

29

manual. Staff closed this self-report without further action for several reasons, including staff’s 

determination that the violation was isolated, inadvertent, had little practical effect, and caused no 

economic harm.

FPA Section 205 Violation (Failure to File Various Agreements). A public utility self-reported 

that it failed to file agreements subject to section 205 of the FPA before providing jurisdictional 

service under those agreements. Upon learning that it had provided service under one of these 

agreements before filing it with the Commission, the company retained outside counsel to review 

its filing practices to determine if there were additional agreements that it failed to timely file. That 

review determined that the company had failed to file a total of 16 agreements. The company then 

self-reported these violations and paid all time value refunds that were owed for selling power 

without Commission authorization. In light of the fact that the company remedied its violations 

by submitting corrective filings, paid all applicable time value refunds, cooperated with staff in 

reporting the details of the violations, and took measures to enhance its compliance function, staff 

closed this self-report without further action. 

FPA Section 205 Violation and Regulatory Filing Violation (Failure to File Certain 

Agreements). An energy company self-reported that it failed to file certain agreements in 

violation of Section 205 of the FPA and various Commission filing requirements outlined in Part 

35 of the Commission’s regulations. Specifically, the company failed to timely file seven 

agreements dealing with matters that potentially fell within the Commission’s jurisdiction. After 

a comprehensive review and internal investigation, the company took the necessary steps to come 

into full compliance by making the required filings. Many of the agreements involved small dollar 

amounts that had not been converted to formal writings or were related to transactions where it 

was unclear whether FPA Section 205 applied. Given the lack of any significant economic harm, 

the company’s voluntary undertaking of a large-scale internal investigation, and the company’s 

substantial efforts to remedy the violations, staff closed this self-report without further action. 

Interstate Commerce Act Violation (Disclosure of Confidential Information). A natural gas 

liquids pipeline self-reported that it had inadvertently disclosed confidential shipper information 

in violation of section 15(13) of the Interstate Commerce Act, which prohibits common carrier 

product pipelines from disclosing information relating to the “nature, kind, quantity, destination, 

consignee, or routing” of the products being transported without the shipper’s consent. See 49 

U.S.C. app. § 15(13) (1988). The pipeline failed to remove an employee from an email distribution 

list for an “inventory report” after he had been transferred from the pipeline to a shipper-affiliate 

of the pipeline. As a result, the employee continued to receive the report, which included 

information concerning the inventory positions and shipments of all shippers serviced by the 

pipeline. Although the employee continued to receive the inventory report for 15 months, he stated 

that he routinely discarded the inventory report and had never looked at or accessed the information 

it contained. After discovering the violation, the pipeline instituted new procedures that required 

that pipeline employees be removed from all distribution lists and be denied access to all 

applications upon their transfer to any pipeline affiliate. Among several factors considered in 

staff’s decision to close this self-report without further action were the fact that the disclosure of 

the inventory report was inadvertent and did not result in harm to any third-party and the steps the 

company took to prevent future violations. 
2020 Staff Report on Enforcement 

30

Interstate Commerce Act Violation (Failure to Seek Tariff). A pipeline company was the 

owner and operator of an existing fully certificated pipeline with a valid tariff in place with the 

Commission. In 2017, the company added a small lateral line that provided service to a single 

manufacturing facility under the same terms of service as the previously existing pipeline. The 

company did not appreciate that the lateral line required its own independent tariff. Immediately 

upon learning of the error, the company informed OEMR staff and made the requisite filings. Staff 

closed this self-report without further action based on several factors, including the lack of market 

harm and the company’s efforts to remedy the violation promptly after its discovery. 

Market-Based Rate Authority Violation. A public utility self-reported that it commenced 

providing an ISO/RTO with ancillary regulation services, along with capacity, reserves and de 

minimis energy supplies, almost three months prior to its application for market-based rate (MBR)

authority. The entity was subsequently granted MBR authority and refunded the full amount of 

the payment in excess of its costs. For these reasons, and because the violation was inadvertent, 

staff closed this self-report without further action. 

NGA Section 7 Violations (Gas). An interstate gas pipeline with NGA Section 7(c) blanket 

certificate authority failed to provide notice of interconnection to a gas distribution facility already 

served by a local distribution company (LDC) in violation of 18 C.F.R. § 157.211(a)(2)(i). The 

pipeline mistakenly believed that the gas distribution facility did not have access to a gas supply. 

The pipeline also failed to conduct an environmental review in violation of 18 C.F.R. § 157.206 

because it erroneously believed that the required environmental reviews had been performed by 

the gas distribution facility. Upon discovering these violations, the pipeline ceased project 

construction and reported the violations to OEP and OE. The pipeline subsequently late-filed the 

appropriate notice filing and completed the necessary environmental reviews. The pipeline also 

made various improvements in its processes to ensure future compliance, including additional 

training, expanded distribution of procedures and mandatory approvals, and increased auditing. 

Among several factors considered in staff’s decision to close this self-report without further action 

were the isolated nature of the violations, the fact that the violations were promptly reported and 

remediated, and the lack of economic or environmental harm. 

Natural Gas Transportation Violation (Prohibition on Buy/Sell Transactions). A public 

utility self-reported that two natural gas affiliates (Affiliate A and Affiliate B) engaged in several 

purchases and sales of natural gas between them in violation of the Commission’s prohibition 

against buy/sell transactions. In the transactions, Affiliate A purchased natural gas from Affiliate 

B, shipped the gas using Affiliate A’s pipeline capacity, and resold the gas that was not used for 

electric generation back to Affiliate B at a downstream location. The transactions at issue occurred 

on five flow days over one week and involved small quantities of natural gas originally sourced 

for power plant consumption that turned out to be unneeded. The transactions occurred because 

an employee of Affiliate B mistakenly believed that the public utility’s longstanding rule against

buy/sell transactions (which mirrors the Commission’s prohibition) had been changed in a way 

that allowed for the transactions. After only five days, a separate employee of Affiliate B 

expressed concerns about such transactions to a supervisor who barred any additional transactions 

and contacted the public utility’s compliance and legal departments that same day. No harm 

resulted from these buy/sell transactions because Affiliate A was not using its capacity to benefit 

Affiliate B, which was only Affiliate A’s agent and had no financial interest in the transactions or 
2020 Staff Report on Enforcement 

31

the shipment of the gas. For these reasons, and because the company took steps to prevent future 

violations, staff closed this self-report without further action. 

Market Manipulation (Offsetting Virtual Trades). A privately held energy trading firm selfreported that two of its subsidiaries took offsetting virtual trading positions at the same location in 

the same hour. The firm explained that traders from its various subsidiaries are able to see one 

another’s cleared positions, but they enter their trades independently for their own business 

purpose. For a single hour on a single date, a trader from one subsidiary submitted an INC offer 

of 100 MW, and a trader from another subsidiary submitted a set of DEC bids for the same location. 

The INC trade cleared in full and the DEC trade cleared in part, resulting in a net short position of 

87.7 MW and a 13.3 MW “wash.” The trading firm’s compliance software identified the issue, 

but because of the timing of the trades, it was unable to undo them. The trading firm immediately 

self-reported the issue and has since implemented structural improvements to ensure that the 

problem cannot reoccur. Among several factors considered in staff’s decision to close this selfreport without further action were the isolated and inadvertent nature of the violation and the lack 

of economic harm.

Investigations 

In FY2020, DOI staff opened six new investigations, as compared with 12 investigations 

opened in FY2019. The majority of these investigations arose from referrals by ISO/RTO market 

monitors and Enforcement’s DAS. Additional investigations stemmed from referrals by 

ISOs/RTOs, self-reports, and the Enforcement Hotline. In addition to cases closed through 

settlement, staff closed eight investigations without further action in FY2020, as compared to 14

investigations closed without further action in FY2019. In addition to closing these investigations 

during the fiscal year, DOI staff closed several Market Monitoring Unit (MMU) referrals following 

inquiries into and analyses of the referred conduct and alleged violations. These matters, discussed 

in DOI Section F below, were closed without being converted into investigations.

Statistics on Investigations

Of the six investigations staff opened this fiscal year (some of which involved more than one 

type of potential violation or multiple subjects), six involved potential market manipulation, six

involved potential tariff violations, and four involved potential misrepresentations prohibited by 

the Commission’s market behavior rules. The six investigations involved a wide range of 

additional issues, including allegations of generators’ failures to meet offer requirements in 

ISOs/RTOs, demand response, and generator interconnection issues. 

Of the eight investigations closed, six were closed because staff concluded that the evidence 

did not support finding a violation. In two other investigations, staff concluded that a violation 

was found but staff did not pursue a sanction. The eight closings were in addition to the three

investigations closed pursuant to settlements that staff reached with subjects. The Commissionapproved settlements in these investigations are summarized above in DOI Section C and listed in 

Appendix B. Illustrative examples of investigations closed without enforcement action are 

discussed below.
2020 Staff Report on Enforcement 

32

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

past five years (FY2016-2020) and the aggregate disposition of investigations that closed from 

fiscal years 2010 through 2020.

Disposition of Investigations, FY2019
2020 Staff Report on Enforcement 

33

Disposition of Investigations, FY2018

Closed - Finding of

Violation/No Sanctions

Closed - Insufficient

Evidence or No Violation

Proceeded to Order to

Show Cause

Settlement

Disposition of Investigations, FY2017

Closed - Insufficient

Evidence or No Violation

Settlement
2020 Staff Report on Enforcement 

34

Disposition of Investigations, FY2016

Closed - Insufficient

Evidence or No Violation

Proceeded to Order to

Show Cause

Settlement

Disposition of Investigations, 

FY2010 - FY2020
2020 Staff Report on Enforcement 

35

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

that were closed without action in Fiscal Years 2016-2020.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Market Manipulation Misrepresentation Other Tariff Violation Violation of

Commission Order

Types of Alleged Violation in Investigations Closed With 

No Action, FY2020

0

2

4

6

8

10

12

FPA Section 205 Market

Manipulation

Misrepresentation Other Tariff Violation Violation of

Commission Order

Types of Alleged Violation in Investigations Closed With 

No Action, FY2019
2020 Staff Report on Enforcement 

36

0

2

4

6

8

10

12

14

16

Market Manipulation Misrepresentation Other Reliability Tariff Violation

Types of Alleged Violation in Investigations Closed With 

No Action, FY2018

0

1

2

3

4

5

6

7

8

9

10

Market Manipulation Misrepresentation Standards of Conduct Tariff Violation Violation of

Commission Order

Types of Alleged Violation in Investigations Closed With 

No Action, FY2017
2020 Staff Report on Enforcement 

37

Illustrative Investigations Closed with No Action 

The following summaries of investigations that Enforcement closed without action in FY2020

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

investigations. 

Market Manipulation (Electric). Following a referral from Enforcement’s DAS, staff opened 

an investigation into whether a generator violated the Commission’s Anti-Manipulation Rule by 

offering its units into the New York Independent System Operator’s (NYISO) day-ahead market 

in a way that was intended to target Day-Ahead Marginal Assurance Payments, a type of uplift 

payment. During the course of the investigation, staff reviewed and analyzed the generator’s 

offering data, contemporaneous communications between the generator and NYISO, and other 

relevant data and information. Based on this, staff concluded that there was insufficient evidence

of an intent to target the payments and closed the investigation without further action. 

Market Manipulation (Electric). Following a referral from the CAISO market monitor, staff 

opened an investigation of a power marketer and scheduling coordinator to determine whether the 

company had violated the Commission’s Anti-Manipulation Rule by partially accepting real-time 

market awards from the Hour-Ahead Scheduling Process (HASP) with the intent to suppress realtime prices and benefit its intertie transactions. Staff determined that the company took partial 

acceptances under a variety of circumstances for different legitimate reasons and did not identify 

evidence supporting a theory of market manipulation. For these reasons, staff closed the 

investigation without further action. 

Violation of Certificate of Public Convenience and Necessity (Gas). Based upon information 

provided by OEP, staff opened an investigation into whether a natural gas company failed to obtain 

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Market Manipulation Tariff Violation

Types of Alleged Violation in Investigations Closed With 

No Action, FY2016
2020 Staff Report on Enforcement 

38

advance landowner authorization for a right-of-way (ROW) variance during the construction of a 

natural gas pipeline in violation of a Commission Certificate Order. Staff determined that the 

landowner ambiguously and informally requested that the company access the landowner’s offROW property to perform the work that the company ultimately used the variance to complete. 

For this reason, staff closed the investigation without further action. 

Tariff Violation (Electric). Following a notification from the NYISO market monitor and a 

referral from Enforcement’s DAS, staff opened an investigation into whether an electric generating 

company submitted inaccurate Variable Operations & Maintenance (VOM) costs in reference 

levels for two of its generating units and energy and ancillary services offers for a third unit that 

was not physically capable of performing due to an alleged unreported, pre-existing outage. Based 

on staff’s review and analysis of market data and information from NYISO and its market monitor, 

staff determined the VOM costs were accurate and appropriate and that the outage resulted from 

technical issues that were unexpected. Therefore, staff closed the investigation because the 

evidence did not indicate that the company had violated the Commission’s regulations or the 

NYISO Tariff. 

Tariff Violation (Electric-Hydro). Following a referral from the ISO-NE market monitor, staff 

opened an investigation to determine whether a generating company submitted offers indicating 

its units could follow dispatch instructions even though they could not. Specifically, the referral 

raised the possibility that the company had improperly registered hydropower resources as nonintermittent resources, even though they were in fact intermittent. The market monitor believed 

that this may have explained why the resources failed to follow dispatch instructions and also 

meant that the company was not entitled to the Real-Time Economic Net Commitment Period 

Compensation payments it received. After analyzing the available information, staff concluded 

that the company had not misrepresented the resources as non-intermittent to ISO-NE because in 

the instances in which the resources did not follow dispatch instructions, they were within the 

tolerance band applicable to non-intermittent resources. Staff also determined that the resources’ 

offer and dispatch behaviors did not affect the reliability of ISO-NE’s transmission grid. Staff 

therefore closed the investigation with no further action.

Market Manipulation and Tariff Violation (Electric-Wind). Following a referral from the 

Southwest Power Pool (SPP) market monitor, staff opened an investigation to determine whether 

a wind resource’s asset owners (who each owned a separate portion of the resource’s output)

potentially: (1) engaged in a manipulative scheme to exchange output data when responding to 

SPP’s dispatch signals in order to raise the Locational Marginal Price (LMP) at the wind resource’s 

settlement location; and/or (2) violated SPP Tariff provisions on following dispatch instructions. 

The SPP market monitor had observed that, in certain intervals, when the higher-priced output of 

Asset Owner A was given a dispatch signal to reduce output, the reduction was instead made by 

the lower-priced output of Asset Owner B. The SPP market monitor alleged that by keeping the 

output the same on Asset Owner A’s portion of the resource, LMPs were set higher than they 

would have been absent this behavior and Asset Owner B was artificially removing its lowerpriced supply from the market. Staff determined that the behavior observed by the market monitor 

resulted from an inadvertent flaw in the automated allocation methodology software developed to 

allocate the wind resource’s output between the two asset owners. At the time that the market 

monitor observed this behavior, the wind resource’s operator (who had developed the allocation 

methodology software) had already identified the flaw and was working with the asset owners on 
2020 Staff Report on Enforcement 

39

a potential fix. Staff concluded that both asset owners intended for the allocation methodology to 

properly allocate the wind resource’s real-time output in accordance with a Power Purchase 

Agreement between them while respecting SPP’s curtailment instructions. Staff also concluded 

that the offers submitted by both asset owners for their respective portions of the output were 

appropriate and not coordinated. Finally, staff concluded that the conduct was relatively isolated 

and that there was no financial incentive for Asset Owner A to engage in this conduct because it 

was economically harmed by it. For these reasons, staff closed the investigation without further 

action. 

Market Manipulation and Tariff Violation (Electric). Staff opened an investigation following 

a utility’s self-report that a generating unit submitted cost-based offers for a one-month period that 

misrepresented fuel type and fuel costs to PJM. Staff investigated the factual accuracy and timeline 

of events and the methodology used to re-credit PJM for excess credits that the unit received as a 

result of the inaccurate offers. Staff also investigated whether the inaccurate offers violated: (1) 

the duty of candor and accuracy in communications with ISOs/RTOs; (2) the PJM Tariff and 

Operating Agreement, and (3) the Commission’s Anti-Manipulation Rule. Based on witness 

interviews and its review and analysis of data request responses from the company, PJM, and the 

PJM market monitor, staff determined that the erroneous cost-based offers were inadvertent and 

that the company accurately resettled with PJM for the excess credits. For these reasons, staff 

closed this investigation without further action.

MMU Referrals

ISO and RTO MMUs perform a critical function surveilling organized electric markets to 

detect potential violations, including market manipulation, anticompetitive behavior, and tariff 

noncompliance. As the Commission has recognized, “effective market monitoring requires close 

collaboration between the [MMUs], RTOs, ISOs, and [Enforcement].”18 This collaboration occurs 

formally, through certain reporting requirements set forth in Commission regulations, as well as 

informally, through regular dialogue with Enforcement. Both types of collaboration facilitate a 

high level of situational awareness among Enforcement staff and ensure a robust knowledge base 

for investigations. In an effort to promote transparency and provide guidance to regulated entities 

and MMUs, this section highlights the MMUs’ functions, describes the types of conduct MMUs 

monitor and refer to Enforcement, and provides illustrative examples of MMU referrals that

Enforcement closed in FY2020 as initial inquiries without conversion to an investigation.

By regulation, MMUs are required “to make a non-public referral to the Commission in all 

instances where the [MMU] has reason to believe that a Market Violation has occurred.”19 This 

referral requirement applies to potential “misconduct by the RTO or ISO, as well as by a market 

18 Southwest Power Pool, Inc., 137 FERC ¶ 61,046, at P 20 (2011).

19 18 C.F.R. § 35.28(g)(3)(iv)(A) (2020). A Market Violation is a violation of a tariff, Commission 

order, rule or regulation, market manipulation, or inappropriate dispatch that creates substantial 

concerns regarding unnecessary market inefficiencies. Id. § 35.28(b)(8).
2020 Staff Report on Enforcement 

40

participant.”20 The Commission has not prescribed a specific level of detail or length for referrals. 

However, they must be (1) non-public, (2) in writing, and (3) addressed to the head of Enforcement 

with copies to the heads of OEMR and OGC.21 In addition, they must include: (1) “sufficient 

credible information to warrant further investigation by the Commission;” (2) the names and 

contact information for suspected violators; (3) the dates of the alleged violations and whether the 

behavior is ongoing; (4) the rule, regulation, or tariff provisions allegedly violated; (5) the specific 

conduct that allegedly constitutes the violation; (6) the consequences to the market; (7) if the 

referral includes allegations of manipulation, a description of the alleged manipulative effect; and 

(8) any other information the MMU wishes to include.22 There is also a continuing obligation to 

update referrals with any information the MMU learns that is “related to the referral.”23 After 

receiving a referral, Enforcement conducts an inquiry into the alleged conduct and determines 

whether to open a full investigation. 

To help facilitate these regulatory requirements, Enforcement assigns staff to serve as liaisons 

with the MMUs for each RTO or ISO as well as with the RTO and ISO itself. MMUs refer a wide 

range of potential violations – both in terms of type and seriousness. Examples of referrals 

illustrating this broad range include: (1) referral of JP Morgan Ventures Energy Corporation for 

potential manipulation and tariff violations related to allegedly abusive bidding practices in 

CAISO and the Midcontinent Independent System Operator (MISO);

24 (2) referral of Westar 

Energy for potential violations of SPP Tariff and Commission regulations for allegedly submitting 

inaccurate cost inputs in its mitigated energy offers;25 and (3) referral of Etracom LLC for an 

alleged cross-market manipulation scheme in CAISO.26

20 Wholesale Competition in Regions with Organized Electric Markets, Order No. 719, 125 FERC 

¶ 61,071, at P 311 (2008).

21 18 C.F.R. § 35.28(g)(3)(iv)(B)-(C) (2020).

22 Id. § 35.28(g)(3)(iv)(D).

23 Id. § 35.28(g)(3)(iv)(E). Separate and apart from this referral requirement, MMUs also must 

“[i]dentify and notify [Enforcement] of instances in which a market participant’s or [ISO’s/RTO’s] 

behavior may require investigation, including, but not limited to, suspected Market Violations.” 

18 C.F.R. § 35.28(g)(3)(ii)(C) (2020). These notifications are more informal, can be made orally 

or in writing, and do not require the documentation involved in a referral. 

24 In Re Make-Whole Payments and Related Bidding Strategies, 144 FERC ¶ 61,068 (2013) 

(approving settlement agreement that included a $285 million civil penalty and $125 million in 

disgorgement in which the company neither admitted nor denied the violations).

25 Westar Energy, Inc., 160 FERC ¶ 61,025 (2017) (approving settlement agreement that included 

a civil penalty of $180,000 and an admission to the violations).

26 Etracom LLC, 155 FERC ¶ 61,284 (2016) (Order Assessing Penalties) (Etracom). Etracom 

ultimately settled with Enforcement. See Etracom LLC, 163 FERC ¶ 61,022 (2018) (approving 

settlement agreement that included a civil penalty of $1.9 million in which the company neither 

admitted nor denied the violations).
2020 Staff Report on Enforcement 

41

Statistics on MMU Referrals

In FY2020, staff received 13 new MMU referrals. Of these referrals (some of which involved 

more than one type of violation or multiple subjects), eight involved potential market 

manipulation, seven involved potential tariff violations, and four involved potential 

misrepresentations prohibited by the Commission’s market behavior rules. Three of these MMU 

referrals were the sources for investigations opened this fiscal year. Enforcement also received 

one supplemental referral of an entity that was already being investigated for the alleged conduct 

described in the referral. As such, this supplemental referral was rolled into that existing 

investigation. Of the MMU referrals received in FY2020, six remained pending at the end of the 

fiscal year.

DOI staff elected not to open full investigations of six MMU referrals in FY2020, two of which 

were carried over from the previous fiscal year. These referrals were analyzed and closed as 

inquiries. Of these referrals (some of which involved more than one type of alleged violation or 

multiple subjects), three involved potential market manipulation, six involved potential tariff 

violations, and five involved potential misrepresentations prohibited by the Commission’s market 

behavior rules. 

Of the six MMU referrals that staff did not convert to full investigations, three were closed 

without further action because staff concluded that the evidence did not support finding a violation. 

In the three other MMU referrals, while staff determined a violation was found, staff did not pursue 

a sanction. 

Illustrative MMU Referrals Closed with No Action 

Enforcement presents the following illustrative examples of MMU referral inquiries that DOI 

staff closed in FY2020 without conversion to an investigation. In determining whether to open an 

investigation based on an MMU referral, staff considers the factors set forth in the Commission’s 

Revised Policy Statement on Enforcement.27 The illustrative 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 MMU referral.

Market Manipulation. Following a referral from PJM’s MMU, staff analyzed whether a 

generator and its fuel supplier engaged in alleged manipulative conduct when the generator 

submitted cost-based offers on certain cold weather days in early 2019 that incorporated “penalty” 

gas rates (rates increased by adders for unauthorized use). Following the referral, staff discussed 

the matter with the companies and the MMU. Staff did not identify information suggesting that 

the fuel supplier misrepresented its ability to deliver gas, or that the generator misrepresented its 

ability to obtain sufficient gas for its units to run if the units had been dispatched on the relevant 

days. For these reasons, staff closed this MMU referral without further action.

Tariff Violation. Following a referral from NYISO’s MMU, staff analyzed whether multiple 

market participants allegedly violated the NYISO Tariff when their Generating Turbine (GT) 

unit(s) failed to adequately perform in response to start signals on certain days in 2018 and 2019. 

27 Revised Policy Statement, 123 FERC ¶ 61,156 at P 25.
2020 Staff Report on Enforcement 

42

Following the referral, staff discussed the matter with the primary alleged offender and obtained 

information regarding the causes of each instance in which the GT units failed to adequately 

perform. Staff determined that the conduct did not appear to have harmed the market or to have 

been willful. For these reasons, staff closed this MMU referral without further action.

Tariff Violation. Following a referral from NYISO’s MMU, staff analyzed whether two nuclear 

power plant generators allegedly violated the NYISO Tariff by failing to bid into the day-ahead 

market at the generators’ qualified Installed Capacity (ICAP) on certain days in 2018 and 2019. 

NYISO assessed sanctions against each generator for this conduct before the matters were 

referred to staff. Staff determined that the violations did not appear to have been willful. For 

example, one of the generators did not bid at ICAP due to process errors that caused the 

generator to fail to update its bids after mechanical issues were resolved. The generator 

subsequently updated its check lists to prevent this issue from reoccurring. For these reasons,

and because NYISO had already assessed a penalty for this conduct, staff closed this MMU 

referral without further action. 

Enforcement Hotline 

DOI staff fields calls and other inquiries made to the Enforcement Hotline (Hotline).28 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 the opening of investigations by DOI. 

In FY2020, Enforcement received 145 Hotline calls and inquiries, 141 of which promptly were 

resolved within the fiscal year either through advice provided by staff, because the caller stopped 

responding to staff’s communications, or because the matter was already pending before the 

Commission and so staff could not discuss it with the caller. Staff also closed five Hotline matters 

that had been pending from the previous year. Of the Hotline calls received in FY2020, four

remained pending at the end of the fiscal year.

Every year, a significant percentage of the Hotline calls and inquiries 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.

Other Matters 

In addition to its investigative work, DOI staff worked on other important matters in FY2020, 

including:

28 See 18 C.F.R. § 1b.21 (2020).
2020 Staff Report on Enforcement 

43

Collaboration with Other Commission Offices. DOI staff regularly coordinates with other 

Commission program offices regarding potential enforcement matters. This includes working 

closely with OEP and OGC on pipeline certificate and hydroelectric licensing matters to ensure 

compliance with statutory and regulatory obligations, as well as the terms and conditions of 

pipeline certificates and hydroelectric licenses and exemptions. In addition, DOI staff works 

closely with OGC, OEMR, and OEPI regarding late filings submitted under sections 203 or 205 

of the FPA. Staff also works closely with OGC and OEMR on evaluating refund reports related 

to the late filings. OGC and OEMR regularly consult with DOI staff when a qualifying facility 

submits a request for a declaratory order and/or a request for waivers of various provisions of Part 

292 of the Commission’s regulations related to small power production and cogeneration under 

PURPA. Regulated entities can submit questions to the Compliance Help Desk to reduce their 

risk of subsequent findings of noncompliance and potential enforcement actions. Finally, OGC 

and OEMR confer with DOI staff for prefiling meetings and/or regarding requests involving the 

Standards of Conduct under Order No. 717 or Affiliate Restrictions under Order No. 697. 

Hydropower Compliance. OEP’s Division of Hydropower Administration and Compliance 

(DHAC) has authority over hydropower compliance matters until such matters are referred to 

Enforcement. DOI staff provided significant input and advice to DHAC regarding three projects 

involving dam safety and other violations within DHAC’s authority during FY2020. 

No-Action Letters. Enforcement is one of several offices within the Commission that is jointly 

responsible for processing requests seeking a determination whether staff would recommend 

enforcement action against the requestor if it pursued particular transactions or practices. The 

“No-Action Letter” can be a useful tool for entities subject to the Commission’s authority to reduce 

the risk of failing to comply with the statutes the Commission administers, the orders, rules or 

regulations thereunder, or Commission-approved tariffs.29 Commission staff is generally available 

to confer on a pre-filing basis for possible “No-Action Letter” requests.

Reliability Coordinator. As part of its cooperation with other program offices, Enforcement has 

a designated Reliability Coordinator who is a member of DOI staff. In addition to serving a 

leadership role in inquiries or investigations involving reliability of the Bulk-Power System, the 

Reliability Coordinator serves as a team member on reliability-related matters including NERC 

and Regional Reliability Entity filings (e.g., Notices of Penalty, changes to NERC Rules, 

amending or retiring Reliability Standards, NERC Five-Year Assessments, and similar periodic 

filings). Enforcement’s Reliability Coordinator also makes presentations to NERC and at Regional 

Entity meetings, such as those of the Member Representative, Operating, and Planning 

Committees. 

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

for Obtaining Guidance, 123 FERC ¶ 61,157 (2008).
2020 Staff Report on Enforcement 

44

DIVISION OF AUDITS AND ACCOUNTING 

Overview

The Division of Audits and Accounting (DAA) administers Enforcement’s audit, accounting, 

and forms administration and compliance 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’s primary goal in conducting its audit, accounting, 

and forms administration and compliance activities is to enable the Commission to achieve its 

strategic objectives by assisting in the development of just and reasonable rates and increasing 

compliance with Commission regulations and policies. 

DAA’s audit program supports the Commission’s strategic objectives through public riskbased audits. DAA performs various types of audits that respond to the needs of the Commission, 

public, and industry, and advises the Commission on compliance and other matters. The audit 

program serves as a resource for the Commission to examine risk areas within the regulated 

industries and inform 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 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, DAA’s publicly issued audit 

commencement letters and audit reports provide insight into and valuable guidance on areas of 

emphasis and concern. 

DAA’s accounting program is a vital component of the Commission’s strategic goal of 

establishing just and reasonable cost of service rates, terms, and conditions by: (1) overseeing the 

accounting and reporting of financial information affecting cost of service rates; (2) acting as the

focal point for interpretive guidance concerning the Commission’s financial accounting and 

reporting rules, orders, regulations, and statutes; and (3) advising the Commission and industry on 

accounting and other financial issues. The accounting program facilitates the consistent reporting 

of financial information and ensures that an entity’s operations are reported in a manner that most 

appropriately supports ratemaking analysis. DAA’s accounting program also provides accounting 

expertise to the Commission’s other program offices and assists 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 forms administration and compliance program supports the Commission’s 

responsibility to ensure just and reasonable rates, terms, and conditions for consumers. DAA 

administers, analyzes, and ensures compliance with the filing requirements of EQRs and various 

Commission forms. The EQRs and Commission forms provide valuable information to the public, 

external shareholders, and the Commission and support the development of regulatory strategies 

that focus on the competitiveness and efficiency of wholesale energy markets. DAA conducts 

outreach to and communication with the public regarding these compliance programs, with the 

goal of ensuring that all parties comply with the Commission’s filing requirements.
2020 Staff Report on Enforcement 

45

Outreach and Guidance

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

others about what constitutes effective compliance, accountability, and transparency. The goal of 

DAA’s outreach is to provide jurisdictional entities with ample opportunity to achieve compliance 

and avoid noncompliance that may result in harm to jurisdictional customers and energy markets. 

DAA regularly hosts EQR user group meetings to conduct outreach with the filing community. 

DAA also actively engages in regular industry outreach with trade associations, such as the 

Interstate Natural Gas Association of America (INGAA), Edison Electric Institute (EEI), 

Association of Oil Pipe Lines (AOPL), and Natural Gas Supply Association (NGSA), and 

encourages interested parties to contact DAA with any inquiries or concerns. As a result of such 

interactions, DAA considers opportunities to enhance the efficiency, transparency, and 

effectiveness of its audit, accounting, and forms administration and compliance programs. DAA 

also engages with state regulators and the public accounting firms that audit and certify 

jurisdictional entities’ financial reports. Such industry outreach contributes to DAA’s analysis of 

accounting trends affecting jurisdictional entities and issuances of accounting guidance by the 

Chief Accountant. For example, in FY2020, guidance was issued for accounting for 

implementation costs incurred in a cloud computing arrangement in Docket No. AI20-1-000; 

accounting for cumulative-effect adjustments to retained earnings relating to the Financial 

Accounting Standards Board’s (FASB) accounting standard on credit losses in Docket No. AI20-

2-000; and accounting for pipeline testing costs incurred to comply with new federal safety 

standards in Docket No. AI20-3-000, all three of which are discussed in greater detail in part F 

below. DAA also continues to provide formal accounting guidance in response to accounting 

requests filed with the Commission. Informal accounting guidance may be requested and obtained 

from DAA via email (accountinginquiries@ferc.gov) and phone ((202) 502-8877). Informal 

guidance on all other compliance matters may be obtained through the Compliance Help Desk.30

Compliance

Compliance Programs

It is imperative that companies establish and maintain effective compliance programs. Such 

programs should foster a culture of compliance that begins at the executive level and permeates 

throughout the organization. Effective compliance programs increase the likelihood that 

jurisdictional companies will understand and follow the Commission’s rules, regulations, and 

orders, as well as their own tariff provisions, both in letter and spirit. However, since each 

company is unique in terms of size, region, organizational structure, and other relevant 

characteristics, no two compliance programs are alike. Each company must tailor its program to 

the specific challenges it faces. Notwithstanding these differences, DAA has found that the 

strongest compliance programs include:

• A proactive program that:

30 Information about the Commission’s Compliance Help Desk is available at 

www.ferc.gov/contact-us/compliance-help-desk.asp.
2020 Staff Report on Enforcement 

46

o Equips staff and management with sufficient training, education, tools, and other 

resources to detect issues in a timely manner to correct or prevent noncompliance;

o Provides effective lines of communication and notifies staff of standards through wellpublicized policies and procedures;

o Stays abreast of compliance trends by reviewing Commission orders and audit reports, 

and evolves based on these trends and other developments in the industry.

• The active involvement of senior management to provide a tangible demonstration of 

“tone-from-the-top” as well as the allocation of funds necessary for such programs.

• A designated compliance officer and compliance committee, charged with development 

and oversight of compliance activities and metrics that assess program effectiveness.

• The active involvement of internal audit and monitoring functions to routinely assess 

compliance with tariff provisions and Commission rules, orders, and regulations, to foster 

a strong and sustainable culture of commitment to compliance on an enterprise-wide basis.

• A policy and culture of seeking guidance from the Commission as necessary to ensure 

compliance, including an effective process to self-report noncompliance identified through 

internal oversight activities.

DAA appreciates the time, effort, and cooperation that each company puts forth during the 

course of an audit. A company’s willingness proactively to assist DAA not only demonstrates its 

commitment to compliance, but also can have a positive impact on the timeliness of the audit itself.

Timely Remedy of Noncompliance

Equally important to a robust compliance program is the timely remedy of noncompliance. 

Although an effective compliance program will often prevent noncompliance with Commission 

rules, regulations, and orders, any instances of noncompliance should be addressed immediately. 

Timely implementation of audit recommendations helps maximize their impact, demonstrates 

commitment to compliance, and supports fair, competitive markets. DAA tracks every audit 

recommendation it makes, and works with each company until all recommendations have been 

fully implemented. Further, the Commission’s FY2018-2022 Strategic Plan encourages strong 

compliance programs and places emphasis on timely implementation of corrective actions within 

six months of audit completion.31 In FY2020, 98 percent of DAA’s audit recommendations were 

implemented within six months.

Compliance Alerts 

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

entities. DAA believes that highlighting these areas for jurisdictional entities and their corporate 

officials here, will increase awareness of these concerns and facilitate compliance efforts. The 

topics presented below represent areas where DAA has found recurring compliance concerns or 

noncompliance of significant impact. DAA believes that greater attention in these areas will 

enable jurisdictional entities to prevent noncompliance, thereby avoiding potential enforcement 

31 See Strategic Plan, supra note 3, at 7 (Objective 1.2: Performance Measure). 
2020 Staff Report on Enforcement 

47

actions. To assist jurisdictional entities in gaining a better understanding of a particular topic,

examples of docket number(s) of one or more recent audit reports or Commission orders dealing 

with the various topics are provided in the discussions below so that jurisdictional entities may 

review the more recent findings by DAA in audit reports or by the Commission in orders related 

to a particular topic area.

Allocated Labor. Companies have charged labor and labor-related costs to construction projects 

without using an appropriate cost allocation method or time tracking process to ensure capitalized 

labor costs have a definite relation to construction. Specifically, DAA has observed that allocation 

methods were not properly designed, nor were the allocation results sufficiently monitored to 

ensure that costs charged were appropriately allocated to capital projects when employees: (1) 

performed activities that only supported the operations of the existing infrastructure; (2) spent a 

portion of their time performing construction-related activities and a portion on other jurisdictional 

activities; or (3) performed activities supporting both jurisdictional and non-jurisdictional 

activities. (FA19-3-000, PA16-4-000, PA16-2-000).

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 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 short-term debt 

for the current year. DAA has found instances where a company used commitment fees associated 

with lines of credit in the calculation of the short-term or the long-term debt rate. Under Order 

No. 561, Commission approval is required to include such fees as part of the AFUDC short-term 

rate derivation (PA18-2-000) or the cost of long-term debt calculation (FA19-3-000). Moreover, 

when a credit facility is established to create liquidity for the company’s general purpose needs, 

the associated commitment fees resemble a banking charge to support a company’s utility 

operations as a whole, and the commitment fees should be excluded from the cost of short-term 

debt (PA18-1-000) or the cost of long-term debt (FA19-3-000) when calculating AFUDC.

Other common findings related to AFUDC during audits include: 

• Failure to exclude goodwill-related equity from the equity component of the AFUDC rate 

(PA10-13-000); 

• Computing AFUDC on contract retention and other noncash accruals (FA19-3-000, FA17-

6-000);

• Compounding AFUDC more frequently than semi-annually (AC12-53-000);

• Improperly using monthly equity and long-term debt balances instead of prior-year-end 

balances in computing the AFUDC rate (FA17-1-000, PA18-2-000); 

• Improperly including Account 216.1, Unappropriated Undistributed Subsidiary Earnings, 

and Account 219, Accumulated Other Comprehensive Income, balances as part of the 

equity component of the AFUDC formula (FA18-2-000, FA18-3-000, PA18-1-000, PA18-

2-000); 

• Employing the net-of-tax approach when performing AFUDC calculations (AC18-63-000);
2020 Staff Report on Enforcement 

48

• Improper inclusion in the short-term debt rate of interest recorded on transmission and 

interconnection study advances received from customers (PA18-1-000); and

• Improperly using an AFUDC methodology not prescribed by the Commission that results 

in capitalized AFUDC above the maximum permitted by the Commission’s regulations 

(FA19-6-000, PA16-4-000). 

Formula Rate Matters. A focal point of DAA’s formula rate audits continues to be compliance 

with the Commission’s accounting and FERC Form No. 1 (Annual Report of Major Electric 

Utilities, Licensees and Others), requirements for costs that are included in formula rate recovery 

mechanisms used to determine billings to wholesale customers. DAA notes that certain areas of 

noncompliance could have been prevented with more effective coordination between jurisdictional 

entities’ accounting and rate staffs to prevent the recovery of costs that should have been excluded 

from the formula rate. Additionally, formula rate audits in recent years have identified patterns of 

noncompliance in the following areas:

• Revenue Credits – Public utilities understated the revenue credits that were used to reduce 

the revenue requirements of their transmission formula rates by improperly excluding 

certain transmission-related revenues. (FA17-2-000 (pole attachment revenue), FA18-3-

000 (rent from affiliate)).

• Income Tax Overpayments – Public utilities have incorrectly recorded in Account 165, 

Prepayments, income tax overpayments for which they elected to receive a refund and not 

have such overpayments applied to a future tax year’s obligation. 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. (FA17-4-000, FA13-1-000).

• Excess Accumulated Deferred Income Taxes (ADIT) – To address the tax effects of the 

Tax Cuts and Jobs Act of 2017 (TCJA), public utilities adjusted ADIT balances to reflect 

the change in the effective corporate tax rate from 35 percent to 21 percent. Under certain 

formula rate tariffs, public utilities were required to make adjustments to neutralize the rate 

base impacts of these TCJA adjustments to ADIT balances. Audit staff found instances 

where utilities removed balances from the ADIT accounts but did not make the necessary

adjustments to keep rate base neutral. This led to rate base being overstated and wholesale 

transmission customers being overbilled. (FA18-3-000).

• Storm Damage – Public utilities have collected excess storm damage amounts from 

wholesale customers by either recovering estimates that did not reflect actual experience 

or recovering both estimated and actual storm damage expenses. (FA15-5-000, FA15-6-

000, FA16-4-000).

• Investment Tax Credits (ITCs) – Public 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 that ITC carry-forwards were recorded 

in an incorrect account and factored into formula rate billings, leading to customer 

overbillings. (FA15-8-000).
2020 Staff Report on Enforcement 

49

• Internal Merger Costs – Public utilities have included merger-related transaction costs in 

operating expense accounts, contrary to the long-standing Commission policy that such 

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

companies misrepresenting utility operating income and expenses reported in their FERC 

Form No. 1. In addition, public utilities subject to hold-harmless commitments have 

incorrectly recovered merger-related transaction and transition costs, including internal 

labor costs, in rates. Public utilities should obtain Commission approval to recover such 

costs and otherwise should have appropriate controls and procedures to ensure that the 

costs are tracked and excluded from formula rates. (PA18-3-000, FA18-3-000, FA17-1-

000, FA16-3-000, PL15-3-000, FA14-10-000).

• Asset Retirement Obligations (ARO) – Public utilities 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, and the accretion expense related 

to the liability. (PA18-1-000, PA18-2-000, FA13-1-000).

• Commitment Fees – Public utilities improperly recorded commitment fees associated with 

lines of credit in Account 165, Prepayments, which led to excess recoveries through 

formula rate billings. (FA15-5-000, FA15-6-000, FA15-7-000).

• Formula Rate Errors – Public utilities’ transmission formula rate calculations 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 FERC Form No. 1 line. Finally, there were instances where 

items specifically excluded by formula rate protocols were included in the formula rate. 

(FA15-6-000).

• Regulatory Assets – Public utilities included amortized regulatory assets in formula rate 

calculations without first obtaining the required Commission approval for recovery of the 

regulatory asset. (PA18-3-000).

• Administrative and General (A&G) Expenses – Most audits find that public utilities 

recorded non-operating expenses and functional operating and maintenance expenses in 

A&G expense accounts, leading to inappropriate inclusion of such costs in revenue 

requirements produced by their formula rates. Examples of these costs include: 

employment discrimination settlement payments, lobbying expenses, charitable 

contributions, storm damage to distribution systems, and payments of penalties. (FA19-2-

000, FA19-3-000, FA19-7-000, FA18-3-000, FA17-1-000).

• Unused Inventory and Equipment – Public utilities included in the cost of construction 

projects the cost of materials, supplies, and equipment purchased for the project, without 

removing the cost of items ultimately unused in whole or in part. (FA13-3-000).

• Electric Vehicle (EV) Charging Stations – Public utilities included EV charging stations as 

part of general plant, even though the EV charging stations serve a distribution function. 

(FA19-3-000).

Transmission Rate Incentives. The Commission has granted many public utilities transmission 

incentive rate treatments as a means of promoting and developing a more efficient and robust 
2020 Staff Report on Enforcement 

50

transmission system. Recent audit activity has found that effective procedures and controls were 

lacking to ensure full compliance with the conditions of Commission orders approving 

transmission incentive rate treatments. In particular, projects that did not qualify for the 

transmission incentive to include construction work in progress in rate base were inappropriately 

including it. DAA believes more robust procedures and controls to ensure compliance with the 

application of transmission incentive rate treatments could have prevented noncompliance in this 

area. (FA16-1-000).

Open Access Transmission Tariffs. An essential goal of open access is to support efficient and 

competitive markets. On recent OATT audits, DAA noted instances where company actions did 

not support this goal due to noncompliance with OATT terms and conditions. Specifically, DAA 

identified issues relating to transmission function employees procuring transmission service at the 

request of market function employees in violation of the independent functioning requirement 

(PA18-1-000); improper use of network transmission service and secondary network transmission 

service (PA18-1-000, PA18-2-000); improper sales from designated network resources (PA17-7-

000); transmission capacity not released in accordance with Commission-approved tariffs (PA13-

4-000); inaccurate available transmission capacity data posted on OASIS (PA17-7-000); 

transmission service provided to customers under expired transmission service agreements (PA13-

6-000); and improper submissions outside of OASIS of the termination of network resources 

(PA18-1-000)

Data Reporting by ISO/RTO Market Participants. In recent audits, DAA identified instances 

when market participants did not submit accurate data to the ISOs/RTOs (PA17-5-000, PA17-3-

000, PA15-5-000). Inaccurate data submitted by market participants weakens the ISOs’/RTOs’ 

ability to operate effective and efficient energy markets. For example, DAA identified instances 

when market participants submitted generation resource offers that did not reflect the actual known 

physical capabilities and characteristics of the resources. This affected the ability of the 

ISOs/RTOs to optimize dispatch in order to reflect the actual marginal cost of energy and to 

manage transmission congestion. DAA encourages all market participants to have adequate 

controls in place to ensure accurate, complete, and timely data are submitted to the ISOs/RTOs.

Natural Gas Accounting and Tariff Matters. Natural gas audits have evaluated compliance 

with the Commission’s accounting and FERC Form No. 2 (Annual Report of Major Natural Gas 

Companies), reporting requirements to ensure that transparent and accurate data is reported for use 

by all stakeholders in developing and monitoring rates. The audits also covered the administration 

and application of transportation services and rates among customers in accordance with approved 

gas tariffs. In recent natural gas audits, DAA has found noncompliance in the following areas:

• Gas Tariff – Natural gas pipelines did not comply with the Commission’s gas tariff 

procedures, specifically with regard to: (1) using the method specified in the tariff for 

valuing system gas activities (PA16-2-000, PA13-5-000); (2) enforcing stipulations in 

operational balancing agreements to manage and monitor gas imbalance activities between 

interstate and intrastate pipelines (PA16-4-000); (3) updating their tariffs to fully reflect 

the Commission’s reservation charge crediting policy32 for force majeure and non-force 

32 Natural Gas Supply Ass’n, 135 FERC ¶ 61,055, order on reh’g, 137 FERC ¶ 61,051 (2011).
2020 Staff Report on Enforcement 

51

majeure events (PA16-4-000); and (4) penalty revenues collected from offending shippers 

and refunded to non-offending shippers (FA18-2-000).

• Accounting – Natural gas pipelines did not comply with Commission accounting 

requirements, specifically with regard to: certain activities pertaining to system gas 

accounting (FA19-6-000, PA16-2-000); penalty revenues assessed to noncompliant 

shippers (PA16-4-000, PA10-3-000); shipper imbalances and cash-outs (FA19-6-000, 

FA15-1-000, PA13-5-000, PA10-3-000); lost and unaccounted-for gas (FA19-6-000, 

FA15-1-000, PA16-4-000, PA13-5-000); and fuel used in compressor stations (FA15-1-

000). Other common areas of DAA-identified noncompliance included: (1) use of 

AFUDC rates above the maximum allowed rate (FA19-6-000, PA16-4-000); (2) improper 

derivation of certain components included in the AFUDC rate (FA19-6-000, FA13-7-000); 

(3) accrual of AFUDC on unpaid amounts and non-eligible construction costs (FA13-9-

000, FA12-4-000); (4) misclassification of non-operating expenses associated with 

donations, fines, and employment discrimination compromise settlements (FA19-6-000, 

FA15-16-000), or with penalties and lobbying activities (PA13-5-000, FA13-7-000, FA12-

4-000), or membership dues (FA19-6-000, FA18-2-000); (5) misclassification of operating 

expenses as general and administrative expenses (PA16-2-000, PA16-4-000); (6) improper 

allocation of shared service costs (PA16-2-000); and (7) application of cost allocation 

methodologies absent a time study or other supporting records (PA16-2-000, FA15-16-

000). 

• Reporting – FERC Form No. 2 reporting was inaccurate, incomplete, and omitted required 

information and footnote disclosures required for various schedules supporting the 

financial reporting (FA18-2-000, FA17-6-000). Other reporting matters pertained to 

unfiled nonconforming service agreements and cash management agreements (FA17-6-

000).

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 the FERC Form No. 6 (Annual Cost of 

Service-Based Analysis Schedule). This 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 only interstate service (i.e., Commissionjurisdictional) amounts, while the rest of the FERC Form No. 6 includes both interstate and 

intrastate amounts. The information reported on page 700 is used by the Commission and 

interested parties to evaluate interstate pipeline rates and facilitate the Commission’s review of the 

five-year index.33 Recent oil pipeline audits have identified accounting errors that impacted the 

33 Page 700 is used as a preliminary screening tool for shippers and other stakeholders to gauge 

whether an oil pipeline’s cost of service substantially diverges from revenues generated by its 

rates. The Commission also uses the expense and barrel-mile data from this page to support the 

Commission’s determination of its proposed oil pipeline transportation rate index adjustment for 

a five-year, forward looking period. The next five-year index will be based on the Commission’s 

evaluation of the increase in costs, on a dollar per barrel-mile basis from 2014 to 2019, as 

reflected on page 700 in oil pipelines’ filings, and will become effective in 2021.
2020 Staff Report on Enforcement 

52

accuracy of amounts reported on page 700, including: incorrect determination of interstate 

revenues and expenses and designating intrastate amounts as interstate (FA18-1-000, FA16-7-

000); misclassification of carrier and noncarrier property, and of charitable donations, 

fines/penalties, lobbying activities, and affiliate transaction mark-ups as operating rather than nonoperating expenses (FA18-1-000; FA16-6-000, FA16-7-000); use of the consolidated rather than 

the equity method of accounting for investments in joint ventures and subsidiary companies 

(FA16-5-000); and use of depreciation rates not approved by the Commission (FA18-1-000). 

DAA also found that some companies were not conducting depreciation studies as required, 

leading to depreciation rates not aligning with the actual service lives of the plants, and ultimately 

to asset groups with negative book balances (FA16-5-000). 

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

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

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

decommissioning trust fund reports (PA13-5-000), or clearly distinguish Commissionjurisdictional from non-jurisdictional monies held in the funds, and accurately report the amount 

of Commission-jurisdictional money in the trusts (PA13-15-000, FA15-6-000. FA15-7-000).

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

all investments in subsidiaries. Recent audits continued 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 (PA14-2-000). 

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 reviewing and using relevant data. It also negatively impacts 

transparency and creates doubt regarding the effectiveness of these companies’ compliance 

programs.

Audit Matters 

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

selected for an audit are not typically suspected of any wrongdoing. DAA consults with other 

divisions within Enforcement and other Commission program offices to inform DAA’s risk-based 

methodology for selecting audit scope areas and audit candidates. DAA is not limited in the types 

of audits it conducts; rather, it responds to the needs and priorities of the Commission and the 

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

a review of the audited entity’s internal compliance program. 

DAA’s public audit reports detail each audit’s scope, methodology, findings of 

noncompliance, and corrective recommendations, with the expectation that all jurisdictional 

entities will use this information to be better informed, avoid noncompliance, and improve 

operational performance. Although not all audits result in findings of noncompliance, when they 

do, timely implementation of the audit report’s corrective recommendations is expected. Timely 
2020 Staff Report on Enforcement 

53

implementation demonstrates an entity’s commitment to improving compliance with the 

Commission’s regulations and precedents and to reducing the risk of future noncompliance. 

In FY2020, DAA completed ten audits of public utility, natural gas, oil, and RTO companies 

covering a wide array of topics. The audits resulted in 51 findings of noncompliance, 199

recommendations for corrective action, and directed approximately $98.4 million in refunds and 

other recoveries. Specifically, DAA directed $13.6 million to be refunded to jurisdictional 

customers and prevented approximately $84.8 million from being inappropriately amortized and 

collected through future rates. These refunds and other recoveries addressed DAA findings 

concerning, among other subjects, the improper application of merger-related costs; lobbying, 

charitable donation, membership dues, and employment discrimination settlement costs; 

accounting for production-related or distribution-related expenses as general or transmissionrelated expenses; pending income tax and insurance premium refunds being treated as 

prepayments; and the regulatory AFUDC formula. Audit recommendations also directed 

improvements to the audited companies’ internal accounting processes and procedures, financial 

reporting for accuracy and transparency, web site postings, and efficiency of operations. 

Collectively, these refunds and recommendations prevented unjust charges in jurisdictional rates, 

and provided procedural and process enhancements that benefit ratepayers and market participants. 

The audits summarized below were completed in FY2020 and provide a sample of DAA findings 

and results. Further samples are contained in prior years’ enforcement reports. The complete audit 

reports are publicly available in the Commission’s eLibrary system.34

DAA’s FY2020 audits were affected by the COVID-19 pandemic. Recognizing the challenges 

the pandemic created for jurisdictional entities, DAA communicated to such entities its willingness 

to be flexible as needed, and relaxed some of its audit requirements to reduce the burden on 

companies. These changes included extending the time to respond to data requests and draft audit 

reports, deferring commencement of several audits planned for FY2020, and halting audit travel. 

Therefore, several audits planned for FY2020 completion will not conclude until FY2021, and 

some audits scheduled for FY2020 commencement have been deferred to a future date. 

1. Formula Rates

Michigan Electric Transmission Company (METC) – Docket No. FA19-7-000. At METC, 

DAA evaluated compliance with: (1) the approved terms, rates, and conditions of METC’s 

transmission formula rate as provided in Attachment O of the MISO Open Access Transmission, 

Energy and Operating Reserve Markets Tariff; (2) the accounting requirements of the Uniform 

System of Accounts Prescribed for Public Utilities and Licensees in 18 C.F.R. Part 101 (Uniform 

System of Accounts (Public Utilities)); (3) the reporting requirements of FERC Form No. 1 under 

18 C.F.R. § 141.1; and (4) the preservation of records requirements under 18 C.F.R. Part 125.35 

The audit identified six findings and 18 recommendations that required METC to take corrective 

action. The company did not contest the six findings and agreed to implement the 18 

recommendations. The six findings covered the following areas: (1) recording lobbying costs 

34 The Commission’s eLibrary system can be accessed at elibrary.ferc.gov.

35 Michigan Electric Transmission Co., Docket No. FA19-7-000 (July 2, 2020) (delegated letter 

order).
2020 Staff Report on Enforcement 

54

associated with pensions in Account 926, Employee Pensions and Benefits, instead of the correct 

Account 426.4, Expenditures for Certain Civic, Political and Related Activities, thereby 

overstating METC’s wholesale transmission revenue requirement; (2) recording settlement costs 

relating to resolving employment discrimination claims in operating expense accounts contrary to 

Accounting Release AR-12; (3) not assigning any engineering and supervision (E&S) costs to 

abandoned transmission construction projects but, instead, improperly reallocating the E&S costs 

associated with abandoned projects to ongoing transmission projects and accruing AFUDC on 

these reallocated amounts; (4) inappropriately accounting for a donation as an operating expense, 

leading to amounts being improperly included in METC’s formula rate mechanism and customer 

billings; (5) failing to use the income statement and using only balance sheet accounts to record 

Asset Retirement Obligations (AROs) relating to METC’s utility plant assets; and (6) not reporting 

certain required information on select pages of the FERC Form No. 1. As a result of the audit, 

METC made refunds to wholesale transmission customers and revised its accounting policies and 

procedures in identified areas of noncompliance.

San Diego Gas & Electric Company (SDG&E) – Docket No. FA19-3-000. At SDG&E, DAA 

evaluated compliance with: (1) SDG&E’s formula rate transmission owner tariff; (2) the 

accounting requirements of the Uniform System of Accounts (Public Utilities) under 18 C.F.R. 

Part 101; (3) the reporting requirements of the FERC Form No. 1 under 18 C.F.R. § 141.1; and (4) 

preservation of records requirements under 18 C.F.R. Part 125.36 The audit identified 11 findings 

and 55 recommendations that required SDG&E to take corrective action. The company accepted 

the 11 findings and 55 recommendations. The 11 findings covered the following areas: (1) an 

inappropriate method of calculating AFUDC involving the improper inclusion of unpaid contract 

retention accruals in the Construction Work in Progress (CWIP) balance, and of unamortized debt 

discounts and losses on reacquired debt in the determination of the long-term debt balance, 

resulting in over accrued AFUDC in the CWIP and utility plant accounts and overbilled wholesale 

transmission customers; (2) with respect to upfront and quarterly commitment fees on a revolving 

line of credit not established in conjunction with acquisition of any debt, improperly accounting 

for the upfront commitment fees in Account 182.3, Other Regulatory Assets, and the quarterly 

commitment fees in Account 923, Outside Services Employed, and improperly including 

amortization of the upfront commitment fees in the calculation of long-term debt interest expense 

used to compute the AFUDC rate; (3) capitalizing overhead costs to Account 107, Construction 

Work in Progress – Electric, using an allocation method that was not based on the actual time 

employees engaged in construction activities or on a representative time study; (4) improperly 

accounting for electric vehicle (EV) charging station distribution assets in accounts that were 

wholesale transmission formula rate inputs; (5) improperly recording state and federal regulatory 

commission expenses in Account 566, Miscellaneous Transmission Expenses, and 923, Outside 

Services Employed, rather than in correct Account 928, Regulatory Commission Expenses; (6) 

recording the costs of operating substations that supported both distribution and transmission 

operations solely to transmission operations; (7) improperly recording charitable donations and 

lobbying expenses in accounts that were wholesale transmission formula rate inputs; (8) 

improperly recording external consultant fees incurred to support general services not applicable 

to a particular operating function – here, information technology systems supporting all operating 

functions – in an account 100 percent charged as a cost of transmission service (Account 560), 

36 San Diego Gas & Electric Co., Docket No. FA19-3-000 (July 30, 2020) (delegated letter order).
2020 Staff Report on Enforcement 

55

rather than in correct Account 923, Outside Services Employed, which was allocated 18 percent 

to transmission and 82 percent to distribution, and failing to retain documentation supporting 

recording a portion of such costs in Account 107, Construction Work in Progress-Electric; (9) not 

filing all tariff records, as required, in eTariff – specifically, improperly omitting Attachment 2, 

SDG&E’s Formula Rate Spreadsheet; (10) premature destruction or loss of records documenting 

an asset’s cost – here, a $200,000 charge in Account 154, Plant Materials and Operating Supplies, 

listed as a core deposit for reels of cable, where neither the cable nor any documentation relating 

to the transaction was found; and (11) not filing proposed journal entries for the purchase of electric 

plant within six months of the transaction’s occurrence, as required by 18 C.F.R. Part 101, Electric 

Plant Instruction No. 5(A) and Account 102, Electric Plant Purchased or Sold. As a result of the 

audit, SDG&E made refunds to wholesale transmission customers and revised its accounting 

policies and procedures in identified areas of noncompliance.

MidAmerican Energy Company (MEC) – Docket No. FA19-2-000. At MEC, DAA evaluated 

compliance with: (1) the approved terms, rates, and conditions of MEC’s transmission formula 

rate mechanism provided in Attachment O of MISO’s Open Access Transmission, Energy and 

Operating Reserve Markets Tariff and other jurisdictional rates on file with the Commission; (2) 

the accounting requirements of the Uniform System of Accounts (Public Utilities) under 18 C.F.R. 

Part 101; (3) the reporting requirements of the FERC Form No. 1 and Supplemental Form 3-Q 

under 18 C.F.R. § 141.1; and (4) preservation of records requirements under 18 C.F.R. Part 125.37 

The audit identified one finding and four recommendations that required MEC to take corrective 

action. The company accepted the one finding and four recommendations. The one finding 

covered the following area: improper recording of costs relating to settlement of an employee 

discrimination claim in Account 920, Administrative and General Salaries, instead of correct 

Account 426.5, Other Deductions, as required by Accounting Release AR-12. As a result of the 

audit, MEC made refunds to wholesale transmission customers and revised its accounting policies 

and procedures in the identified area of noncompliance.

2. Gas Tariff & Accounting

National Fuel Gas Supply Corporation (National Fuel) – Docket No. FA19-6-000. At National 

Fuel, DAA evaluated compliance with: (1) accounting requirements of the Uniform System of 

Accounts Prescribed for Natural Gas Companies under 18 C.F.R. Part 201; (2) reporting

requirements of the FERC Form No. 2 under 18 C.F.R. § 260.1; and (3) selected provisions of 

National Fuel’s FERC Gas Tariff (Tariff).38 The audit identified five findings and 19 

recommendations that required National Fuel to take corrective action. The company did not 

contest the five findings and 19 recommendations. The five findings covered the following areas:

(1) use of an inappropriate method of calculating AFUDC that only considered a portion of the 

short-term debt borrowed in the month such debt was incurred and that incorrectly applied the 

annual AFUDC rate it calculated to the period March through February of each year, rather than 

January through December, as specified in the Commission’s regulations, causing AFUDC to 

exceed the maximum permitted in years when short-term debt was outstanding for the entire year; 

37 MidAmerican Energy Co., Docket No. FA19-2-000 (July, 2, 2020) (delegated letter order).

38 National Fuel Gas Supply Corp., Docket No. FA19-6-000 (July 15, 2020) (delegated letter 

order).
2020 Staff Report on Enforcement 

56

(2) improperly recording certain non-operating expenses, including charitable contributions, 

penalties, and lobbying costs, in operating expense accounts and improperly capitalizing 

membership dues and lobbying expenses as costs of construction; thereby overstating operating 

expenses and plant in service; (3) with respect to valuation of system gas, improperly valuing 

certain system gas activities at 90 percent, rather than 100 percent, of the cash-out index, resulting 

in understating the balance of gas owed to system gas, as well as various operating expense 

accounts used to record system gas activities under the fixed asset method, and improperly 

calculating the October 2018 production monthly index price, resulting in an erroneously high 

price and overpayment of a non-affiliated shipper when cashing out its balance; (4) improperly 

recording amounts for lost-and-unaccounted-for-gas (LAUF) and also for gas used by underground 

storage compressor stations in transmission – rather than the correct production and gas storage –

expense accounts, and recording the cost of gas purchased to replace system gas encroachments in 

the incorrect production gas supply expense account, thereby reducing the transparency of these 

gas activities reported in the FERC Form No. 2; and (5) improperly netting shipper imbalance 

payables and receivables in Account 174, Miscellaneous Current and Accrued Assets, and netting 

imbalance cash-out settlement losses and gains in Account 495, Other Gas Revenues, and Account 

182.3, Other Regulatory Assets, reducing the transparency of these gas activities reported in the 

FERC Form No. 2. As a result of the audit, National Fuel updated its accounting policies and 

procedures in areas of noncompliance, submitted corrected FERC Form No. 2 filings, and removed 

from its plant or operating expense accounts certain improperly recorded expenses, thereby 

preventing amounts from potentially being inappropriately collected through future rates.

3. Oil Tariff & Accounting

ONEOK NGL Pipeline, L.L.C. (ONEOK NGL) – Docket No. FA18-1-000. At ONEOK NGL, 

DAA evaluated compliance with Commission regulations for oil pipeline companies in 18 C.F.R. 

Parts 340-357, including: (1) the Uniform System of Accounts in 18 C.F.R. Part 352; (2) 

preservation of records requirements in 18 C.F.R. Part 356; (3) FERC Form No. 6 financial 

reporting requirements in 18 C.F.R. Part 357; and (4) select portions of ONEOK NGL's FERC 

transportation tariffs.39 The audit identified six findings and 19 recommendations that required 

ONEOK NGL to take corrective action. The company did not contest the six findings and 19 

recommendations. The six findings covered the following areas: (1) incorrectly calculating and 

reporting on Page 700 of FERC Form No. 6 the following: (a) depreciation expense, which was 

based on the market value of certain acquired assets rather than the assets’ book value, as required 

by Commission regulations; (b) AFUDC depreciation, overstated because of improper inputs, such 

as unrelated amortization amounts and other items that duplicated amounts recorded in carrier 

property upon the completion of construction; and (c) rate base reported on line 5a of Page 700 of 

FERC Form No. 6, which incorrectly included the cost of carrier property under construction (i.e., 

CWIP), when only the cost of carrier property in service is to be reported; (2) improperly recording 

certain inactive and abandoned pipeline assets as carrier property in Account 30, Carrier Property; 

(3) transporting product on FERC jurisdictional gathering lines without nominations, contrary to 

ONEOK NGL’s FERC Tariff No. 9, Item No. 45; (4) improperly charging and accounting for 

transportation revenues on its North Line at interstate, rather than the required intrastate, rates, 

thereby overcharging for these deliveries and overstating interstate transportation revenues; (5) 

39 ONEOK NGL Pipeline, L.L.C., Docket No. FA18-1-000 (Jan. 9, 2020) (delegated letter order).
2020 Staff Report on Enforcement 

57

improperly recording revenue for the lease of a pipeline asset owned by its affiliate as rental 

revenue of its own; and (6) applying to carrier property assets depreciation rates that were not 

approved by and on file with the Commission, resulting in overstated depreciation and misreported 

amounts on Page 700 of FERC Form No. 6. As a result of the audit, ONEOK NGL restated its 

2015-2018 FERC Form No. 6 filings and strengthened its accounting, reporting, and tariff 

implementation policies and procedures relating to the identified findings. 

Electric Tariff & Accounting 

Public Service Company of New Mexico (PNM) – Docket No. PA18-1-000. At PNM, DAA 

evaluated compliance with: (1) the terms, conditions, and rates of its OATT, including its 

transmission formula rate mechanism as provided in Attachment H of its OATT and other 

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

System of Accounts (Public Utilities) under 18 C.F.R. Part 101; (3) the reporting requirements of 

the FERC Form No. 1 and Supplemental Form 3-Q under 18 C.F.R. § 141.1; (4) the regulations 

regarding OASIS prescribed in 18 C.F.R. Part 37; (5) the requirements of its MBR authorizations 

and the MBR regulations under 18 C.F.R. Part 35, Subpart H and the EQR filing regulations under 

18 C.F.R. § 35.10b; and (6) the regulations governing nuclear plant decommissioning trust funds 

prescribed in 18 C.F.R. Part 35, Subpart E.40 The audit identified 11 findings and 35 

recommendations that required PNM to take corrective action. The company did not contest the 

11 findings and 35 recommendations. The 11 findings covered the following areas: (1) upon its 

wholesale power marketing function employees’ request, PNM’s transmission function employees 

procured point-to-point (PTP) transmission service on certain paths for the marketing function, 

contrary to the Commission’s Independent Functioning Rule; (2) incorrectly using estimated,

rather than actual, transmission costs to price certain cost-based energy sales, resulting in 

overcharging a transmission customer; (3) PNM’s transmission function improperly allowed its 

marketing function to use secondary network transmission service, rather than requiring that it use 

PTP transmission service, to deliver energy outside of PNM’s control area, contrary to PNM’s 

OATT; (4) improperly allowing network customers to submit terminations of network resources 

outside of OASIS, rather than through OASIS as required by Commission Order No. 676-H; (5) 

PNM did not obtain Commission approval, as required, in advance of recovering asset retirement 

obligation (ARO) costs in its transmission formula rate calculations, and also did not file its 

accounting entries with the Commission, as required, to reclassify approximately $37 million from 

Account 108, Accumulated Provision for Depreciation of Electric Utility Plant (Major Only), to 

Account 435, Extraordinary Deductions; (6) PNM used deficient methods of calculating its 

AFUDC rate, causing it to collect AFUDC in excess of the maximum permitted by the 

Commission’s regulations, in that PNM: (a) improperly included in its short-term debt rate the 

interest recorded on transmission and interconnection study advances paid to PNM; (b) incorrectly 

included unappropriated, undistributed subsidiary earnings as part of the equity component; and 

(c) incorrectly combined the costs of all debt issuances, rather than individually computing the 

costs of each debt issuance, to determine the weighted cost of long-term debt; (7) improperly 

accounting for upfront and quarterly commitment fees, paid for a credit facility, in Accounts 428, 

Amortization of Debt Discount and Expense, and 431, Other Interest Expense, respectively, rather 

40 Public Service Co. of New Mexico, Docket No. PA18-1-000 (July 7, 2020) (delegated letter 

order).
2020 Staff Report on Enforcement 

58

than in correct Account 930.2, Miscellaneous General Expenses; (8) improperly accounting for 

electric generating station remediation expenses as a general expense, in Account 930.2, 

Miscellaneous General Expenses, rather than as production-related expenses appropriately 

recorded in Account 506, Miscellaneous Steam Power Expenses (Major Only); (9) the improper 

posting on OASIS of certain transmission schedules associated with PNM’s transmission and 

marketing functions as non-affiliated, rather than affiliated, transactions; (10) not executing 

transmission service agreements governing 15 non-affiliated transmission capacity reassignments 

prior to commencing the reassigned transmission service, contrary to section 23.1(b) of PNM’s 

OATT, and not reporting these reassignments in EQR filings; and (11) reporting errors in EQR 

filings, including the improper reporting of cost-based power sales and unreported capacity 

reassignments. As a result of the audit, PNM made refunds to wholesale transmission customers 

and revised its accounting, reporting, and tariff-implementation policies and procedures in the 

identified area of noncompliance. 

National Grid USA (National Grid) – Docket No. FA16-2-000. At National Grid, DAA 

evaluated compliance with: (1) cross-subsidization restrictions on affiliate transactions under 18 

C.F.R. Part 35; (2) accounting, recordkeeping, and reporting requirements under 18 C.F.R. Part 

366; (3) preservation of records requirements for holding companies and service companies under 

18 C.F.R. Part 368; and (4) the Uniform System of Accounts for Centralized Service Companies 

under 18 C.F.R. Part 367. The audit also evaluated the associated public utilities’ compliance with 

the Commission's accounting requirements for transactions with associated companies under 18 

C.F.R. Part 101 and the applicable reporting requirements in the FERC Form No. 1, under 18 

C.F.R. Part 141.

41 The audit identified seven findings and 32 recommendations that required 

National Grid to take corrective action. The company did not contest the seven findings and 32 

recommendations. The seven findings covered the following areas: (1) National Grid’s two 

centralized service companies used improper composite depreciation rates to determine 

depreciation expense accrued on certain property, thereby accruing depreciation expense at rates 

not consistent with Commission accounting rules, which was then allocated and billed to their 

public utility affiliates and passed on through transmission formula rates to transmission

customers; (2) the two centralized service companies did not consistently apply their documented 

cost allocation methods, nor timely update their general ledger system to reflect changes in the 

allocation percentages actually used to bill affiliates, leading to the over-allocation of costs to 

certain National Grid public utility subsidiaries; (3) the primary centralized service company 

improperly accounted for and allocated to public utility subsidiaries the lobbying component of 

industry association membership dues, which was improperly included in wholesale transmission 

rates; (4) the primary centralized service company improperly recorded donations in Account 921, 

Office Supplies and Expenses, and Account 930.2, Miscellaneous General Expenses, instead of

correct Account 426.1, Donations; amounts recorded in Accounts 921 and 930.2 (including the 

donations) were allocated to, among others, National Grid’s public utility subsidiaries, which 

recorded the amounts in the same Accounts 921 and 930.2, with some of the public utility 

subsidiaries improperly including the donation amounts in their transmission formula rates and 

transmission customer billing rates; (5) the same service company improperly accounted for 

various administrative and general (A&G) expenses in its books and records, misstating certain 

A&G accounts billed to the public utility subsidiaries, resulting in FERC Form No. 1 misreporting 

41 National Grid USA, Docket No. FA16-2-000 (Nov. 15, 2019) (delegated letter order).
2020 Staff Report on Enforcement 

59

by the public utilities; (6) the public utility subsidiaries did not follow the instructions on page 429, 

Transactions with Associated (Affiliated) Companies, of their FERC Form No. 1 filings – in 

particular each: (a) reported on page 429 all costs billed between it and its affiliates, contrary to 

the instructions that require companies to report only non-power goods and services; (b) did not 

identify the specific non-power goods and services provided to and received from its respective 

affiliates; (c) did not explain in a footnote the allocation processes used by its affiliated central 

service companies, as required by the instructions; and (d) did not have coordination between the 

FERC Form No. 1 and FERC Form No. 60 reporting staffs – resulting in reporting inaccurate and 

incomplete information for transactions with associated companies; and (7) the two centralized 

service companies did not complete the FERC Form No. 60 reports filed during the audit period 

in accordance with all of the form’s general and specific schedule instructions, instead permitting 

deficiencies relating to (a) disclosure of the methods used to allocate costs to affiliates on Schedule 

XXI – Methods of Allocation and (b) adherence with various other schedule and page instructions. 

As a result of the audit, National Grid or its public utility subsidiaries made refunds to wholesale 

transmission customers and revised the accounting and reporting policies and procedures in the 

identified areas of noncompliance. 

Mergers & Acquisitions

Exelon Corporation (Exelon) – Docket No. PA18-3-000. At Exelon, DAA evaluated whether 

Exelon and its public utility subsidiaries (collectively the Companies) complied with the 

conditions established in the Commission's November 20, 2014 order authorizing the merger of 

Exelon and Pepco Holdings, Inc (PHI). The audit also evaluated the Companies’ compliance with: 

(1) the tariff requirements governing their Commission-jurisdictional rates; (2) the accounting 

requirements of the Uniform System of Accounts (Public Utilities) under 18 C.F.R. Part 101; and 

(3) the financial reporting requirements in 18 C.F.R. Part 141, focusing primarily on the 

transactions and costs associated with the merger.42 The audit identified four findings of 

noncompliance and made 17 recommendations for corrective action. The company did not contest 

the four findings and 17 recommendations. The four findings covered the following areas: (1) 

Exelon’s subsidiary Baltimore Gas & Electric (BG&E) improperly included the amortization of 

merger-related regulatory assets approved by the Maryland Public Service Commission in 

wholesale transmission rates, contrary to the conditions established in the Commission’s merger 

orders; (2) certain of the Companies improperly included merger-related costs in their transmission 

formula rate allocators, resulting in overstating their wholesale transmission revenue requirements; 

(3) merger commitment costs for the Exelon and PHI merger were improperly included in the 

Companies’ transmission revenue requirements; and (4) several of the Companies improperly 

recorded the amortization of certain regulatory assets and improperly included the amortization of 

the regulatory assets in their wholesale transmission formula rates without obtaining the required 

Commission approval to recover the regulatory assets. As a result of the audit, the Companies 

made refunds to wholesale transmission customers and revised their accounting policies and 

procedures in identified areas of noncompliance.

42 Exelon Corp., Docket No. PA18-3-000 (Nov. 21, 2019) (delegated letter order).
2020 Staff Report on Enforcement 

60

No Audit Findings of Noncompliance

Louisville Gas and Electric Company and Kentucky Utilities Company (LG&E/KU) –

Docket No. PA19-4-000. At LG&E/KU, DAA evaluated compliance with: (1) the approved 

terms, conditions, and rates of LG&E/KU’s OATT; and (2) the regulations regarding OASIS

prescribed in 18 C.F.R. Part 37.43 The audit resulted in no findings or recommendations that 

required LG&E/KU to take corrective action at this time. Audit staff reached this conclusion on 

the performance of audit steps outlined in the scope and methodology section of the audit report, 

review of material LG&E/KU provided in response to audit staff’s data requests and onsite visits, 

interviews with LG&E/KU employees, and a review of publicly available documents.

NYISO – Docket No. PA19-1-000. At NYISO, DAA evaluated compliance with: (1) provisions 

of the NYISO Tariff, business practices, corporate bylaws, policies, and codes of conduct related 

to its market administration obligations; (2) provisions of its Market Administration and Control 

Area Services Tariff (MST); (3) provisions of select agreements, including foundation agreements, 

service agreements, and interconnection study agreements; and (4) Order Nos. 825 and 831, and 

other relevant Commission orders.44 The audit resulted in no findings or recommendations that 

required NYISO to take corrective action at this time. Audit staff reached this conclusion based 

on performance of the audit steps outlined in the scope and methodology section of the audit report, 

including an examination of materials provided by NYISO in response to data requests, on-site 

visits, interviews with NYISO employees, and review of publicly available documents.

Pending Contested Audit Matters

Dominion Energy Transmission, Inc. (DETI) – FA15-16-000. At DETI, DAA evaluated 

compliance with: (1) its FERC Gas tariff; (2) the accounting requirements of the Uniform System 

of Accounts (Natural Gas), under 18 C.F.R. Part 201; and (3) the reporting requirements of the 

FERC Form No. 2, under 18 C.F.R. § 260.1.45 The audit identified six findings and 24 

recommendations that required DETI to take corrective action. On September 27, 2017, DETI 

notified DAA that it accepted five of the six findings and intended to contest one finding. As a 

result of the accepted findings, incorrectly accounted for expenses were reclassified to accounts 

not used in the development of future cost of service rates.

On December 8, 2017, DETI formally contested the Audit Report’s finding that DETI did not use 

its own book balances and cost rates associated with its debt, equity, and CWIP to compute its 

43 Louisville Gas and Electric Co. and Kentucky Utilities Co., Docket No. PA19-4-000 (Feb. 21, 

2020) (delegated letter order). Audit staff did not evaluate LG&E/KU’s compliance with the 

accounting requirements of the Uniform System of Accounts (Public Utilities) under 18 C.F.R. 

Part 101, or the reporting requirements of the FERC Form No. 1 and Supplemental Form 3-Q 

under 18 C.F.R. section 141.1. 

44 New York Independent System Operator, Inc., Docket No. PA19-1-000 (July 7, 2020) (delegated 

letter order).

45 Dominion Energy Transmission, Inc., Docket No. FA15-16-000 (Nov. 8, 2017) (delegated letter 

order).
2020 Staff Report on Enforcement 

61

AFUDC rate as required by the Commission’s accounting requirements. DETI elected to have a 

paper hearing under the procedures in 18 C.F.R. Part 158. Initial and reply memoranda have been 

filed by interested entities. This matter is pending before the Commission.

Accounting Matters

DAA administers the Commission’s accounting programs established for the electric, natural 

gas, and oil industries as vital components of the Commission’s strategy of setting just and 

reasonable cost-of-service rates. The foundation of the Commission’s accounting programs is the 

Uniform Systems of Accounts codified in the Commission’s regulations for public 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 promotes consistent, 

transparent, and useful accounting information for the Commission and other stakeholders to set 

and monitor cost-of-service rates. DAA enables the Commission to achieve its strategic goal of 

setting just and reasonable rates through carefully considering and applying the Commission’s 

ratemaking policies, past Commission actions, industry trends, and external factors (e.g., 

economic, environmental, and 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 across various 

Commission program offices to provide regulatory accounting analysis on various types of filings 

made by jurisdictional entities. DAA provides accounting expertise to Commission program 

offices in developing Commission policies and rulemakings to ensure these initiatives fully 

consider and evaluate accounting and financial issues affecting jurisdictional entities. DAA also 

holds pre-filing meetings with jurisdictional entities to inform them of relevant accounting 

requirements prior to making a filing with the Commission. To best serve the Commission and 

other stakeholders in these capacities, DAA monitors and participates in projects initiated by the 

FASB, Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), and 

International Accounting Standards Board (IASB) that may impact the Commission or its 

jurisdictional entities.

DAA also receives informal accounting inquiries and provides feedback on the Commission’s 

accounting and financial reporting regulations when appropriate. These inquiries come directly 

from jurisdictional entities, industry trade groups, legal and consulting firms, 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 where potential ambiguity 

exists to ensure compliance and a standardized interpretation of 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 

participation in various formal speaking engagements and industry accounting meetings.
2020 Staff Report on Enforcement 

62

Overview of FY2020 Filings Reviewed by DAA

In FY2020, DAA advised and acted on 441 proceedings at the Commission covering various 

accounting matters with cost-of-service rate implications, such as accounting for mergers and 

divestitures, asset transactions, early plant retirements, AFUDC, pensions and other postretirement benefits, and income taxes. These proceedings included requests for declaratory orders, 

natural gas certificate applications, merger and acquisition applications, electric and natural gas 

rate filings, applications for issuance of securities, and requests for accounting approval. In many 

of these cases, DAA served in an advisory role to other program offices in identifying and 

analyzing the accounting implications of those requests. Over the past five years, DAA has 

reviewed over 2,000 Commission proceedings to ensure proper accounting is followed and to 

advise the Commission of potential rate impacts. 

Requests for Approval of the Chief Accountant

In FY2020, DAA acted through the Chief Accountant’s delegated authority on 104 accounting 

filings requesting approval of a proposed accounting treatment or financial reporting matter.46 The 

topics covered in these filings addressed various issues within the Commission’s accounting and 

financial reporting requirements for electric, natural gas, and oil pipeline entities. Of note in 

FY2020 was a continued high volume of accounting filings related to asset acquisitions similar to 

FY2019. There was also a notable increase in the number of filings related to accounting policy. 

These accounting requests related to the accounting for leased property, such as generation and 

transmission facilities, AFUDC waiver requests, updates on the pre-commercial test period for 

46 The accounting filings are docketed in the Commission’s eLibrary with the “AC” docket 

prefix (for requests for approval by the Chief Accountant, “AC Dockets”) and “AI” docket prefix 

(for requests for interpretations by the Chief Accountant, “AI Dockets”).

0

50

100

150

200

Accounting Filings Rate Filings Certificate Filings Mergers and Asset

Transactions Filings

Securities Filings

Filings to the Commission Reviewed by DAA

2016 2017 2018 2019 2020
2020 Staff Report on Enforcement 

63

authorized projects, accounting issues relating to the Tax Cuts and Jobs Act of 2017, and a 

proposed change in accounting method relating to financial instruments.

The Chief Accountant issued two guidance letters to address certain Accounting Standards 

Updates (ASU) and new Accounting Standards Codifications (ASC) issued by FASB. The areas 

affected by the ASUs during FY2020 included accounting for costs of implementing cloud 

computing arrangements (ASU 2018-15)47 and accounting for current expected credit losses (ASU 

2016-13).48 The Chief Accountant also issued one guidance letter to address accounting for 

pipeline testing costs, as it relates to compliance with the Pipeline and Hazardous Materials Safety 

Administration’s final rule.49 These guidance letters are discussed in further detail below.

The Chief Accountant continues to receive accounting requests from jurisdictional entities to 

make prior period adjustments. For ASUs and new ASCs that require a prior period adjustment 

and may affect the regulatory accounting of jurisdictional entities, the Commission’s accounting 

regulations require that entities file a request with the Commission and receive approval before 

using Account 439, Adjustments to Retained Earnings, for public 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 

filings related to these accounts, DAA staff considers the changes to retained earnings as a result 

of the prior period adjustments and their effects on each entity’s capital structure. The Chief 

Accountant letter orders that grant approval to use Account 439 (or Account 705) are not intended 

to influence the outcome of any rate treatment established for the accounting adjustments. DAA 

encourages companies making such filings to include all relevant historical evidence and analyses 

to support the adjustments.

47 See FASB Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other—

Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud 

Computing Arrangement (August 2018). 

48 See FASB Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses 

(Topic 326): Measurement of Credit Losses on Financial Instruments (June 2016).

49 Safety of Gas Transmission Pipelines: Maximum Allowable Operating Pressure 

Reconfirmation, Expansion of Assessment Requirements, and Other Related Amendments, 84 Fed. 

Reg. 52180 (Oct. 1, 2019) (codified at 49 C.F.R. Part 192).
2020 Staff Report on Enforcement 

64

Rate Proceedings

In FY2020, DAA participated in 171 rate proceedings that continued to predominately involve 

electric formula rate proceedings, but also included natural gas and oil rate proceedings. DAA 

worked with other Commission 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 the FERC Form Nos. 1 and 2, DAA sought to ensure that accounting information 

in the rate proceedings was presented consistently with the Commission’s 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. Recurring areas of emphasis in DAA’s review of rate filings during FY2020 included 

stranded costs associated with early plant retirements, asset retirement obligations, pensions and 

postretirement benefits other than pensions, taxes, capital structure and cost of service 

considerations, and allocation of expenses to production, transmission, and distribution. 

Certificate Proceedings

In FY2020, DAA reviewed 51 natural gas pipeline certificate applications seeking various 

Commission authorizations, including to: construct, own, and operate new pipeline facilities; 

acquire pipeline facilities; abandon pipeline facilities in place, by removal, or by sale; and establish 

initial recourse rates for new pipeline service. DAA continued to work with other Commission 

program offices to assist in the development of just and reasonable rates by reviewing construction 

costs and other items used to determine initial recourse rates, including operation and maintenance 

expenses, depreciation, taxes, and overall rate of return. In reviewing such information during 

FY2020, DAA’s focus continued to be whether applicants followed Commission accounting 

requirements related to asset abandonment, construction, AFUDC, contributions in aid of 

construction, regulatory assets and liabilities, leases, and system gas. 

0 5 10 15 20 25 30 35 40 45 50

Other Miscellaneous

Record Retention

Regulatory Assets/Liabilities

Deferred Income Taxes

Construction Period Costs

Prior Period Adjustment

Accounting Policy

Sale of Assets

Purchase of Assets

Mergers and Divestitures

Accounting Filings (AC Dockets)

2018 2019 2020
2020 Staff Report on Enforcement 

65

Merger and Acquisition Proceedings

In FY2020, DAA reviewed 108 applications from public utilities under section 203 of the FPA, 

consisting of a combination of merger and divestiture transactions, and asset acquisition and sales 

transactions. The accounting review for merger transactions entails examining proposed 

accounting for costs to execute the transaction, costs to achieve integration and synergies, purchase 

accounting adjustments to assets and liabilities, and goodwill. DAA examines whether the 

accounting is consistent with any hold-harmless or other rate requirements discussed in a merger 

order. DAA also reviews accounting entries to determine that they provide enough transparency 

to the Commission and all interested parties for evaluating the impact on rates. For asset 

acquisition and sales transactions, staff conducts accounting reviews to examine whether 

applicants properly accounted for the purchase and sale of plant assets consistent with Commission 

regulations. The review focuses on whether jurisdictional entities maintain the appropriate original 

cost and historical accumulated depreciation of acquired utility plant and properly record 

acquisition premiums or discounts and gains or losses. DAA also consistently reminded 

jurisdictional entities to file accounting entries timely, within six months of a finalized merger or 

asset 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 FY2020, DAA reviewed seven public utility security issuance 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, the 

applicant’s 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 excessive amounts of money and inappropriately using the proceeds to finance nonutility businesses without demonstration of the ability for repayment. This also ensures that future 

issuances of debt are consistent with the public interest.

Accounting Inquiries

In FY2020, DAA responded to 105 accounting inquiries from jurisdictional entities and other 

stakeholders on various accounting and financial topics. Accounting inquiries are made through 

the Compliance Help Desk, the Accounting Inquiries phone line and email, or directly to DAA 

staff. A large number of accounting inquiries during FY2020 sought accounting and financial 

reporting direction on capitalization of various costs, taxes, and functional classifications of plant. 

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’s eLibrary system50 and

Title 18 of the Code of Federal Regulations. Such informal accounting and financial reporting 

50 The Commission’s eLibrary system can be accessed at elibrary.ferc.gov.
2020 Staff Report on Enforcement 

66

guidance is not binding on the Commission, and cannot grant waiver of a Commission regulation 

or order.

Accounting for Implementation Costs Incurred in a Cloud Computing 

Arrangement

On December 20, 2019, the Chief Accountant issued accounting guidance in Docket No. AI20-

1-000 relating to accounting for implementation costs incurred in a cloud computing arrangement 

that is a service contract. The accounting guidance was issued in response to multiple inquiries 

from industry participants regarding clarification on how to apply ASU No. 2018-15, Intangibles—

Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees 

Paid in a Cloud Computing Arrangement, within the framework and regulatory intent of the 

Commission's existing accounting requirements. ASU No. 2018-15 aligns the accounting for costs 

incurred to implement a cloud computing arrangement that is a service contract with pre-existing 

guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 

No. 2018-15 requires capitalized implementation costs to be reported on the balance sheet in the 

same line item as any prepayment of the service fees for the associated cloud computing 

arrangements, and related amortization expense to be reported in the same expense line item on 

the income statement as the expense for the service fees of the associated cloud computing 

arrangement. 

The Chief Accountant’s guidance letter permits jurisdictional entities to capitalize and amortize certain implementation costs, provided that entities adhere to the regulations of plant 

construction costs set forth under Part 101, Part 201, and Part 367 of the Commission's 

regulations.51 Staff assessed that jurisdictional entities have historically determined capitalizable 

internal-use software costs in a manner consistent with the requirements of ASC 350-40, which is 

an acceptable approach for accounting and financial reporting to the Commission. Comparably, 

implementation costs related to cloud computing arrangements are similar to the costs incurred to 

develop internal-use software and should therefore be accounted for on a similar basis. 

Accordingly, it is appropriate for jurisdictional entities to determine capitalized implementation 

costs related to cloud computing consistent with ASC 350-40. Examples of implementation costs 

that may be capitalized include upfront costs to integrate with on-premise software, coding, 

configuration, and customization. Service fees and other non-capital costs for the cloud computing 

arrangement are generally recorded as an expense. 

51 See 18 C.F.R. Part 101, Electric Plant Instructions No. 3 (Components of Construction) and No. 

4 (Overhead Construction Costs) (2020); 18 C.F.R. Part 201, Gas Plant Instructions No. 3 

(Components of Construction) and No. 4 (Overhead Construction Costs) (2020); 18 C.F.R. Part 

367, Service Company Property Instructions No. 367.51 (Components of Construction) and No. 

367.52 (Overhead Construction Costs) (2020). 
2020 Staff Report on Enforcement 

67

Accounting for Cumulative-Effect Adjustments to Retained Earnings Related to 

Credit Loss Measurement Methodology

On May 7, 2020, the Chief Accountant issued accounting guidance in Docket No. AI20-2-000 

relating to accounting for cumulative-effect adjustments to retained earnings as it relates to 

implementing the FASB’s accounting standard on credit losses. FASB issued ASU No. 2016-13, 

which adds FASB Accounting Standards Codification, Topic 326, Measurement of Credit Losses 

on Financial Instruments, to require companies to change the method of measuring credit losses, 

including uncollectible accounts receivable, from an incurred loss basis to a current expected credit 

loss (CECL) basis. ASU No. 2016-13 is required to be applied through a cumulative-effect 

adjustment to retained earnings as of the beginning of the first reporting period in which the 

guidance is effective. Staff has found that the Commission’s Uniform System of Accounts 

accommodates recognition of expected credit losses on accounts receivable for jurisdictional 

public utilities and licensees, natural gas companies, oil pipeline companies, and centralized 

service companies. The Chief Accountant determined that the method of measuring expected 

credit losses under ASU No. 2016-13 is a reasonable methodology and is acceptable for 

Commission financial accounting and reporting purposes. To the extent a jurisdictional entity 

determines that a cumulative adjustment to its beginning retained earnings account is necessary to 

implement ASU No. 2016-13, the entity is authorized to make such an adjustment, and is relieved 

of the requirement to seek Commission approval to do so.52

Accounting for Pipeline Testing Costs

On June 23, 2020, the Chief Accountant issued accounting guidance in Docket No. AI20-3-

000 relating to accounting for pipeline testing costs incurred to comply with new federal safety 

standards. The accounting guidance was issued in response to multiple inquiries from 

jurisdictional entities seeking clarification on how to apply the new Pipeline and Hazardous 

Materials Safety Administration’s (PHMSA) final rule (PHMSA Final Rule) to existing 

accounting instructions under Accounting Release No. 8 (AR-8), Hydrostatic Testing of Gas Main 

and Pipelines. The PHMSA Final Rule addresses, among other items, the safety of gas 

transmission pipelines, including actions an operator must take to reconfirm the maximum 

allowable operating pressure (MAOP) of natural gas pipelines not yet tested using the new federal 

safety regulations.53 In AR-8, the Chief Accountant provided accounting guidance to allow 

capitalization of certain pipeline retesting costs necessary to comply with specific requirements 

under USAS B31.8 (1968 ed.)54, which became federal standards under the Natural Gas Pipeline 

52 See 18 C.F.R. Parts 101, 201, 367 (Account 439, Adjustments to Retained Earnings) and Part 

352 (Account 705, Prior Period Adjustments to Beginning Retained Earnings Account) (2020).

53 Safety of Gas Transmission Pipelines: Maximum Allowable Operating Pressure Reconfirmation, 

Expansion of Assessment Requirements, and Other Related Amendments, 84 Fed. Reg. 52,180 

(Oct. 1, 2019) (codified at 49 C.F.R. Part 192).

54 See USA Standard Code for Pressure Piping – Gas Transmission and Distribution Piping 

Systems, USAS B31.8 (1968 ed.).
2020 Staff Report on Enforcement 

68

Safety Act passed by Congress in 1968.55 Here, the Chief Accountant guidance letter permits firsttime and one-time retesting costs, relating to the PHMSA Final Rule and subsequent regulatory 

pipeline safety standards, to be capitalized. However, pipeline testing costs incurred under a 

planned maintenance program should be recorded as maintenance expense in the period incurred, 

consistent with the Commission’s accounting regulations and precedents.56

COVID-19 Pandemic Response

Consistent with Commission wide efforts to address industry concerns regarding the impact of 

the COVID-19 pandemic on company financial and operational activities, the Chief Accountant 

promptly issued three letter orders under delegated authority relating to the pandemic, and advised 

on one Commission order, in response to specific financial accounting relief requests. In Docket 

No. AC20-81-000, San Diego Gas & Electric Company (SDG&E) requested expedited approval 

of a 12-month waiver to modify its existing AFUDC rate calculation in response to the COVID19 emergency. SD&E represented that it had not historically held a significant amount of cash 

and cash equivalents, but in response to the COVID-19 emergency, it might need to build 

significant short-term debt and cash reserves to preserve liquidity as an offset to potential capital 

market limitations from resulting financial market volatility, or in the event that it faces unexpected 

cash flow demands. SDG&E proposed to use a methodology for calculating its AFUDC that 

would enable it to exclude certain portions of its short-term debt from its AFUDC rate calculation, 

limited to a specific floor. The Chief Accountant approved SDG&E’s waiver request, stating that 

it would allow the company to obtain the needed liquidity to respond to the COVID-19 emergency 

without having an unduly adverse impact on the company’s AFUDC rate.

In Docket No. AC20-127-000, industry trade organizations EEI, INGAA, and the American 

Gas Association (AGA) (collectively, the Associations) requested, on behalf of their member 

companies, expedited approval of a 12-month waiver of certain provisions of Parts 101 and 201 

of the Commission’s regulations57 in order for their member companies to modify their existing 

AFUDC rate calculations, beginning March 2020, in response to the COVID-19 pandemic. The 

Associations represented that their member companies were experiencing reductions in customer 

load/demand, particularly for the commercial and industrial sectors, and many member companies 

committed to working with state regulators to suspend service shutoffs for non-payment during 

the pandemic emergency. As a result, the member companies might experience cash flow 

constraints requiring increased interim financing capability, including the potential issuance of 

significant amounts of short-term debt. The Associations proposed that member companies be 

allowed to compute the AFUDC rate for the 12-month period starting with March 2020 using each 

company’s simple average of the actual historical short-term debt balances for 2019, instead of 

current period short-term debt balances, leaving all other aspects of the AFUDC formula 

55 Natural Gas Pipeline Safety Act of 1968, Public Law 90-481, 82 Stat. 720, codified, as 

subsequently amended, at 49 U.S.C. 60101 et seq. (2018).

56 See Docket No. AI05-1-000, Order on Accounting for Pipeline Assessment Costs (June 30, 

2005); see also 18 C.F.R. Part 201, Gas Operating Expense Instruction No. 2, Maintenance (2020).

57 See 18 C.F.R. Part 101, Electric Plant Instruction No. 3(17) and Part 201, Gas Plant Instruction 

No. 3(17) (2020).
2020 Staff Report on Enforcement 

69

unchanged. On June 30, 2020, the Commission issued an order granting the Associations’ 

temporary waiver request, stating that the member companies’ need to maintain liquidity and 

improve financing flexibility during this unique state of emergency warranted an exception to the 

AFUDC rate computation, and that the approved proposal would ensure removal from the AFUDC 

rate calculation of any distorting effects of temporary increases in the amount of current period 

short-term debt. In addition to granting the temporary waiver for the Associations’ member 

companies, the Commission extended the 12-month waiver, beginning March 1, 2020, to all 

jurisdictional entities subject to the Commission’s accounting regulations whether or not they are 

a member of the Associations, stating that such a waiver could provide companies with needed 

liquidity to address the COVID-19 emergency.

In Docket Nos. AC20-126-000 and AC20-130-000, the Chief Accountant responded to 

requests made by Plains Pipeline, L.P. and Rocky Mountain Pipeline System LLC, respectively, 

to recognize a goodwill impairment loss. The companies represented that their respective parent 

companies’ market capitalizations declined significantly during the first quarter of 2020 as a result 

of the collapse of oil prices driven by both the decrease in demand caused by the COVID-19 

pandemic and excess supply resulting in expected decreases in future cash flows for certain assets. 

The companies stated that the uncertainty related to oil demand would continue to have a 

significant impact on the investment and operating plans of their primary customers, and that these 

events constituted a triggering event requiring performance of impairment tests as of March 31, 

2020. Based on the results of the impairment tests, the companies recognized goodwill impairment 

losses for their entire goodwill balances. The Chief Accountant found that the recordation of 

goodwill impairment was appropriate since the companies demonstrated that the goodwill 

impairment loss was material and unusual in nature.58

Commission Order No. 864 Compliance

On November 21, 2019, the Commission issued Order No. 864,59 a final rule which 

requires public utility transmission providers with transmission formula rates under an OATT, a 

transmission owner tariff, or a rate schedule to revise those transmission formula rates to account 

for any changes caused by the Tax Cuts and Jobs Act of 2017.60 The Tax Cuts and Jobs Act, 

among other things, reduced the federal corporate income tax rate from 35 percent to 21 percent, 

effective January 1, 2018. This tax rate reduction resulted in a reduction in Accumulated Deferred 

Income Tax (ADIT) assets and liabilities on the books of most public utilities. Accordingly, public 

utilities are required to adjust their ADIT assets and ADIT liabilities to reflect the effect of the 

58 See 18 C.F.R. Part 352 (2020).

59 Public Utility Transmission Rate Changes to Address Accumulated Deferred Income Taxes, 

Order No. 864, 169 FERC ¶ 61,139 (2019), order on reh’g and clarification, Order No. 864-A, 

171 FERC ¶ 61,033 (2020).

60 An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on 

the budget for fiscal year 2018, Pub. L. No. 115-97, 131 Stat. 2054 (2017) (Tax Cuts and Jobs 

Act).
2020 Staff Report on Enforcement 

70

change in tax rates in the period that the change is enacted.61 Furthermore, as a result of the federal 

income tax rate reduction, a portion of an ADIT liability that was previously collected from 

customers will no longer be due from public utilities to the IRS and is considered excess ADIT. 

Conversely, for public utilities that have an ADIT asset, the federal income tax rate reduction will 

result in a reduction to the ADIT asset, or deficient ADIT.

To adequately evaluate adjustments made to ADIT, Order No. 864 requires public utilities 

with transmission formula rates to make a filing demonstrating compliance with the final rule. A 

public utility can demonstrate that its formula rate already meets the requirements specified in the 

final rule, or it can make revisions to its formula rate to include: a mechanism to deduct any excess 

ADIT from or add any deficient ADIT to rate base; incorporate a mechanism to decrease or 

increase the income tax allowance by any amortized excess or deficient ADIT, respectively; and 

incorporate a new permanent worksheet that will annually track the information related to excess 

or deficient ADIT. Since issuance of the final rule, the Commission has received nearly 100 

compliance filings to date. DAA has actively supported the other program offices in the overall 

review and assessment of each compliance filing. DAA has provided its expertise to ensure, 

among other things, that public utilities properly remeasure ADIT accounts to establish the excess 

or deficient ADIT, record a regulatory asset (Account 182.3) associated with deficient ADIT or a 

regulatory liability (Account 254) associated with excess ADIT,62 properly account for the 

amortization of excess or deficient ADIT, and support adequate amortization periods for the return 

or recovery of excess or deficient ADIT, respectively.

Forms Administration and Compliance

DAA staff administers and ensures compliance with certain Commission filing 

requirements. The Commission requires companies subject to its jurisdiction 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, 16 U.S.C. § 824d (2018), and Part 35 of the Commission’s 

regulations, 18 C.F.R. Part 35 (2020), 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 

61 See 18 C.F.R. §§ 35.24 and 154.305 (2020); see also Regulations Implementing Tax 

Normalization for Certain Items Reflecting Timing Differences in the Recognition of Expenses or 

Revenues for Ratemaking and Income Tax Purposes, Order No. 144, FERC Stats. & Regs. ¶ 30,254 

(1981) (cross-referenced at 18 FERC ¶ 61,163), order on reh’g, Order No. 144-A, FERC Stats. & 

Regs. ¶ 30,340 (1982) (cross referenced at 15 FERC ¶ 61,142).

62 See Docket No. AI93-5-000, Accounting for Income Taxes, (Apr. 23, 1993).
2020 Staff Report on Enforcement 

71

agreements for all jurisdictional services (including market-based power sales, cost-based power 

sales, and transmission service) and providing transaction information (including rates) for shortterm and long-term power sales during the most recent calendar quarter.

63

In FY2020, the Commission received EQR submittals from nearly 2,800 entities each 

quarter. DAA 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 was 

accurate and reliable. DAA also reviews EQR issues that arise during audits and submits candidate 

entities that do not timely file their EQRs to OEMR for possible revocation of MBR authority. 

DAA held two EQR user group meetings in FY2020 to conduct outreach with the filing community 

and to discuss potential system improvements and enhancements. At the December 4, 2019 user 

group meeting, participants attended in person and via webcast/phone. The September 23, 2020 

user group meeting was fully virtual with all participants attending via webcast. During FY2020, 

staff also updated the EQR Frequently Asked Questions (FAQ)

64, made updates to the EQR 

website, and provided additional assistance to filers. On June 18, 2020, in Docket No. RM01-8-

000, the Commission revised its EQR reporting requirements to require time zone information to 

be reported in connection with transmission capacity reassignments and clarified information that 

should be reported in the EQR with respect to ancillary services, including Black Start, and certain 

tariff-related information.65

eForms Refresh Project

On April 16, 2015, the Commission directed Commission staff to begin the process of 

replacing its electronic filing format used for many of the forms submitted by industry, as the 

current filing software is no longer supported.66 The eForms refresh project included FERC Form 

Nos. 1, 1-F, 3-Q (electric), 2, 2-A, 3-Q (natural gas), 6, 6-Q, 60, and 714 (collectively, Commission 

Forms). On June 20, 2019, the Commission issued a final rule adopting XBRL as the standard for 

63 Revised Public Utility Filing Requirements, Order No. 2001, 99 FERC ¶ 61,107, reh’g denied, 

Order No. 2001-A, 100 FERC ¶ 61,074, reh’g denied, Order No. 2001-B, 100 FERC ¶ 61,342, 

order directing filing, Order No. 2001-C, 101 FERC ¶ 61,314 (2002), order directing filing, Order 

No. 2001-D, 102 FERC ¶ 61,334, 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, order on reh’g and 

clarification, Order No. 2001-H, 121 FERC ¶ 61,289 (2007), order revising filing requirements, 

Order No. 2001-I, 125 FERC ¶ 61,103 (2008).

64 See Electric Quarterly Report Frequently Asked Questions, available at 

https://www.ferc.gov/about/what-ferc/frequently-asked-questions-faqs/frequently-askedquestions-electric-quarterly.

65 Revisions to Electric Quarterly Report Filing Process, 171 FERC ¶ 61,214, order denying reh’g, 

172 FERC ¶ 61,141 (2020).

66 Electronic Filing Protocols for Commission Forms, 151 FERC ¶ 61,025 (2015).
2020 Staff Report on Enforcement 

72

filing these forms.67 In March 2020, the Commission held a virtual staff-led technical conference 

via webcast to discuss the use of XBRL for filing the Commission Forms. On July 17, 2020, the 

Commission issued an order adopting the final XBRL taxonomy, protocols, implementation guide, 

and other supporting documents. The Commission also established an implementation schedule 

for filing the Commission Forms using the XBRL process.68 In particular, the schedule required 

these forms to be submitted using the XBRL process starting with the third quarter of 2021 filings 

for FERC Form Nos. 3-Q (electric), 3-Q (natural gas), and 6-Q and indicated that all of the other 

Commission Forms due subsequent to the third quarter of 2021 must be submitted using the XBRL 

process.

Financial Forms

DAA administers and oversees compliance with FERC Form Nos. 1, 1-F, 2, 2-A, 3-Q (gas 

and electric), 6, 6-Q, 60 and FERC-61. During FY2020, the Commission received approximately 

2,500 financial forms submittals. On March 13, 2020 and April 2, 2020, in response to the National 

Emergency declared concerning COVID-19, the Commission issued notices extending the filing 

deadlines for certain Commission forms (including EQR submittals) for filing entities that were 

unable to meet the deadline due to steps they took to meet the emergency conditions.69 In August 

2020, the Commission also provided relief to parties needing extensions of time to file certain 

Commission forms as a result of emergency conditions in the Gulf Coast area of the United States 

caused by Hurricane Laura. Specifically, the Commission extended until September 30, 2020, 

certain deadlines for filing Commission forms.70

 

67 Revisions to the Filing Process for Commission Forms, Order No. 859, 167 FERC ¶ 61,241 

(2019).

68 Revisions to the Filing Process for Commission Forms, Order on Technical Conference, 172 

FERC ¶ 61,059 (2020).

69 Notice Granting Extension of Time, Docket No. AD20-11-000 (Mar. 19, 2020); Notice Granting 

Extension of Time, Docket No. AD20-11-000, et al. (Apr. 2, 2020).

70 Notice Granting Extension of Time, Docket No. AD20-6-000 (Aug. 28, 2020).
2020 Staff Report on Enforcement 

73

DIVISION OF ANALYTICS AND SURVEILLANCE 

Overview

The Division of Analytics and Surveillance (DAS) develops surveillance tools, conducts 

surveillance, and analyzes transactional and market data to detect potential manipulation, 

anticompetitive behavior, and other anomalous activities in the energy markets. DAS focuses on: 

(1) natural gas surveillance; (2) electric surveillance; and (3) analytics for reviewing market 

participant behavior. The analysts and economists in DAS identify market participants whose 

conduct may potentially call for investigation or further Commission action. They do this not only 

by conducting surveillance and inquiries of the natural gas and electric markets, but also by 

reviewing market monitor referrals71 and Hotline complaints against the non-public data available 

to the Commission. This internal review process reduces burden on the industry by resolving some 

matters without the need for investigation. When an investigation is opened, DAS staff 

participates in investigations with attorneys from DOI, providing detailed transactional analyses, 

market event analyses, 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 been 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 ISOs/RTOs to provide, on an ongoing 

basis and in a format consistent with how the data is collected in each market, critical information 

on market bids, offers, and market outcomes.72 On average, the Commission receives, on a nonpublic basis, approximately eight gigabytes of data in more than 1,380 tables each day from the 

six organized markets combined. Each ISO/RTO database is different, and DAS is responsible for 

understanding the particular nuances of each database and preparing them for use in surveillance 

screens and analyses.

Similarly, pursuant to Order No. 771,73 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 has access to approximately 11 million 

eTags and gains access to approximately 5,000 new eTags each day. The Commission also 

routinely receives non-public physical electric and natural gas market data from the ICE and a 

subset of the Large Trader Report from the Commodity Futures Trading Commission (CFTC) 

through a Memorandum of Understanding. DAS staff continue to use these data sources, EQR 

data, and data from a variety of subscription-based services, extensively. 

71 Specific examples of this review of market monitor referrals are included in DOI Section F.2. 

of this report under “Illustrative MMU Referrals Closed with No Action.”

72 Enhancement of Electricity Market Surveillance and Analysis through Ongoing Electronic 

Delivery of Data from Regional Transmission Organizations and Independent System Operators, 

Order No. 760, 139 FERC ¶ 61,053 (2012). 

73 Availability of E-Tag Information to Commission Staff, Order No. 771, 141 FERC ¶ 61,235 

(2012).
2020 Staff Report on Enforcement 

74

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 

electricity markets. In the context of surveillance, DAS seeks to: (1) detect anomalous activities 

in the markets; and (2) identify potential investigative subjects. When a surveillance screen trips, 

staff conducts a series of analyses to gain information about the activity that caused it. First, staff 

evaluates the activity using available market data and information 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 screen trip or surveillance alert, staff 

performs a more in-depth review of the conduct, which may involve contacting the market 

participant to request additional information and discuss the conduct at issue. Staff classifies this 

enhanced review as the opening of a surveillance inquiry. If, after conducting a surveillance

inquiry, staff is still concerned that there is a potential violation, it will recommend that DOI open 

an investigation into the matter. 

1. 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, monitoring daily and monthly markets. 

These screens and data feeds alert staff to anomalous market conditions and market participant 

actions based on a review of supply, demand, pipeline utilization, operational notices, and physical 

and financial trading. Asset-based screens evaluate natural gas trading around infrastructure, 

including natural gas storage, pipeline capacity, and electric generation. In addition, DAS uses 

Large Trader Report data from the CFTC to weigh potential financial incentives that might 

encourage a market participant to engage in a manipulative scheme. 

In FY2020, natural gas surveillance screens produced approximately 10,594 screen trips. Staff 

reviewed these automated screen trips, compared the conduct that triggered the screen trips to 

conduct at other hubs, and evaluated whether a fundamentals or physical asset-based explanation 

existed for the activity. DAS also reviewed other observed anomalous market outcomes for 

potential concern. In FY2020, staff reviewed and dismissed most of the screen trips as consistent 

with concurrent conditions. Where concerns remained, staff classified specific screen trips and 

market activity as “surveillance alerts.” Staff documented 1,457 surveillance alerts that ranged in 

severity from low to high concern. When concerns persisted through more thorough review, DAS 

opened a surveillance inquiry, a more in-depth staff review of the specific trading behavior, which 

in some cases involves contacting market participants for additional information or to discuss the 

conduct at issue. In FY2020, DAS conducted 26 such natural gas surveillance inquiries. DAS 

closed all of those inquiries with no further action and did not refer any to DOI for investigation.
2020 Staff Report on Enforcement 

75

2. Electricity

DAS accesses data from a variety of sources to screen for anomalies and potentially 

manipulative behavior in the ISOs/RTOs and bilateral wholesale electricity markets. During 

FY2020, staff ran monthly and weekly screens to identify patterns by monitoring the interactions 

between bids and cleared physical and financially settled electricity products. In particular, these 

screens identify financial transmission rights and swap-futures that settle against nodes that are 

affected by transmission constraints where market participants also trade virtuals, generate 

electricity, purchase electricity, or move power between Balancing Authorities. 

During the fiscal year, staff continued to refine its processes for screening to detect: (1) 

uneconomic virtual transactions by node, zone, and constraint; (2) potential day ahead and real

time market congestion manipulation that would benefit financial transmission rights (FTRs), 

synthetic real time FTRs, swap-futures positions for physical load and generation portfolios; (3) 

anomalies in physical offer patterns, particularly in non-price based parameters; (4) abnormal outof-market payments; (5) irregularities in capacity market sell offers; and (6) 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. 
2020 Staff Report on Enforcement 

76

Each month during FY2020, DAS ran and reviewed 84 electric surveillance screens; monthly, 

hourly and intra-hour sub-screens; and reports for over 38,000 hub and pricing nodes within the 

six ISOs/RTOs. Additionally, DAS screened non-ISO/RTO markets and cross-ISO/RTO portfolio 

trades for potential manipulation. In reviewing screen trips and, in some cases, after 

communicating with the ISO/RTO MMUs, DAS identified 39 instances of market behavior that 

required further analysis through a surveillance inquiry. Of the 39 electric surveillance inquiries, 

five were referred to DOI for investigation, 28 were closed with no referral, and six remain open 

with DAS staff continuing its analytic work.

3. Illustrative DAS Surveillance Inquiries Closed with No Referral

Market Manipulation (Gas). DAS natural gas surveillance screens identified a market 

participant selling at low prices and with moderate market concentration in bidweek trading at a 

hub in the West for a few bidweeks, while holding large short financial basis positions. This 

created short exposure to next-month bidweek indices such as Platts Inside FERC Gas Market 

Report (IFERC). Staff contacted the market participant, who explained that: (1) the participant 

needed to sell gas acquired under a long-term contract; (2) the financial positions hedged this gas, 

transport capacity, and storage capacity for the prompt month and out several forward months; and 

(3) the short index exposure from physical trading provided a hedge against a negative price 

blowout from pipeline curtailments. After staff reviewed additional information provided by the 

market participant and verified the explanations provided, DAS closed the surveillance inquiry 

with no referral to DOI. 
2020 Staff Report on Enforcement 

77

Market Manipulation (Gas). DAS natural gas surveillance screens identified a producer that 

bought gas with high market share, losses, and a large long financial basis position during multiple 

bidweeks at a northeastern hub. Staff was concerned that the company was providing support for 

its produced gas and financial basis positions. Staff arranged a call with the company, where it 

explained how its financial basis hedged its pipeline transport to a more premium market, and that 

the prices at the receipt location were sufficiently low relative to the delivered markets to justify 

the physical purchases. DAS staff examined the company’s trading and verified the explanations 

provided. Further DAS findings showed that the company’s trading temporally aligned with other 

companies’ trading, and that trades occurred in the context of reasonable bid-ask spreads. DAS 

closed the surveillance inquiry with no referral to DOI.

Market Manipulation (Gas-Electric). DAS evaluated a bidweek trip where a market participant 

bought at high prices in the middle of bidweek, while it was long basis futures. Staff also observed 

the market participant actively trading in associated power futures at the time of this concerning 

physical gas purchases. DAS contacted the market participant, who stated that these purchases 

were part of a spark spread strategy and that the gas purchases were supported by index gas 

premiums at the time of purchase. After staff examination of the additional information provided, 

market heat rates, and financial product trading, DAS closed the inquiry without referral to DOI.

Market Manipulation (Gas). DAS natural gas surveillance screens identified a market 

participant purchasing at a few hubs in the West at some of the highest prices of the hubs’ bidweek 

trading. The participant also held large long financial basis positions and short index future 

positions; these financial positions created long exposure to next-month bidweek indices like 

IFERC at these locations, and these positions would benefit from higher physical trading prices. 

Staff discussed these trading behaviors with the market participant, as well as the company's 

market view on the impact of an anticipated new pipeline. After consideration of the additional 

information provided, the participant's market view and details of the new pipeline, DAS closed 

the inquiry without referral to DOI.

Market Manipulation (Electric). Several of DAS’ surveillance screens flag virtual bidding 

behavior that appears uneconomic or otherwise anomalous. In one such screen trip, a market 

participant had traded virtual load into a leveraged swap-futures position at NYISO Zone A. DAS 

called the market participant, who described a fuller spread strategy that included the Zone A 

positions. Additionally, the market participant provided contemporaneous documentation of the

fundamental factors (e.g., forecasted vs. expected load) that it considered when making the trades. 

Because of this explanation and the contemporaneous documentation of the strategy, DAS closed 

this inquiry without a referral.

Market Manipulation (Electric). DAS staff routinely reviews transmission data (e.g., e-Tags 

provided under Order No. 771) as part of its screening of interchange transactions. In FY2020, 

DAS electric surveillance screens flagged a pair of market participants in the non-ISO/RTO West 

exchanging identical amounts of power during the same market hour, resulting in two market 

participants paying transmission charges for essentially no flow of power. DAS staff contacted 

the relevant parties to request additional information about these transactions. These round-trip 

transactions were the result of two separate bilateral transactions: the first involved the export of 

carbon-free electricity from a generator to a market participant, ostensibly in exchange for 

replacement power from an unspecified energy source. In the second transaction, a CAISO load-
2020 Staff Report on Enforcement 

78

serving entity purchased zero-carbon energy from the same market participant involved in the first 

transaction. A delay in conducting the second transaction led to circular electric scheduling for 

several months. When the second transaction was finalized, the circular scheduling ceased, and 

the first market participant exported its carbon-free energy directly to the load-serving entity 

purchasing it. After verifying and considering the additional information provided by the market 

participants, DAS staff closed the inquiry without a referral to DOI. 

Market Manipulation (Electric). DAS electric surveillance screens identified a market 

participant who traded virtual supply uneconomically over a two-month period at NYISO Zone G, 

while also holding a slightly leveraged swap-futures position at that location. Upon closer 

analysis, staff determined that part of the swap-futures belonged to a different strategy in the 

market participant’s portfolio. The virtual position instead matched a short day ahead swap and a 

separate, long real time swap position. The market participant had profitably arbitraged a pricing 

discrepancy between the day ahead and real time futures markets and had no remaining floating 

price exposure. While staff identified price divergence between day ahead and real time

potentially caused by the market participant, that divergence was relatively small and the NYISO 

Tariff allows for the mitigation of any trading that causes persistent hourly deviations. 

Accordingly, DAS staff closed the inquiry without a referral to DOI.

Analytics

During FY2020, DAS worked on approximately 50 investigations, some of which are 

discussed above in the DOI section. Many of these investigations involved 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’ investigative 

activities generally include: (1) analyzing companies’ portfolios, transactions, and other market 

actions; (2) identifying patterns of market activity that could indicate potential market 

manipulation or other violations and time periods in which they may have occurred; (3) assessing 

market conditions and other contextual information during periods of potential manipulation or 

other violations; (4) supporting DOI in taking investigative testimony; and (5) calculating the 

amount of unjust profits and market harm resulting from alleged 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.

Market-Based Rate Ex Post Analysis

Following the September 2019 realignment of the functions performed by the Division of 

Energy Market Oversight (DEMO), DAS became responsible for conducting analytical reviews of 

wholesale electric market-based rate transactions to detect the potential exercise of market power. 

This ex-post analysis was formerly performed by staff assigned to Enforcement’s DEMO who are 

now assigned to DAS. To accomplish this function in FY2020, DAS staff developed, refined, and 

implemented tools and algorithmic indicators to conduct ongoing analysis of transactional and 

other market data to ensure that jurisdictional rates remain just and reasonable and not unduly 
2020 Staff Report on Enforcement 

79

discriminatory or preferential. This ex post analysis evaluated 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 a potential 

exercise of market power. Once such outcomes were identified, DAS coordinated with other 

Commission program offices to determine whether to recommend the Commission take action to 

remedy market power concerns. DAS also used these tools to assist in analyzing applications and 

filings for market-based rates, public utility mergers, and other docketed proceedings. During 

FY2020, DAS staff reviewed over 2.6 million market-based rate transactions filed through the 

Commission’s EQRs by 187 sellers of wholesale energy. Staff routinely analyzed the combined 

results of 17 statistical indicators to detect potential instances of the exercise of market power 

within 63 geographic regions or market hubs.

Data Management

During FY2020, DAS focused on three initiatives to enhance its collection and use of data 

collected under Order No. 760. First, under an initiative started in FY2019, DAS continued to 

enhance communication channels with the six ISOs/RTOs. This initiative improved data model 

design and enhanced responses to Commission analyst inquiries about how to utilize data received 

under Order No. 760. Second, DAS and FERC IT staff developed a process that uses software to 

automate data model releases submitted by the ISOs/RTOs. This approach reduced data model 

development times by 80% and reduced human error sometimes introduced during the data model 

release process. Additionally, DAS and FERC IT staff invested the time saved in the data model 

release process to deploy new maintenance enhancements on the Order No. 760 databases, and to 

develop new post-data model release data quality checks. Finally, in FY2020, DAS launched a 

data warehouse effort, which aims to simplify analysts’ use of Order No. 760 data. 
2020 Staff Report on Enforcement 

80

Audits Branch 1

Nicholas Coughlin, Chief

Quality Assurance

Sylvia Anderson, Chief

Division of Audits and Accounting

Kristen Fleet, Acting Director & Chief Accountant

Kristen Fleet, Deputy Director

Timothy Smith, Dir, Audits & Acctg. Operations

Kurt Jacobs, Legal Counsel

Laura Vallance, Legal Counsel

Administration Staff

Karen A. Duncan, Chief

Audits Branch 2

Christopher Handy, Chief 

Audits Branch 3

Nkosi Brooks, Chief

Audits Branch 4

Brian Harrington, Chief

Regulatory Accounting Branch

Olga Anguelova, Chief

EQR Administration Branch

Jeffrey Sanders, Chief

APPENDIX A: OFFICE OF ENFORCEMENT ORGANIZATION CHART (CURRENT) 

Regulatory Accounting Branch

Office of the Director

Larry R. Parkinson, Director

Janel Burdick, Deputy Director

Mark Weber, Senior Market & Risk Advisor

Investigations Branch 1

Lisa Owings, Chief

Investigations Branch 2

Jay Matson, Chief

Investigations Branch 3

Nicholas Stavlas, Chief

Investigations Branch 4

Katherine Walsh, Chief

Analytics and Surveillance Branch 2

Nancy Bowler, Chief

Analytics and Surveillance Branch 1 

Michael DeLiso, Chief

Analytics and Surveillance Branch 3

Benjamin Jarrett, Chief

Analytics and Surveillance Branch 4

Nezam Rabonik, Chief

Analytics and Surveillance Branch 6

Jeremy Larrieu, Chief

Analytics and Surveillance Branch 5

Felice Richter, Chief 

Analytics and Surveillance Branch 7

Erin Miller, Chief

Division of Analytics and Surveillance

Sean Collins, Director 

Jamie Marcos, Deputy Director

David Zlotnick, Legal Counsel

Steven Reich, Sr. Technical Advisor

Division of Investigations

Geof Hobday, Director

Jeremy Medovoy, Deputy Director
2020 Staff Report on Enforcement 

81

APPENDIX B: FY2020 CIVIL PENALTY ENFORCEMENT ACTIONS74

 

Subject of Investigation and Order 

Date Total Payment Explanation of Violations

Emera Energy Incorporated, Docket 

No. IN20-2-000, Order Approving 

Stipulation and Consent Agreement, 

170 FERC ¶ 61,007

$5,000 civil penalty; 

$14,120 disgorgement.

The Commission approved a Stipulation and Consent Agreement

between Enforcement and Emera Energy Incorporated (Emera) 

resolving Enforcement’s investigation into whether the company 

submitted Fuel Price Adjustments that did not reflect an arm’s length 

fuel purchase transaction in contravention of ISO-NE Tariff, market 

Rule 1, Appendix A § III.A.3.4(b). Enforcement found that Emera’s 

prices did not accurately reflect market prices on some occasions. 

Under the terms of the settlement, Emera admitted to the facts, but 

neither admitted nor denied the violation.

Exelon Generation Company, LLC, 

Docket No. IN20-3-000, Order 

Approving Stipulation and Consent 

Agreement, 170 FERC ¶ 61,008

$32,500 civil penalty;

$101,756 disgorgement.

The Commission approved a Stipulation and Consent Agreement 

between Enforcement and Exelon Generation Company, LLC 

(Exelon) resolving Enforcement’s investigation into whether the 

company submitted erroneous data to ISO-NE. Enforcement’s 

investigation found that Exelon violated 18 C.F.R. §§ 35.41(a) and (b) 

and ISO-NE Tariff Market Rule 1 § III.1.7.20(b) and Tariff § 

III.13.6.1.1.2, when it erroneously reported the type and quantity of 

fuel it needed to start up the company’s Mystic 7 generating unit. This 

error caused Exelon to be overcompensated when the unit was 

dispatched for reliability purposes. Under the terms of the settlement, 

Exelon admitted the facts and violation.

74 A list of all post-EPAct 2005 civil penalty orders is available at http://www.ferc.gov/enforcement/civil-penalties/civil-penalty-action.asp.
2020 Staff Report on Enforcement 

82

Calpine Corporation, Docket No. 

IN17-1-000, Order Approving 

Stipulation and Consent Agreement, 

170 FERC ¶ 61,092

$400,000 civil penalty. The Commission approved a Stipulation and Consent Agreement 

between Enforcement, Texas Reliability Entity, Inc. (Texas RE), 

NERC, and Calpine Corporation (Calpine) resolving Enforcement’s 

investigation into whether Calpine violated the Reliability Standard 

for protection systems maintenance and testing, PRC-005-1 R2, as 

well as CAISO Tariff section 9.3.10.3.1, relating to forced outages, of 

which 79 instances involved alleged falsified records. Enforcement’s 

investigation further found 215 instances of noncompliance with PRC005-1 R2, two of which involved violations of CAISO Tariff section 

9.3.10.3.1 because employees were aware that a generator was unable 

to run but did not report an outage. Under the terms of the settlement, 

Calpine admitted to the facts, but neither admitted nor denied the 

violations.