130 FERC ¶ 61,220 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Jon Wellinghoff, Chairman; 

 Marc Spitzer, Philip D. Moeller, 

 and John R. Norris. 

Enforcement of Statutes, Orders, Rules, 

 and Regulations 

Docket No. PL10-4-000

POLICY STATEMENT ON PENALTY GUIDELINES 

(Issued March 18, 2010) 

1. The Commission issues this Policy Statement on Penalty Guidelines for the 

purpose of adding greater fairness, consistency, and transparency to our civil penalty 

determinations. The Commission’s Penalty Guidelines (Penalty Guidelines) are modeled 

on portions of the United States Sentencing Guidelines (Sentencing Guidelines), with 

appropriate modifications to account for Commission-specific considerations. The 

Penalty Guidelines are contained at the end of this Policy Statement. 

I. Introduction

2. The Commission’s present adoption of a guidelines approach as a significant factor 

to be considered in determining civil penalties is the latest in a line of policy statements 

and initiatives we have implemented since passage of the Energy Policy Act of 2005 

(EPAct 2005) to add greater fairness, consistency, and transparency to our enforcement 

program.1

 The Penalty Guidelines accomplish this by using a set of objective 

characteristics to determine penalties that are transparent. The Penalty Guidelines will 

promote greater consistency by basing penalties on a set of uniform factors that are 

 1

 A guidelines approach allows for the discretion to depart from the indicated 

penalty where necessary. 
Docket No. PL10-4-000 - 2 - 

assigned transparent values and weighted similarly for similar types of violations and 

similar types of violators. Organizations will be provided more notice and certainty as to 

how we will determine appropriate civil penalties.2

 Application of the Penalty 

Guidelines, however, is discretionary, not mandatory. As such, deviations in penalties 

may be necessary to account for the specific facts and circumstances of a violation. 

3. The Commission’s approach to determine penalties has evolved during the almost 

four-and-a-half years since EPAct 2005 first went into effect in August 2005. We have 

given the question careful consideration at many junctures, weighing the benefits and 

costs and considering how other federal agencies determine civil penalties. We have paid 

close attention to the Sentencing Guidelines because they rely on many of the same 

factors that are at the core of our enforcement program.3

 We now believe that it is in the 

public interest to advance our past use of the Sentencing Guidelines’ principles by 

implementing a guidelines approach patterned after the Sentencing Guidelines, which 

apply factors in a focused manner to promote fairness and consistency, while still 

allowing for the discretion to depart from the indicated penalty where necessary. 

4. The purpose of this Policy Statement is to explain how we have come to the 

decision to adopt the Penalty Guidelines, to explain the benefits of a guidelines approach, 

and to set forth how our Penalty Guidelines will work in practice. 

II. Background

A. Energy Policy Act of 2005

5. The Commission has various enforcement tools in policing the areas of the electric, 

natural gas, hydroelectric, and oil pipeline industries within our jurisdiction. Specifically, 

we can require compliance plans and disgorgement of unjust profits, we have the ability 

to condition, suspend, or revoke market-based rate authority, certificate authority, or 

blanket certificate authority, we have the ability to refer matters to the Department of 

Justice for criminal prosecution, and we have civil penalty authority. With respect to 

civil penalties, the Commission received a significant enhancement to its 

 2

 “Organization” is defined in the Penalty Guidelines as “any entity other than a 

natural person.” Penalty Guidelines § 1A1.1 (Commentary note 1). 

3 See, e.g., Compliance with Statutes, Regulations, and Orders, 125 FERC 

¶ 61,058, PP 23-25 (2008) (Policy Statement on Compliance). 
Docket No. PL10-4-000 - 3 - 

 

enforcement program with the passage of EPAct 2005.4

 Prior to EPAct 2005, the 

Commission’s authority to assess civil penalties was limited to: (1) $11,000 per day 

under Part I of the Federal Power Act (FPA); (2) $11,000 per day under sections 211 

through 214 of Part II of the FPA; and (3) $5,500 per day under the Natural Gas Policy 

Act of 1978 (NGPA).5

 The Commission lacked civil penalty authority entirely under the 

Natural Gas Act (NGA). Congress significantly expanded this authority in EPAct 2005 

through three primary enhancements. First, Congress expanded the Commission’s FPA 

civil penalty authority to cover all provisions of FPA Part II and any rule or order issued 

thereunder.6

 Second, Congress extended our civil penalty authority to cover the NGA 

and any rule, regulation, restriction, condition, or order made or imposed by the 

Commission under the NGA.7

 Third, Congress increased the maximum civil penalty the 

Commission can assess to $1,000,000 per day, per violation for any violation of the 

NGA, NGPA, and Part II of the FPA.8

 With this expansion came the responsibility to 

carefully implement our new authority and to seek to improve our application of it in 

light of experience. This Policy Statement represents such an improvement. 

6. While granting the Commission this greater civil penalty authority, EPAct 2005 

also mandated that we consider certain factors in determining the amount of a particular 

penalty. Specifically, EPAct 2005 amended the NGA to provide that “[i]n determining 

the amount of a proposed penalty, the Commission shall take into consideration the 

nature and seriousness of the violation and the efforts to remedy the violation.”9

 Thus, in 

4 See Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005) (EPAct 

2005). 

5

 16 U.S.C. § 823b(c) (2000) (FPA Part I); 16 U.S.C. § 825o-1(b) (2000) (FPA 

Part II); 15 U.S.C. § 3414(b)(6) (2000) (NGPA); 18 C.F.R. § 385.1602 (2009). 

6

 EPAct 2005 § 1284(e)(1) (amending FPA § 316A(a)). 

7

 EPAct 2005 § 314(b)(1) (inserting new NGA § 22). 

8

 EPAct 2005 § 314(b)(1) (inserting new NGA § 22(a)); EPAct 2005 § 314(b)(2) 

(amending NGPA § 504(b)(6)(A)); EPAct 2005 § 1284(e)(2) (amending FPA § 

316A(b)). EPAct did not change the Commission’s existing $11,000 per day authority 

under Part I of the FPA. See section 385.1602(b) of the Commission’s regulations, 18 

C.F.R. § 385.1602(b) (2009). 

9

 15 U.S.C. § 717t-1 (added by EPAct 2005§ 314(b)). A similar directive already 

had existed in the FPA. 
Docket No. PL10-4-000 - 4 - 

determining an appropriate penalty, Congress instructs that we must specifically consider 

the seriousness of the violation and the efforts a company takes to remedy it. As we will 

discuss more fully below, these two factors have been at the forefront of our penalty 

determinations since EPAct 2005 and will continue to be significant factors under the 

Penalty Guidelines that we announce here. 

 B. The Commission’s First Policy Statement on Enforcement 

7. Following the passage of enhanced civil penalty authority in EPAct 2005, the 

Commission issued the first Policy Statement on Enforcement on October 20, 2005 (2005 

Policy Statement), for the purpose of providing guidance and regulatory certainty 

regarding our statutes, orders, rules, and regulations.10 We made clear that our purpose 

was to provide “firm but fair enforcement” of our laws and to provide notice to 

jurisdictional organizations of the consequences of violating our laws.11 The 

Commission described factors that we would consider in determining appropriate 

penalties under our enhanced penalty authority.12 

8. In deciding what criteria would guide our penalty determinations, we considered 

our statutory mandates from EPAct 2005 as well as the enforcement policies of other 

federal agencies, including the Securities and Exchange Commission (SEC), the 

Commodity Futures Trading Commission (CFTC), and the Department of Justice (DOJ). 

We explained that the “first touchstone for our determination” would be the seriousness 

of the violation, given that this was a statutorily mandated consideration.13 We listed 

some factors we would consider in judging the seriousness of the violation, including the 

harm caused by the violation and whether the violation resulted from manipulation, 

deceit, or artifice.14 We also looked to the second statutory criterion, specifically, the 

efforts made by the company to remedy the violation in a timely manner.15 This criterion 

 10 Enforcement of Statutes, Orders, Rules, and Regulations, 113 FERC ¶ 61,068 

(2005) (2005 Policy Statement). 

11 Id. P 1. 

12 Id. PP 17-27. 

13 Id. P 11. 

14 Id. P 20. 

15 Id. P 21. 
Docket No. PL10-4-000 - 5 - 

 

also includes several factors, including efforts relating to internal compliance, selfreporting, and cooperation.16 We encouraged organizations to create comprehensive 

compliance programs, develop a culture of compliance, and to self-report and cooperate 

with the Commission if violations were to occur.17 

9. At the time, the Commission also considered the most effective way to apply the 

various factors to determine a penalty. It did this, in part, by considering the enforcement 

programs at other federal agencies. In 2001, the SEC issued a decision in which it listed 

thirteen factors it considers in determining whether, and how much, credit it gives for 

self-policing, self-reporting, remediation, and cooperation.18 While listing these factors, 

the SEC declined to adopt a guidelines approach, emphasizing that it was not limiting its 

broad discretion to evaluate each case individually.19 The CFTC also has listed relevant 

factors it considers to determine penalties, but like the SEC, has declined to adopt a 

guidelines approach. Other agencies, however, have adopted guidelines approaches. For 

example, the Environmental Protection Agency uses various matrices to calculate civil 

penalty amounts.20 Similarly, the Nuclear Regulatory Commission uses a guidelines 

model to determine penalties.21 The Federal Communications Commission employs 

guidelines to assess forfeiture penalties.22 In addition, the Occupational Safety and 

Health Administration uses a guidelines approach to determine penalties.23 We also 

16 Id. PP 21-27. 

17 See, e.g., id. P 2. 

18 Accounting and Auditing Enforcement, SEC Release No. 1470 (October 23, 

2001). 

19 Id. 

20 See generally Calculation of the Economic Benefit of Noncompliance in EPA’s 

Civil Penalty Enforcement Cases, 64 Fed. Reg. 32,948 (Envtl. Prot. Agency June 18, 

1999); Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of 

Violations, 65 Fed .Reg. 19,618 (Envtl. Prot. Agency April 11, 2000). 

21 See NRC Enforcement Policy at 18-21, available at http://www.nrc.gov/aboutnrc/regulatory/enforcement/enforc-pol.pdf. 

22 See 47 C.F.R. § 1.80 (2009). 

23 See OSHA’s Field Operations Manual, Chapter 6 (Nov. 9, 2009). 
Docket No. PL10-4-000 - 6 - 

considered the practice of the DOJ, which, pursuant to the Sentencing Reform Act of 

1984, uses the Sentencing Guidelines to determine penalties.24 After weighing our 

options, we chose, like the SEC and CFTC, to determine penalties based on a case-bycase approach, hoping to retain more discretion and flexibility to address each case on its 

individual set of facts.25 

10. Although we declined at the time to adopt a guidelines approach like that used by 

the DOJ, we were heavily influenced by the Sentencing Guidelines and the practices of 

the DOJ in deciding which factors would guide our penalty analyses. For example, as 

with our approach, the Sentencing Guidelines consider the seriousness of an offense, in 

part, by calculating the gain to the organization or the loss caused by the conduct,26 and 

the number of victims.27 Also, the Sentencing Guidelines consider the organization’s 

culpability, including whether the organization has a prior history, whether the 

organization has self-reported the offense, whether high-level personnel were involved in 

the offense, and whether the organization cooperated with governmental authorities.28 

Moreover, the Sentencing Guidelines provide credit for organizations with effective 

compliance programs.29 The Commission incorporated all of these factors into its 2005 

Policy Statement and it has continued to weigh these factors in its penalty determinations, 

albeit in a less structured manner than is found in the Sentencing Guidelines. 

C. Early Experience with Civil Penalties and Feedback from Regulated 

Community

11. The Commission’s early experience with our enhanced civil penalty authority 

reflected the “firm but fair enforcement” policy that we articulated in our 2005 Policy 

Statement. We imposed civil penalties in the context of negotiated settlements where 

 24 2005 Policy Statement at P 8. 

25 Id. P 13. 

26 United States Sentencing Commission, Guidelines Manual (U.S.S.G.), § 

8C2.4(a). 

27 Id. § 2B1.1(b)(1-2). 

28 Id. § 8C2.5. 

29 Id. §§ 8C2.5(f); 8B2.1. 
Docket No. PL10-4-000 - 7 - 

d in 

 

 

appropriate, but we also closed many investigations with no sanctions and required 

compliance measures instead of penalties in others. Between 2005 and 2007, the 

Commission’s Office of Enforcement staff (Enforcement staff) closed forty-seven out of 

sixty-four investigations without any sanctions being imposed, even though Enforcement 

staff found a violation in twenty-two of those closed investigations.30 Only the 

remaining one-quarter of the total investigations completed during this period resulte

civil penalties.31 In addition, Enforcement staff closed with no action more than half of

the seventy-four self-reports submitted to Enforcement staff during this period.32

Enforcement staff frequently exercised prosecutorial discretion to resolve minor 

infractions with agreed-upon compliance measures rather than with penalties. 

12. Between 2005 and the end of 2007, all of the post-EPAct 2005 investigations 

resulting in civil penalties were resolved by settlement between Enforcement staff and the 

subject companies. The Commission issued 12 orders approving these settlements.33 

The civil penalties ranged from $300,000 to $10 million, and reflected a wide variety in 

the type and seriousness of the violations at issue. In some of these cases, disgorgement 

or other monetary remedies were imposed as well, and all but three of the settlements 

also required compliance plans designed to prevent reoccurrence of the violations. We 

also issued two Orders to Show Cause, based on Enforcement staff’s allegations of 

30 Report on Enforcement, Docket No. AD07-13-000, at 21 (Nov. 14, 2007). No 

sanctions were imposed in the twenty-two investigations because the violations were 

relatively minor in nature and resulted in little or no actual harm. In addition, in some of 

those investigations, the violations predated the effective date of the Commission’s 

expanded penalty authority under EPAct 2005. 

31 Id. 

32 Id. at 15. 

33 See In re BP Energy Co., 121 FERC ¶ 61,088 (2007); In re MGTC, Inc., 121 

FERC ¶ 61,087 (2007); In re Gexa Energy L.L.C., 120 FERC ¶ 61,175 (2007); In re 

Cleco Power, LLC, 119 FERC ¶ 61,271 (2007); In re Columbia Gulf Transmission Co., 

119 FERC ¶ 61,174 (2007); In re Calpine Energy Services, L.P., 119 FERC ¶ 61,125 

(2007); In re Bangor Gas Co., 118 FERC ¶ 61,186 (2007); In re NRG Energy, Inc., 

118 FERC ¶ 61,025 (2007); In re NorthWestern Corp., 118 FERC ¶ 61,029 (2007); In re 

Entergy Services, Inc., 118 FERC ¶ 61,027 (2007); In re SCANA Corp.; 118 FERC 

¶ 61,028 (2007); In re PacifiCorp, 118 FERC ¶ 61,026 (2007). 
Docket No. PL10-4-000 - 8 - 

possible violations of a former Market Behavior Rule34 and the current AntiManipulation Rule.35 Reflecting the seriousness of the allegations in those cases, those 

orders portended the possibility of near maximum statutory penalties. 

13. Given the importance and nascence of this new enforcement regime, Enforcement 

staff prepared a report summarizing the enforcement actions it took in the first two years 

after issuance of EPAct 2005,36 and the Commission held a widely-attended Conference 

on Enforcement Policy (Enforcement Conference) on November 16, 2007, to entertain 

questions and suggestions regarding our enforcement program.37

14. The Enforcement Conference generated many thoughtful comments, questions, and 

suggestions, including requests for additional information on how we apply the factors 

set out in our 2005 Policy Statement and suggestions that the Commission adopt a 

guidelines approach to determine penalties. These requests and suggestions led the 

Commission to issue a Revised Policy Statement on Enforcement (Revised Policy 

Statement). 

D. Revised Policy Statement on Enforcement and Policy Statement on 

 Compliance

15. In 2008, we issued two additional policy statements to provide further guidance on 

our enforcement program. First, on May 15, 2008, the Commission issued the Revised 

Policy Statement to supersede the 2005 Policy Statement and provide industry with a 

 34 18 C.F.R. § 284.403(a)(2005) (at the time of the alleged violations, this 

regulation included the now rescinded Market Behavior Rule 2); Energy Transfer 

Partners, L.P., 120 FERC ¶ 61,086 (2007). 

35 18 C.F.R. § 1c.1-1c.2 (2007); Amaranth Advisors LLC, 120 FERC ¶ 61,085 

(2007). 

36 Report on Enforcement, Docket No. AD07-13-000 (Nov. 14, 2007). This report 

was well-received by the regulated community, and Enforcement staff has continued to 

issue this report on an annual basis. 

37 Conference on Enforcement Policy, Docket No. AD07-13-000 (Nov. 16, 2007). 
Docket No. PL10-4-000 - 9 - 

 

fuller picture of Enforcement staff’s investigative process and the factors we consider to 

determine whether a penalty is warranted and, if so, the amount of such penalty.38 

Second, on October 16, 2008, we issued the Policy Statement on Compliance to discuss 

factors related to effective compliance that the Commission will consider in determining 

whether to reduce or, where appropriate, even eliminate civil penalties for violations.39 

16. In the Revised Policy Statement, the Commission re-emphasized that the two most 

important factors are seriousness of the offense and the strength of an organization’s 

commitment to compliance.40 As to the compliance factor, the Commission provided 

additional guidance not included in the 2005 Policy Statement as to what specifically 

constitutes an effective compliance program.41 The Policy Statement on Compliance 

further supplemented our discussion as to the specific factors underpinning effective 

compliance programs. There, we enumerated four hallmarks of effective compliance 

programs: active engagement and leadership by senior management; effective preventive 

measures; prompt detection and cessation of violations and voluntary reporting of 

violations; and remediation of the misconduct.42 Thus, with both the Revised Policy 

Statement and Policy Statement on Compliance, the Commission placed a renewed and 

heavy emphasis on promoting industry-wide compliance and the creation of effective 

compliance programs. 

17. As was the case with the 2005 Policy Statement, the Commission once again was 

heavily influenced by the factors enumerated in the Sentencing Guidelines. For example, 

the hallmarks of an effective compliance program that we listed in the Policy Statement 

on Compliance are all included in the Sentencing Guidelines.43 Nevertheless, the 

Commission continued to decline various commenters’ suggestions that we adopt a 

penalty guidelines approach like that used by the DOJ. We explained in the Revised 

38 Enforcement of Statutes, Regulations and Orders, 123 FERC ¶ 61,156 (2008) 

(Revised Policy Statement). 

39 Policy Statement on Compliance, 125 FERC ¶ 61,058 (2008). 

40 Revised Policy Statement at P 54. 

41 Id. P 59. 

42 Policy Statement on Compliance at PP 13-21. 

43 See U.S.S.G. § 8B2.1. 
Docket No. PL10-4-000 - 10 - 

Policy Statement that “[o]ur two years of experience in administering the enhanced 

penalty authority granted under EPAct 2005 has not yet convinced us to revise our 

decision [from the 2005 Policy Statement] at this time.”44 We left open the possibility of 

moving to a guidelines approach in the future, indicating that a guidelines approach might 

be more feasible when “the Commission develops more experience in reviewing matters 

involving its enforcement authority.”45 

 E. United States Sentencing Guidelines 

18. The section of the Sentencing Guidelines that applies to organizations involves a 

two-step process to determine the ultimate fine range that an organization will be 

required to pay after being sentenced for a crime. First, the Sentencing Guidelines 

require the calculation of a base fine.46 The base fine is the greater of the gain to the 

organization, the loss caused by the conduct, or a pre-determined amount that is 

generated by the offense level and is enumerated in the guidelines.47 Second, the 

Sentencing Guidelines produce a multiplier range for the base fine, which requires an 

analysis of the organization’s culpability, considering factors similar to those the 

Commission considers, such as whether the organization has a prior history of violations, 

whether high-level management was involved in the offense, whether the organization 

has self-reported and accepted responsibility for its conduct, whether the organization had 

an effective compliance program at the time it committed its offense, and whether the 

organization cooperated with government authorities.48 The multiplier and the base fine 

are then combined to calculate a fine range for the conduct.49 

19. Imposing a sentence or fine generated by the Sentencing Guidelines is not 

mandatory. The Sentencing Guidelines themselves provide for a departure process where 

 44 Revised Policy Statement at P 52. 

45 Id. P 53. See also Policy Statement on Compliance at P 22 (explaining that the 

“appropriate result must be determined on a case-by-case basis”). 

46 See U.S.S.G. § 8C2.4. 

47 Id. 

48 See id. § 8C2.5. 

49 See id. § 8C2.6. 
Docket No. PL10-4-000 - 11 - 

 

a judge may impose a sentence higher or lower than the relevant guidelines range.50 In 

addition, the Supreme Court in United States v. Booker held that under the Sixth 

Amendment the Sentencing Guidelines are advisory, not mandatory, in nature and that 

federal judges are required only to consider the guidelines.51 As a practical matter, 

though, a majority of federal criminal sentences fall within the designated Sentencing 

Guidelines range.52

20. For over two decades, federal courts have used the Sentencing Guidelines to 

determine sentences and fines in federal criminal cases. Although the Sentencing 

Guidelines have not existed without controversy in the criminal law community, they are 

designed to promote many of the same policy goals that we promote at the Commission. 

Specifically, the Sentencing Guidelines are designed to provide certainty and fairness by 

avoiding unjustified disparity among offenders with similar characteristics, while 

permitting enough flexibility to account for applicable aggravating and mitigating 

factors.53 Moreover, by providing a predictable sentence, the Sentencing Guidelines 

operate as a deterrent to misconduct. Since nationwide implementation of the Sentencing 

Guidelines in January 1989, federal judges have sentenced more than one million 

defendants under the Sentencing Guidelines.54 

50 See, e.g., id. §§ 1B1.4; 5K2.0 (“A departure may be warranted in the exceptional 

case in which there is present a circumstance that the Commission has not identified in 

the guidelines but that nevertheless is relevant to determining the appropriate sentence.”). 

51 543 U.S. 220, 264 (2005). 

52 Since Booker, the United States Sentencing Commission has conducted national 

comparisons of sentences imposed by judges relative to the Sentencing Guidelines range. 

Since 2006, approximately sixty percent of sentences have fallen within the guidelines 

range annually. See United States Sentencing Commission, Final Quarterly Data Report, 

Fiscal Year 2006, at 1 (61.7 percent); Fiscal Year 2007, at 1 (60.8 percent); Fiscal Year 

2008, at 1 (59.4 percent); Preliminary Report, Fiscal Year 2009, at 1 (57.1 percent 

through September 30, 2009). 

53 See An Overview of the United States Sentencing Commission at 1, June 2009, 

available at http://www.ussc.gov/general/USSC_Overview_200906.pdf. 

54 Id. at 2. 
Docket No. PL10-4-000 - 12 - 

ease 

t 

 

21. In 1991, the United States Sentencing Commission (Sentencing Commission) 

created a new chapter of the Sentencing Guidelines related to sentencing of 

organizations. The purpose of this chapter, much like the Commission’s purpose in 

assessing penalties against organizations, is to provide “just punishment, adequate 

deterrence, and incentives for organizations to maintain internal mechanisms for 

preventing, detecting, and reporting criminal conduct.”55 After implementing this 

chapter related to organizations in 1991, the number of indicted organizations increased 

rapidly, then declined, and has now continued to increase in recent years.56 The incr

in indictments has led corporations to operate more cautiously and to devote significan

attention and resources to self-policing programs.57 

22. Since the Sentencing Guidelines went into effect nationwide in 1989, the Supreme 

Court has upheld their constitutionality, even while rejecting the mandatory nature of 

them in Booker. In 1989, defendants began challenging the constitutionality of the 

Sentencing Guidelines, arguing that they represented improper legislative delegation and 

a violation of the separation of powers doctrine. The Court rejected these arguments in 

Mistretta v. United States.

58 In Booker, the Court held that the Sixth Amendment right to 

a jury trial applies to the Sentencing Guidelines.59 As a result, the Court held that district 

courts are not bound by the Sentencing Guidelines, but they must at least consult them 

when sentencing.60 Even while making the Sentencing Guidelines advisory, the Court in 

Booker recognized that the guidelines still would serve the purpose of “provid[ing] 

certainty and fairness in meeting the purposes of sentencing, [while] avoiding 

unwarranted sentencing disparities . . . [and] maintaining sufficient flexibility to permit 

individualized sentences when warranted.”61 

55 U.S.S.G. § 8A1.1 (Introductory Commentary). 

56 Melissa Ku & Lee Pepper, Corporate Criminal Liability, 45 Am. Crim. L. Rev. 

275, 289 (2008). 

57 Id. 

58 488 U.S. 361 (1989). 

59 543 U.S. 220, 226-27 (2005). 

60 Id. 

61 Id. (citation and internal quotations omitted). 
Docket No. PL10-4-000 - 13 - 

23. Thus, the Sentencing Guidelines have been tested for more than twenty years and 

used to promote fairness, consistency, and efficiency in sentencing for federal criminal 

cases. More than one million defendants, including many organizations, have been 

sentenced and fined under the Sentencing Guidelines. 

III. Discussion

24. As demonstrated above, since the passage of EPAct 2005 we have continuously 

sought and implemented methods to bring more fairness, consistency, and transparency 

to our enforcement program. Most recently, we: (1) formalized a process by which 

Enforcement staff will provide exculpatory evidence to subjects of its investigations and 

respondents in administrative enforcement proceedings;62 and (2) authorized the Director 

of the Office of Enforcement to direct the Secretary of the Commission to issue 

Enforcement staff’s preliminary notice of violations after the subject of an investigation 

has had an opportunity to respond to Enforcement staff’s preliminary findings letter.63 

25. Until now, however, we have chosen not to use the Sentencing Guidelines, or any 

other guidelines approach, to apply various penalty factors. Instead, we have chosen to 

apply the factors more generally. For the reasons discussed below, we now believe that 

the advantages of a penalty guidelines approach outweigh the disadvantages and that we 

have gained sufficient experience to employ a guidelines approach as a significant factor 

to be considered in determining civil penalties. 

A. The Penalty Guidelines Approach 

26. On balance, the Commission believes that it is in the public’s interest to use a 

guidelines approach to determine civil penalties patterned after the Sentencing Guidelines 

related to organizations. The multiple advantages of a guidelines approach outweigh the 

disadvantages, and we believe that we now have enough experience with various types of 

enforcement actions to implement such an approach. We believe further that the 

Sentencing Guidelines provide the best model to adapt to Commission purposes because 

they focus on factors—such as the seriousness and remediation of a violation—that 

reflect the requirements of EPAct 2005 and that we believe are the centerpiece of our 

penalty regime. Moreover, the Sentencing Guidelines allow for the consideration of a 

 62 Enforcement of Statutes, Regulations, and Orders, 129 FERC ¶ 61,248 (2009), 

reh’g pending. 

63 Enforcement of Statutes, Regulations, and Orders, 129 FERC ¶ 61,247 (2009). 
Docket No. PL10-4-000 - 14 - 

wide range of additional factors that are also important, while still providing sufficient 

flexibility to allow for departures where necessary. 

27. The advantages of the penalty guidelines approach we adopt today reflect our 

continual efforts to promote greater fairness, consistency, and transparency in our 

enforcement program. The adoption of the Penalty Guidelines promotes greater fairness 

and ensures greater proportionality in violations by more rigorously imposing 

appropriately different penalties for conduct of differing severity. At the same time, the 

Commission retains the discretion to depart from the Penalty Guidelines as necessary. 

28. Determining penalties based on a guidelines approach also promotes consistency 

by basing the penalty calculations on a set of uniform factors that are weighted similarly 

for similar types of violations and similar types of violators. To date, we have attempted 

to treat cases consistently. As an analytical exercise, however, it is simply more difficult 

to compare outcomes in particular cases and determine if they are “consistent” as 

opposed to consistently applying the same factors to all cases to reach results. This 

problem of “back end” consistency review becomes even greater as the “database” of 

cases grows and the cases become ever more varied from one another. The uniformity of 

the guidelines approach reduces the potential disparities in penalties that might otherwise 

arise for similar violations committed by similarly situated offenders, particularly 

because a uniform approach ensures that similar cases are considered based on more than 

just institutional judgment. 

29. The guidelines approach promotes greater transparency by providing notice to 

organizations as to how we will determine civil penalties for violations of the statutes, 

rules, regulations, restrictions, conditions, or orders overseen by the Commission. This 

will add to organizations’ confidence in the fairness and consistency of our enforcement 

program. Determining penalties based on the Penalty Guidelines avoids potential 

confusion in the industry regarding the bases behind particular penalties. Further, 

organizations will gain a greater understanding of which types of violations the 

Commission views as most important. This, in turn, will help organizations best allocate 

resources to the most important compliance objectives, leading to more robust and 

effective compliance. 

30. Another benefit of using a guidelines approach is the relative ease of administration 

in determining civil penalties. Determining appropriate civil penalties has been a 

complex process, made more difficult and time consuming by the present and inevitable 

lack of uniformity of the analyses in cases. Modeled on the Sentencing Guidelines, the 

Penalty Guidelines allow for a more straightforward process, while still allowing us the 

discretion to depart from the guidelines where appropriate. 
Docket No. PL10-4-000 - 15 - 

 

31. We have confidence in the fairness of the Penalty Guidelines because they are 

modeled on the Sentencing Guidelines. We base our new approach on the Sentencing 

Guidelines because they are largely driven by the same factors in our policy statements 

on enforcement and that we believe should be the focus of our penalty regime. The 

Sentencing Guidelines consider similar factors to those present in our policy statements 

on enforcement, but do so in a more focused manner. For instance, while the current 

enforcement statements consider generally the harm caused by the violation, the 

Sentencing Guidelines explicitly incorporate a dollar value estimate of the harm into the 

base penalty determination.64 Similarly, the current enforcement policy statement 

considers whether the organization had a robust internal compliance program generally. 

In contrast, the Sentencing Guidelines provide a specified and substantial reduction in the 

culpability score if the violation occurred while the organization had such a program in 

place.65 

32. We recognize that a guidelines approach is not without some disadvantages. A 

guidelines approach provides less flexibility and discretion than a more generalized 

approach. Similarly, a guidelines approach always creates the possibility of outcomes not 

adequately accounting for all of the specifics of a case. This is inevitable with any 

guidelines-based system, including the Sentencing Guidelines. Indeed, a system tailored 

to fit every conceivable circumstance of a case would likely prove unworkable. The 

Penalty Guidelines, however, reduce the impact of this concern by allowing us to depart 

from the guidelines where we deem appropriate. This departure mechanism allows us to 

account for unique or exceptional factors that might arise in a case. In addition, we have 

made certain modifications and changes to the Sentencing Guidelines in our Penalty 

Guidelines to account for recurring Commission-specific considerations that have arisen 

in our experience since EPAct 2005. Also, the Commission will continue to determine 

penalties based on the individual facts and circumstances for certain violations, such as 

for natural persons as opposed to organizations,66 and for cases involving multiple types 

of violations.67 Finally, we also retain some discretion because the Penalty Guidelines 

produce a penalty range, rather than an absolute figure. Specific facts of each case will 

determine where in the range the ultimate penalty might fall. Overall, we retain sufficient 

64 Compare Revised Policy Statement at P 55, with U.S.S.G § 8C2.4. 

65 Compare Revised Policy Statement at PP 57-60, with U.S.S.G § 8B2.1. 

66 Penalty Guidelines § 1A1.1 (Commentary note 1). 

67 Id. § 1C2.1(b). 
Docket No. PL10-4-000 - 16 - 

 

discretion and flexibility in those cases where the Penalty Guidelines produce a penalty 

that does not “fit” the violation for one reason or another. We do not intend to depart 

from the Penalty Guidelines regularly, but neither will we always adhere to a rigid 

application of them. 

33. With the Penalty Guidelines, organizations may be able to estimate their civil 

penalty exposure with various violations. As such, some would argue that the guidelines 

approach creates the potential that organizations will engage in cost-benefit analyses and 

decide that the benefits of committing a violation outweigh the cost of a potential civil 

penalty. On the other hand, it would be difficult for an organization to adequately predict 

all of the effects of its misconduct before committing the violations. This uncertainty in 

how an organization’s violation would actually “play out” would likely hinder the 

organization’s ability to accurately estimate, in advance of the misconduct, its civil 

penalty. Also, such gaming by organizations would likely trigger penalty enhancements 

intended to deter willful misconduct.68 

34. Another consideration weighing against adopting a guidelines approach is the 

continuing need to keep the model current with statutory, regulatory, and policy changes. 

The Commission’s priorities change over time, and we have a history of re-examining 

and refining our approach to determining civil penalties. This is a cost that is embedded 

in all approaches to determining penalties. Indeed, when Congress created the 

Sentencing Guidelines regime, it directed the Sentencing Commission to continually 

monitor the Sentencing Guidelines, to submit to Congress appropriate modifications to 

the Sentencing Guidelines, and to establish education and research programs related to 

the guidelines. In so directing the Sentencing Commission, Congress recognized that 

“sentencing is a dynamic field that requires continuing review by an expert body to revise 

sentencing policies, in light of application experience, as new criminal statutes are 

enacted, and as more is learned about what motivates and controls criminal behavior.”69 

Enforcement staff, working with the Commission, will have to attend to this task, but it is 

not an unreasonably difficult one. We anticipate that the Penalty Guidelines will be 

adjusted and amended as necessary and appropriate in light of reason and experience, as 

well as to reflect changes in the law and enforcement practice and policy. In addition, 

Enforcement staff will hold a technical conference one year from the implementation of 

the Penalty Guidelines to discuss how the Penalty Guidelines have worked and to permit 

comments and questions from the industry. 

68 See, e.g., id. § 1C2.3(b)(1)-(5). 

69 U.S.S.G., Chapter 1, Part A, Introductory Commentary. 
Docket No. PL10-4-000 - 17 - 

35. After balancing the foregoing factors, we believe that the benefits outweigh the 

disadvantages and that a guidelines approach to determining penalties is best for the 

Commission, organizations, and the public at large. Most of the potential downsides are 

minimal, more perceived than likely, and more administrative than substantive. We have 

several years of experience in determining penalties and, at this juncture, determine it 

appropriate to use the Penalty Guidelines. 

36. Courts have acknowledged the benefits of an agency issuing a policy statement 

designed to inform the public as to the approach the agency plans to take in future 

cases.70 Courts have also recognized the limitations of policy statements. Consistent 

with this precedent, we recognize that, as a policy statement, the Penalty Guidelines are 

neither a rule nor a precedent but instead are an announcement to the public of the course 

the Commission intends to follow in future penalty determinations. In addition, when the 

Commission applies the Penalty Guidelines, we must be prepared to support the 

application of the Guidelines. 

IV. Description of the Commission’s Penalty Guidelines

 A. Calculation of Civil Penalties Under Penalty Guidelines

37. The attached Penalty Guidelines provide the details of our new approach and need 

to be carefully applied in each case. The purpose of this section, however, is to describe 

in summary fashion how our new Penalty Guidelines work in practice. Like the 

Sentencing Guidelines, our model generates a penalty range based on the combination of: 

(1) a violation level, consisting of a base level that is adjusted for various seriousness 

factors; and (2) a culpability score, which considers an organization’s past and current 

conduct and efforts to remedy the violation. Generating a final penalty range can be 

broken down into five discrete steps. 

i. Step One: Base Violation Level

38. Step one involves identifying the “base violation level” from an applicable Chapter 

Two guideline.71 Specifically, Chapter Two consists of three separate guidelines for 

various types of violations, each containing a unique “base violation level:” 

 70 Pacific Gas and Electric v. FPC, 506 F.2d 33, 38 (D.C. Cir. 1974) (PGE); 

Panhandle Eastern Pipe Line Co. v. FERC, 198 F.3d 266, 269-70 (D.C. Cir. 1999). 

71 Penalty Guidelines § 1C2.1(a). 
Docket No. PL10-4-000 - 18 - 

” of eighteen. 

(1) violations of the Reliability Standards for the Bulk Electric System of North America 

carry a “base violation level” of sixteen;72 (2) violations involving fraud, manipulation, 

or anti-competitive conduct and violations of rules, tariffs, and orders carry a “base 

violation level” of six;73 and (3) violations involving misrepresentations and false 

statements to the Commission carry a “base violation level 74

 ii. Step Two: Adjustments

39. Step two involves applying, in the order listed, any appropriate adjustments 

contained in the applicable Chapter Two guideline.75 Specifically, each Chapter Two 

guideline contains specific adjustments that account for circumstances that are specific to 

the type of violation at issue. For example, the guideline for violations of the Reliability 

Standards has adjustments based on the risk of loss caused by the particular violation.76 

Many violations of the Reliability Standards pose a risk of serious harm, but did not, on 

their facts, result in actual harm. These adjustments account for this reality and consider 

two primary factors: the amount of potential injury and the likelihood of that injury 

actually occurring. As an example, if we find that the violation created either a high risk 

of substantial harm or a low risk of major harm, seven points will be added to the “base 

violation level.”77 

40. The guideline for violations involving fraud, manipulation, or anti-competitive 

conduct and violations of rules, tariffs, and orders contains adjustments for the monetary 

gain or loss caused by the violation and the scope of the violation.78 The adjustment for 

gain or loss has the potential to significantly increase an organization’s civil penalty. For 

example, if an organization causes a loss of more than $1 million, sixteen points would 

be added to the “base violation level” and, as a result, the ultimate penalty would increase 

 72 Id. § 2A1.1(a). 

73 Id. § 2B1.1(a). 

74 Id. § 2C1.1(a). 

75 Id. § 1C2.1(a). 

76 See id. § 2A1.1(b)(1). 

77 Id. § 2A1.1(b)(1)(D). 

78 Id. § 2B1.1(b)(1)-(2). 
Docket No. PL10-4-000 - 19 - 

accordingly. The adjustments for scope consider the volume of energy involved in the 

violation as well as the violation’s duration.79 Further, this guideline contains an 

adjustment that creates a floor violation level of sixteen for violations that present a 

serious threat to market transparency.80 The guideline for misrepresentations and false 

statements contains upward adjustments for violations resulting in substantial 

interference with the administration of justice and violations involving spoliation of 

records or that are otherwise extensive in scope, planning, or preparation.81 

41. Applying the foregoing adjustments to the “base violation level” from step one 

generates a final “violation level.” Each “violation level” then corresponds to a specific 

dollar amount listed in a table in Chapter One, section 1C2.2(b), which plays a role in 

determining the “base penalty,” discussed below. 

 iii. Step Three: Base Penalty

42. Step three involves calculating a “base penalty,” which is the greater of: (1) the 

dollar amount from the table in section 1C2.2(b) that corresponds to the applicable 

violation level, described above; (2) the pecuniary gain to the organization from the 

violation; or (3) the pecuniary loss from the violation caused by the organization.82 As 

 79 Id. § 2B1.1(b)(2). 

80 Id. § 2B1.1(b)(3). “Flipping” transactions, for example, present a serious threat 

to market transparency. These transactions disguise what is in effect a long-term 

discounted release of firm capacity as a series of short-term releases, circumventing the 

Commission’s capacity release rules that require competitive bidding for long-term 

discounted releases and, thereby, denying access to the capacity to interested market 

participants. See, e.g., In re BP Energy Co., 121 FERC ¶ 61,088 (2007). Violations of 

an organization’s Open Access Same-time Information System (OASIS) posting 

requirements provide another example. An organization’s failure to post information on 

OASIS, for example, results in a lack of transparency because transmission customers are 

not able to view information regarding the transmission system, including information 

about available products and desired services. See, e.g., Entergy Servs., Inc., 118 FERC 

¶ 61,027 (2007). 

81 Id. § 2C1.1(b)(1)-(2). “Substantial interference with the administration of 

justice” includes the unnecessary expenditure of substantial Commission resources. 

82 Id. § 1C2.2(a)(1)-(3). 
Docket No. PL10-4-000 - 20 - 

described in step five, this “base penalty” will be combined with “minimum and 

maximum multipliers,” stemming from an organization’s “culpability score,” to generate 

penalty ranges. 

iv. Step Four: Culpability Score

43. Step four involves calculating an organization’s “culpability score.” Each 

organization’s “culpability score” starts with a base score of five and is then adjusted 

upward or downward depending on six separate considerations.83 

44. First, we will adjust the “culpability score” upwards in pre-determined amounts 

where high-level personnel of the organization or unit of the organization within which 

the violation occurred participated in, condoned, or were willfully ignorant of the 

violation.84 We also consider whether tolerance of the violation by substantial authority 

personnel was pervasive throughout the organization or unit of the organization within 

which the violation occurred.85 Following the Sentencing Guidelines, this factor is tied 

to the size of the organization and the unit of the organization within which the violatio

occurred. For example, we will increase the “culpability score” by five points where this 

factor applies to an organization with 5,000 or more employees, four points if 1,000 or 

more employees, three points if 200 or more employees, two points if fifty or more 

employees, and one point if ten or more employees.

n 

 

86 

45. Second, we will increase the “culpability score” where the organization has a prior 

history of committing violations. We will increase the “culpability score” by one point 

where the organization committed any part of the instant violation less than ten years 

after a prior Commission adjudication of any violation or less than ten years after an 

adjudication of similar misconduct by other enforcement agencies.87 We will increase 

83 Id. § 1C2.3(a). 

84 Id. § 1C2.3(b). 

85 Id. 

86 Id. § 1C2.3(b)(1)-(5). 

87 Id. § 1C2.3(c)(1). The other enforcement agencies would include those Federal 

and state enforcement agencies that adjudicate similar types of matters as the 

Commission. 
Docket No. PL10-4-000 - 21 - 

 

the score by two points where the organization committed any part of the instant violation 

less than five years after a prior Commission adjudication of any violation or less than 

five years after an adjudication of similar misconduct by other enforcement agencies.88

46. Third, following the Sentencing Guidelines, we will increase the “culpability 

score” by two points if the violation violated a judicial or Commission order or injunction 

directed at the organization by the Commission or other Federal and state enforcement 

agencies that adjudicate similar types of matters as the Commission.89 

47. Fourth, also following the Sentencing Guidelines, we will increase the “culpability 

score” by three points where the organization obstructed justice, or encouraged 

obstruction of justice, during the investigation or resolution of the violation.90 Three 

points will also be added if the organization knew of such obstruction, but failed to take 

reasonable steps to prevent it.91

48. The fifth adjustment to the “culpability score” deals with an organization’s 

compliance and ethics program and reemphasizes from our previous policy statements 

the importance we place on compliance. Specifically, we will reduce an organization’s 

“culpability score” by three points if the violation occurred despite the existence of an 

effective compliance and ethics program at the time of the violation.92 Moreover, 

Chapter One, Part B of our Penalty Guidelines details what is required for an 

organization to have an effective compliance and ethics program.93 Part B is modeled 

after section 8B2.1 of the Sentencing Guidelines, but is consistent with the four hallmarks 

of effective compliance programs that we enumerated in our Policy Statement on 

Compliance: active engagement and leadership by senior management; effective 

88 Id. § 1C2.3(c)(2). “Prior adjudication” is defined in the Penalty Guidelines as 

“any resolution, whether by trial or settlement, regardless whether the settlement included 

an admission of the violation.” Penalty Guidelines § 1A1.1 (Commentary note 3(e)). 

89 Id. § 1C2.3(d). 

90 Id. § 1C2.3(e). 

91 Id. 

92 Id. § 1C2.3(f)(1). 

93 See id. § 1B2.1. 
Docket No. PL10-4-000 - 22 - 

preventive measures; prompt detection and cessation of violations and voluntary 

reporting of violations; and remediation of the misconduct.94 

49. Finally, we will decrease the “culpability score” for self-reporting, cooperation, 

and acceptance of responsibility.95 We have always considered self-reporting and 

cooperation, but we now also will give specific, transparent, and measurable credit if the 

organization clearly demonstrates recognition and affirmative acceptance of 

responsibility for its violation. Moreover, we will also reduce the “culpability score” 

where the organization resolves the matter without the need for a trial-type hearing. 

Organizations can substantially reduce their scores if they satisfy each of these elements. 

Specifically, if an organization self-reports, exhibits full cooperation during the 

investigation, admits the violation, and resolves the matter without the need for a trialtype hearing, we will reduce the “culpability score” by five points.96 

50. Thus, the base “culpability score” of five is adjusted based on the six culpability 

factors to produce a final “culpability score.” The final “culpability score” corresponds 

to a set of “minimum and maximum multipliers” that are listed in a table in section 1C2.4 

of our Penalty Guidelines. For example, any “culpability score” of ten or higher 

corresponds to “minimum and maximum multipliers” of 2.00 and 4.00.97 A “culpability 

score” of zero or less corresponds to “minimum and maximum multipliers” of 0.05 and 

0.20.98 “Culpability scores” one through nine also have corresponding “minimum and 

maximum multipliers.” 

v. Step Five: Multiplication of Base Penalty by Minimum and 

Maximum Multipliers

51. The fifth and final step involves multiplying the “base penalty” amount (from step 

three) by the “minimum and maximum multipliers” (from step four) to produce the 

 94 Policy Statement on Compliance at PP 13-21. 

95 Penalty Guidelines § 1C2.3(g). 

96 Id. § 1C2.3(g)(1). 

97 Id. § 1C2.4. 

98 Id. 
Docket No. PL10-4-000 - 23 - 

applicable penalty range.99 For example, a case involving a base penalty of $1 million 

and “minimum and maximum multipliers” of 0.80 and 1.60 would generate a penalty 

range of $800,000 to $1,600,000. 

B. Specific Examples Calculating Civil Penalties Under the Penalty 

 Guidelines

52. In addition to our general description above setting forth the steps involved in 

calculating civil penalties under the Penalty Guidelines, we add further guidance below 

by applying the guidelines using specific hypothetical examples.100 

i. Example One: Market Manipulation in Violation of 18 C.F.R. § 

1c

53. Our first example involves Organization A, a 450-employee organization that has 

violated the Commission’s anti-manipulation regulation, 18 C.F.R. § 1c. Enforcement 

staff learned, through a call to the Enforcement Hotline and through subsequent data 

responses, that Organization A manipulated a specific market for a period of three weeks 

and caused a loss of $75 million to other market participants. Organization A committed 

multiple violations on each day during the three-week period. Organization A’s senior 

management knew about and condoned the manipulative conduct, Organization A does 

not have a prior history before the Commission, it did not violate an order specifically 

directed at Organization A, and did not engage in obstruction of justice. At the time of its 

violation, Organization A lacked an effective compliance program. Organization A fully 

cooperated with Enforcement staff throughout Enforcement staff’s investigation. 

Although it settled the case, Organization A refused to demonstrate an affirmative 

acceptance of responsibility for its violations. To calculate a civil penalty for 

Organization A, we would take the following steps: 

 Step One: Base Violation Level 

o Base violation for market manipulation = 6 (§ 2B1.1(a)) 

 99 Id. § 1C2.5. 

100 These examples are entirely hypothetical and the facts are not taken from any 

of Enforcement staff’s prior or pending investigations. 
Docket No. PL10-4-000 - 24 - 

 Step Two: Adjustments 

o Applicable Adjustments: 

 Manipulation caused a loss of $75 million = add 24 

(§ 2B1.1(b)(1)(M)) Manipulation lasted more than ten, but 

less than fifty days = add 2 (§ 2B1.1(b)(2)) 

o Final violation level (adding the base and the adjustments) = 32, 

which corresponds to $17,500,000 from the “Violation Level 

Penalty Table” (§ 1C2.2(b)) 

 Step Three: Base Penalty 

o Base penalty is the greater of: (a) the dollar amount from the 

“Violation Level Penalty Table,” which in this case would be 

$17,500,000 (see step two, above); (b) the pecuniary gain; or (c) the 

pecuniary loss, which in this case was $75 million (§ 1C2.2) 

o Because the pecuniary loss in this case ($75 million) was greater 

than $17,500,000, the base penalty equals $75 million (§ 1C2.2) 

 Step Four: Culpability Score 

o Base culpability score = 5 (§ 1C2.3(a)) 

o There was senior management involvement and Organization A has 

more than 200, but less than 1,000 employees = add 3 (§ 

1C2.3(b)(3)) 

o No prior history (§ 1C2.3(c)) 

o No violation of an order directed specifically at Organization A (§ 

1C2.3(d)) 

o No obstruction of justice (§ 1C2.3(e)) 

o No effective compliance program (§ 1C2.3(f)) 

o No self-report 

o Organization A fully cooperated and avoided a trial-type hearing = 

subtract 2 (§ 1C2.3(g)) 
Docket No. PL10-4-000 - 25 - 

o Organization A did not accept responsibility (§ 1C2.3(g)) 

o Total culpability score = 5+3-2 = 6 

o A culpability score of 6 corresponds to minimum and maximum 

multipliers of 1.20 and 2.40 (§ 1C2.4) 

 Step Five: multiply base penalty amount by minimum and maximum 

multipliers to determine penalty range (§ 1C2.5) 

o Minimum penalty: $75,000,000 x 1.20 = $90,000,000

o Maximum penalty: $75,000,000 x 2.40 = $180,000,000

ii. Example Two: Tariff Violation

54. In our second example, Organization B, a 200-employee corporation that provides 

electric transmission services, violated its Open Access Transmission Tariff (OATT) by 

denying access to unrelated organizations without a valid reason and favoring its affiliate 

instead. As a result, Organization B’s affiliate was able to make favorable sales in a 

market in which it would have been unable to participate without Organization B’s 

transmission. These favorable sales by Organization B’s affiliate totaled $1,700,000 in 

that market. Organization’s B’s violation lasted for almost a full year. Organization B 

self-reported these violations. Organization B’s senior management was not involved in 

the violations, but Organization B committed the same type of violations less than two 

years earlier. Organization B did not violate an order specifically directed at 

Organization B, and it did not commit obstruction of justice. Organization B lacked an 

effective compliance program at the time it committed its violations. It fully cooperated 

with Enforcement staff, settled the matter, and demonstrated an affirmative acceptance of 

responsibility for its misconduct. To calculate a civil penalty for Organization B, we 

would take the following steps: 

 Step One: Base Violation Level 

o Base violation for a tariff violation = 6 (§ 2B1.1(a)) 

 Step Two: Adjustments 

o Applicable Adjustments: 

 Organization B gained $1,700,000 = add 16 (§ 

2B1.1(b)(1)(I)) 
Docket No. PL10-4-000 - 26 - 

 OATT violations lasted more than 250 days = add 6 (§ 

2B1.1(b)(2)) 

o Final violation level (adding the base and the adjustments) = 28, 

which corresponds to $6,300,000 from the “Violation Level Penalty 

Table” (§ 1C2.2(b)) 

 Step Three: Base Penalty 

o Base penalty is the greater of: (a) the dollar amount from the 

“Violation Level Penalty Table,” which in this case would be 

$6,300,000 (see step two, above); (b) the pecuniary gain, which in 

this case was $1,700,000; or (c) the pecuniary loss (§ 1C2.2) 

o Thus, the base penalty equals $6,300,000 (§ 1C2.2) 

 Step Four: Culpability Score 

o Base culpability score = 5 (§ 1C2.3(a)) 

o No senior management involvement 

o Prior history less than 5 years after prior Commission adjudication = 

add 2 (§ 1C2.3(c)) 

o No violation of an order directed specifically at Organization B (§ 

1C2.3(d)) 

o No obstruction of justice (§ 1C2.3(e)) 

o Organization B lacked an effective compliance program (§ 1C2.3(f)) 

o Organization B self-reported, fully cooperated, accepted 

responsibility, and avoided a trial-type hearing = subtract 5 (§ 

1C2.3(g)) 

o Total culpability score = 5+2-5 = 2 

o A culpability score of 2 corresponds to minimum and maximum 

multipliers of 0.40 and 0.80 (§ 1C2.4) 

 Step Five: multiply base penalty amount by minimum and maximum 

multipliers to determine penalty range (§ 1C2.5) 
Docket No. PL10-4-000 - 27 - 

o Minimum penalty: $6,300,000 x 0.40 = $2,520,000

o Maximum penalty: $6,300,000 x 0.80 = $5,040,000 

iii. Example Three: Capacity Release Violation

55. Example three involves Organization C, a local distribution company that selfreported shipper-must-have-title violations involving the transportation of natural gas on 

three interstate pipelines during a two-year period. Organization C’s violations affected 

the transparency of the applicable markets, but it did not earn any profits from its 

transactions and did not cause any identifiable harm to other market participants. 

Organization C’s senior management was not involved in the violations, and 

Organization C did not have any history of violations before the Commission. 

Organization C did not violate an order specifically directed at Organization C, and it did 

not commit obstruction of justice. Organization C lacked an effective compliance 

program at the time it committed its violations. It fully cooperated with Enforcement 

staff, settled the matter, and demonstrated an affirmative acceptance of responsibility for 

its misconduct. To calculate a civil penalty for Organization C, we would take the 

following steps: 

 Step One: Base Violation Level 

o Base violation level for capacity release violation = 6 (§ 2B1.1(a)) 

 Step Two: Adjustments 

o Applicable Adjustments: 

 Violations lasted more than 250 days = add 6 (§ 2B1.1(b)(2)) 

o Final violation level (adding the base and the adjustments) = 12, but 

because the violations presented a serious threat to market 

transparency, the violation level becomes 16. (§ 2B1.1(b)(3)). A 16 

violation level corresponds to $175,000 from the “Violation Level 

Penalty Table” (§ 1C2.2(b)) 

 Step Three: Base Penalty 

o Base penalty is the greater of: (a) the dollar amount from the 

“Violation Level Penalty Table,” which in this case would be 

$175,000 (see step two, above); (b) the pecuniary gain, which in this 

case was $0; or (c) the pecuniary loss, which in this case was $0 (§ 

1C2.2) 
Docket No. PL10-4-000 - 28 - 

o Thus, the base penalty equals $175,000 (§ 1C2.2) 

 Step Four: Culpability Score 

o Base culpability score = 5 (§ 1C2.3(a)) 

o No senior management involvement 

o No prior history (§ 1C2.3(c)) 

o No violation of an order directed specifically at Organization C (§ 

1C2.3(d)) 

o No obstruction of justice (§ 1C2.3(e)) 

o Organization C lacked an effective compliance program (§ 1C2.3(f)) 

o Organization C self-reported, fully cooperated, accepted 

responsibility, and avoided a trial-type hearing = subtract 5 (§ 

1C2.3(g)) 

o Total culpability score = 5-5 = 0 

o A culpability score of 0 corresponds to minimum and maximum 

multipliers of 0.05 and 0.20 (§ 1C2.4) 

 Step Five: multiply base penalty amount by minimum and maximum 

multipliers to determine penalty range (§ 1C2.5) 

o Minimum penalty: $175,000 x 0.05 = $8,750

o Maximum penalty: $175,000 x 0.20 = $35,000

iv. Example Four: Violation of Reliability Standards

56. Example four involves Organization D, a transmission owner which violated 

Reliability Standard FAC-003-1, Requirement 2, for failing to implement its annual plan 

for vegetation management work to ensure the reliability of the system. Organization D’s 

vegetation management plan required it to perform, or contract with a third party vendor 

to perform, annual aerial patrols of all of its transmission lines. The plan also required it 

to verify that its vendors promptly and satisfactorily completed the patrols. One of 

Organization D’s vendors failed to perform an aerial patrol, as required, and Organization 

D never verified whether the work had been completed. As a result, no patrol had been 

performed over a 500 kV line, which ultimately came into contact with an overgrown 
Docket No. PL10-4-000 - 29 - 

tree. The contact caused a loss of load to 20,000 customers for seven hours during the 

middle of a work day. No one was injured as a result of the loss of load. The value of 

the loss of load was $15 million. Organization D’s senior management was not involved 

in the violations, and Organization D did not have any history of Reliability Standard 

violations before the Commission. Organization D did not violate an order specifically 

directed at Organization D, and it did not commit obstruction of justice. Organization D 

lacked an effective compliance program at the time it committed its violations. It did not 

self-report its violation, was not fully cooperative with Enforcement staff, and did not 

demonstrate an affirmative acceptance of responsibility for its violation. Organization D, 

however, did settle the matter, thus avoiding the need for a trial-type hearing. To 

calculate a civil penalty for Organization D, we would take the following steps: 

 Step One: Base Violation Level 

o Base violation level = 16 (§ 2A1.1(a)) 

 Step Two: Adjustments 

o Applicable Adjustments: 

 Organization D’s violations created a moderate risk of 

extreme harm = add 14 (§ 2A1.1(b)(1)(G)) 

o Final violation level (adding the base and the adjustments) = 30, 

which corresponds to $10,500,000 from the “Violation Level 

Penalty Table” (§ 1C2.2(b)) 

 Step Three: Base Penalty 

o Base penalty is the greater of: (a) the dollar amount from the 

“Violation Level Penalty Table,” which in this case would be 

$10,500,000 (see step two, above); (b) the pecuniary gain; or (c) the 

pecuniary loss, which in this case was $15,000,000 (§ 1C2.2) 

o Thus, the base penalty equals $15,000,000 (§ 1C2.2) 

 Step Four: Culpability Score 

o Base culpability score = 5 (§ 1C2.3(a)) 

o No senior management involvement 

o No prior history (§ 1C2.3(c)) 
Docket No. PL10-4-000 - 30 - 

o No violation of an order directed specifically at Organization D 

(§ 1C2.3(d)) 

o No obstruction of justice (§ 1C2.3(e)) 

o Organization D lacked an effective compliance program (§ 1C2.3(f)) 

o Organization D did not self-report, fully cooperate, or accept 

responsibility (§ 1C2.3(g)) 

o Organization D avoided a trial-type hearing = subtract 1 

o Total culpability score = 5-1 = 4 

o A culpability score of 4 corresponds to minimum and maximum 

multipliers of 0.80 and 1.60 (§ 1C2.4) 

 Step Five: multiply base penalty amount by minimum and maximum 

multipliers to determine penalty range (§ 1C2.5) 

o Minimum penalty: $15,000,000 x 0.80 = $12,000,000

o Maximum penalty: $15,000,000 x 1.60 = $24,000,000

C. General Principles of Applicability

57. The Penalty Guidelines do not affect the Commission’s practice of requiring 

disgorgement of unjust profits.101 In cases of identifiable pecuniary gain that results from 

a violation, the Commission will continue to enter disgorgement orders for the full 

amount of the gain, plus interest.102 The disgorgement amount is also relevant to 

determining the base penalty, which, as described above, is the greater of (1) the dollar 

amount from the table in section 1C2.2(b) that corresponds to the applicable violation 

 101 See Revised Policy Statement at P 42 (“It is important to note that the 

Commission has discretion to order disgorgement not in lieu of, but in addition to, civil 

penalties . . . .”). 

102 Penalty Guidelines § 1B1.1(a). 
Docket No. PL10-4-000 - 31 - 

 

level; (2) the pecuniary gain to the organization from the violation; or (3) the pecuniary 

loss from the violation caused by the organization.103 

58. The Penalty Guidelines will generally be applicable to Commission cases, but, as 

we have stated, we reserve the discretion to depart from them where we deem 

appropriate. We believe that retaining this level of flexibility is necessary to account for 

unique circumstances not considered by the Penalty Guidelines. 

59. In addition, we will continue to determine civil penalties based on the individual 

facts and circumstances for natural person violators.104 As a Commission, we have less 

experience in determining penalties to be applied when the case involves an individual as 

opposed to an organization. Moreover, since we have patterned the Penalty Guidelines 

after the organizational Sentencing Guidelines, the structure is not designed to apply to 

natural persons. As a result, the Commission will determine the appropriate penalty for 

natural persons based on the facts and the circumstances of the violation but will look to 

the Penalty Guidelines for guidance in setting the penalties. Thus, the Penalty Guidelines 

apply to organizations which violate the statutes, rules, and tariffs overseen by the 

Commission.105 As noted above, under the Penalty Guidelines, an “organization” is “any 

entity other than a natural person.”106 

60. The Commission also has discretion to determine penalties in cases involving 

multiple types of violations.107 For example, the Commission will set penalties for a case 

involving both anti-competitive conduct and violations of the Reliability Standards. 

61. Moreover, the Penalty Guidelines contain certain caveats where the penalty range 

will not be followed. First, where the minimum guideline penalty is greater than the 

maximum penalty authorized by our $1 million per day, per violation statutory authority, 

then the guideline penalty will be reduced to the maximum penalty authorized by 

103 Id. § 1C2.2(a)(1)-(3) (emphasis added). 

104 Id. § 1A1.1 (Commentary note 1). 

105 Id. § 1A1.1. 

106 Id. § 1A1.1 (Commentary note 1). 

107 Id. § 1C2.1(b). 
Docket No. PL10-4-000 - 32 - 

 

statute.108 Second, we will reduce the penalty to the extent that it would impair the 

organization’s ability to disgorge profits,109 and can reduce penalties where the 

organization is not able to pay the minimum penalty.110

62. The Penalty Guidelines apply to all future violations of any statute, rule, regulation, 

restriction, condition, or order of the Commission. The Penalty Guidelines will apply to 

any pending investigation where Enforcement staff and the organization have not yet 

entered into settlement negotiations. 

63. The Commission’s prior policy statements on enforcement as well as its Policy 

Statement on Compliance still provide useful guidance and will continue to inform our 

enforcement program. The Penalty Guidelines supplement those previous documents, 

but any perceived conflicts will be resolved in favor of the Penalty Guidelines. 

64. The North American Electric Reliability Corporation (NERC), acting as the 

Electric Reliability Organization, and Regional Entities (RE) impose penalties for 

violations of Commission-approved, mandatory Reliability Standards using penalty 

guidelines that employ a Base Penalty Amount Table. FPA section 215(e)(2) provides 

that a penalty imposed by NERC or an RE may take effect no earlier than 31 days after 

NERC files with the Commission a notice of penalty and the record of the proceeding.111 

In the Notice of Penalty Policy Order, we established the general criteria the Commission 

will use to determine whether it will review a particular notice of penalty.112 The 

Commission stated that the more serious the violation described in the notice of penalty, 

the more likely it would be subject to Commission review.113 To date, the Commission 

has decided to further review only one of the 153 Notices NERC has filed. We are not 

modifying the approach set forth in the Notice of Penalty Policy Order. In our previous 

108 Id. § 1C3.1(b). 

109 Id. § 1C3.2(a). 

110 Id. § 1C3.2(b). 

111 16 U.S.C. §284o(e)(2) (Supp V (2005)). See also 18 C.F.R. §39.7(e). 

112 See Statement of Administrative Policy on Processing Notices of Penalty and 

Order Revising Statement in Order No. 672, 123 FERC ¶ 61,046 (2008) at PP 10-11. 

113 Id. P 11. 
Docket No. PL10-4-000 - 33 - 

determinations on notices of penalty, our prior Policy Statements on Enforcement and the 

Policy Statement on Compliance were resources that informed our judgment whether to 

review the notices of penalty. We intend to use the Penalty Guidelines in a similar 

manner. That is, while we do not anticipate applying the Penalty Guidelines when we 

look at most notices of penalty that we receive, for an out-of-ordinary notice of penalty 

describing a serious violation we may consider the results of applying the Penalty 

Guidelines—but these results would not be determinative of our decision to proceed with 

a further review. 

65. The Commission’s principal objective in enforcement is to ensure compliance with 

our rules, regulations and orders. That goal is best achieved if the orders we issue and the 

regulations we adopt clearly inform the public as to what the Commission expects of 

them and how the Commission will implement its rules and programs. To that end, we 

expect that all orders imposing penalties shall describe the facts that support the penalty 

amount. 

V. Conclusion

66. The Commission’s use of the Penalty Guidelines further improves our enforcement 

program and our approach to making civil penalty determinations. Although the Penalty 

Guidelines represent a change in the way we determine civil penalties, they incorporate 

many of our prior considerations and further our enforcement program goals by serving 

as a deterrent, encouraging compliance, and adding greater fairness, consistency, and 

transparency. 

By the Commission. 

(S E A L) 

Nathaniel J. Davis, Sr., 

Deputy Secretary. 

 
Docket No. PL10-4-000 - 34 - 

FERC Penalty Guidelines

CHAPTER 1 

PART A - GENERAL APPLICATION PRINCIPLES 

§1A1.1. Applicability of these Guidelines

This chapter applies to the penalties to be imposed on all organizations for violations of the statutes, rules, 

regulations, restrictions, conditions or orders overseen by the Federal Energy Regulatory Commission. 

The Commission reserves the right to depart from these Guidelines where it deems appropriate. 

Commentary

Application Notes: 

1. "Organization" means any entity other than a natural person. The Commission will determine 

the appropriate penalty for natural persons based on the facts and circumstances of the violation 

but will look to these Guidelines for guidance in setting those penalties. 

2. The definitions in the United States Sentencing Guidelines are persuasive authority in 

interpreting these Guidelines unless otherwise specified. 

3. The following are definitions of terms used frequently in this chapter: 

(a) "High-level personnel of the organization" means individuals who have substantial 

control over the organization or who have a substantial role in the making of policy 

within the organization. The term includes: a director; an executive officer; an individual 

in charge of a major business or functional unit of the organization, such as sales, 

administration, or finance; and an individual with a substantial ownership interest. 

"High-level personnel of a unit of the organization" is defined in the Commentary to 

§1C2.3 (Culpability Score). 

(b) "Substantial authority personnel" means individuals who within the scope of their 

authority exercise a substantial measure of discretion in acting on behalf of an 

organization. The term includes high-level personnel of the organization, individuals who 

exercise substantial supervisory authority (e.g., a plant manager, a sales manager), and 

any other individuals who, although not a part of an organization’s management, 

nevertheless exercise substantial discretion when acting within the scope of their 

authority (e.g., an individual with authority in an organization to negotiate or set price 

levels or an individual authorized to negotiate or approve significant contracts). Whether 

an individual falls within this category must be determined on a case-by-case basis. 

(c) "Agent" means any individual, including a director, an officer, an employee, or an 

independent contractor, authorized to act on behalf of the organization. 

(d) An individual "condoned" a violation if the individual knew of the violation and did not 

take reasonable steps to prevent or terminate the violation. 

(e) "Prior adjudication" means any resolution, whether by trial or settlement , regardless 
Docket No. PL10-4-000 - 35 - 

whether the settlement included an admission of the violation. 

(f) "Similar violations" means prior conduct that is similar in nature to the conduct 

underlying the instant violation, without regard to whether or not such conduct violated

the same provision. 

(g) "Pecuniary gain" is derived from 18 U.S.C. § 3571(d) and means the additional 

 before tax profit to the entity resulting from the relevant conduct of the violation. Gain 

can result from either additional revenue or cost savings. For example, a violation 

involving an unreported outage by an organization receiving capacity payments can 

produce additional revenue. In such a case, the pecuniary gain is the additional revenue 

received because the outage was not reported. A violation involving a failure to comply 

with the reliability standards requiring vegetation management can produce pecuniary 

gain resulting from cost savings. In such a case, the pecuniary gain is the amount saved 

over time as a result of the failure to implement an appropriate vegetation management 

program. 

(h) "Pecuniary loss" is equivalent to the term "loss" as used in Chapter Two (Violation 

Conduct). In a case involving a violation of the Reliability Standards, the loss will be 

enhanced to the extent necessary to reflect any loss that the organization should have 

caused to prevent greater risk to the bulk power system. An example of such an 

enhancement to pecuniary loss would be the value of firm load that a balancing authority 

should have shed to resolve an emergency condition, but did not do so. 

(i) An individual was "willfully ignorant of the violation" if the individual did not investigate 

the possible occurrence of violative conduct despite knowledge of circumstances that 

would lead a reasonable person to investigate whether violative conduct had occurred. 

(j) “Violation” means a violation of any statute, rule, regulation, restriction, condition or 

order overseen by the Commission. “Compliance with the law” means compliance with 

a statute, rule, regulation, restriction, condition or order overseen by the Commission. 

PART B - DISGORGING GAIN FROM VIOLATIONS AND EFFECTIVE COMPLIANCE AND 

ETHICS PROGRAM

1. DISGORGING GAIN FROM VIOLATIONS 

§1B1.1. Disgorgement

(a) In the case of pecuniary gain as a result of the violation, the Commission enters a 

disgorgement order for the full amount of the gain plus interest. 

 

2. EFFECTIVE COMPLIANCE AND ETHICS PROGRAM 

§1B2.1. Effective Compliance and Ethics Program

(a) To have an effective compliance and ethics program, for purposes of 

subsection (f) of §1C2.3 (Culpability Score), an organization shall— 
Docket No. PL10-4-000 - 36 - 

(1) exercise due diligence to prevent and detect violations; and 

(2) otherwise promote an organizational culture that encourages ethical 

conduct and a commitment to compliance with the law. 

Such compliance and ethics program shall be reasonably designed, implemented, 

and enforced so that the program is generally effective in 

preventing and detecting violations. The failure to prevent or detect the instant 

violation does not necessarily mean that the program is not generally effective in 

preventing and detecting violations. 

(b) Due diligence and the promotion of an organizational culture that encourages 

ethical conduct and a commitment to compliance with the law within the 

meaning of subsection (a) minimally require the following: 

(1) The organization shall establish standards and procedures to prevent and 

detect violations. 

(2) (A) The organization’s governing authority shall be knowledgeable 

 about the content and operation of the compliance and ethics 

program and shall exercise reasonable oversight with respect to 

the implementation and effectiveness of the compliance and 

ethics program. 

(B) High-level personnel of the organization shall ensure that the 

organization has an effective compliance and ethics program, as 

described in this guideline. Specific individual(s) within high-level 

personnel shall be assigned overall responsibility for the 

compliance and ethics program. 

 (C) Specific individual(s) within the organization shall be delegated 

day-to-day operational responsibility for the compliance and 

ethics program. Individual(s) with operational responsibility 

shall report periodically to high-level personnel and, as 

appropriate, to the governing authority, or an appropriate 

subgroup of the governing authority, on the effectiveness of the 

compliance and ethics program. To carry out such operational 

responsibility, such individual(s) shall be given adequate 

resources, appropriate authority, and direct access to the 

governing authority or an appropriate subgroup of the governing 

authority. 

(3) The organization shall use reasonable efforts not to include within the 

substantial authority personnel of the organization any individual whom the 

organization knew, or should have known through the exercise of due 

diligence, has engaged in violations or other conduct inconsistent 

with an effective compliance and ethics program. 

(4) (A) The organization shall take reasonable steps to communicate 
Docket No. PL10-4-000 - 37 - 

periodically and in a practical manner its standards and 

procedures, and other aspects of the compliance and ethics 

program, to the individuals referred to in subdivision (B) by 

conducting effective training programs and otherwise 

disseminating information appropriate to such individuals’ 

respective roles and responsibilities. 

(B) The individuals referred to in subdivision (A) are the members 

of the governing authority, high-level personnel, substantial 

authority personnel, the organization’s employees, and, as 

appropriate, the organization’s agents. 

(5) The organization shall take reasonable steps— 

(A) to ensure that the organization’s compliance and ethics program 

is followed, including monitoring and auditing to detect violations; 

(B) to evaluate periodically the effectiveness of the organization’s 

compliance and ethics program; and 

(C) to have and publicize a system, which may include mechanisms 

that allow for anonymity or confidentiality, whereby the 

organization’s employees and agents may report or seek 

guidance regarding potential or actual violations without 

fear of retaliation. 

(6) The organization’s compliance and ethics program shall be promoted and 

 enforced consistently throughout the organization through (A) 

 appropriate incentives to perform in accordance with the compliance and 

 ethics program; and (B) appropriate disciplinary measures for engaging 

in violations and for failing to take reasonable steps to prevent or 

detect violations. 

(7) After a violation has been detected, the organization shall take 

reasonable steps to respond appropriately to the violation and to 

prevent further similar violations, including making any necessary 

modifications to the organization’s compliance and ethics program. 

(c) In implementing subsection (b), the organization shall periodically assess the risk 

of violations and shall take appropriate steps to design, implement, or 

modify each requirement set forth in subsection (b) to reduce the risk of violations 

identified through this process. 

Commentary

Application Notes: 

1. Definitions.—For purposes of this guideline: 
Docket No. PL10-4-000 - 38 - 

"Compliance and ethics program" means a program designed to prevent and detect violations. 

"Governing authority" means the (A) the Board of Directors; or (B) if the organization does 

not have a Board of Directors, the highest-level governing body of the organization. "High-level 

personnel of the organization" and "substantial authority personnel" have the meaning given those terms 

in the Commentary to §1A1.1 (Application Instructions-Organizations). 

"Standards and procedures" means standards of behavior and internal controls that are 

reasonably capable of reducing the likelihood of violations. 

2. Factors to Consider in Meeting Requirements of this Guideline.— 

(A) In General.—Each of the requirements set forth in this guideline shall be met by 

 an organization; however, in determining what specific actions are necessary to meet 

those requirements, factors that should be considered include: (i) applicable industry 

practice; (ii) the size of the organization; and (iii) similar violations. 

(B) Applicable Industry Practice.—An organization’s 

failure to incorporate and follow applicable industry practice weighs against a finding of 

an effective compliance and ethics program. 

 

(C) The Size of the Organization.— 

(i) In General.—The formality and scope of actions that an organization 

 shall take to meet the requirements of this guideline, including the 

 necessary features of the organization’s standards and procedures, 

 depend on the size of the organization. 

(ii) Large Organizations.—A large organization generally shall devote more formal 

operations and greater resources in meeting the requirements of this guideline 

than shall a small organization. 

(iii) Small Organizations.—In meeting the requirements of this guideline, small 

organizations shall demonstrate the same degree of commitment to ethical 

conduct and compliance with the law as large organizations. However, a small 

organization may meet the requirements of this guideline with less formality and 

fewer resources than would be expected of large organizations. In appropriate 

circumstances, reliance on existing resources and simple systems can 

demonstrate a degree of commitment that, for a large organization, would only 

be demonstrated through more formally planned and implemented systems. 

Examples of the informality and use of fewer resources with which a 

small organization may meet the requirements of this guideline include 

the following: (I) the governing authority’s discharge of its responsibility for 

oversight of the compliance and ethics program by directly managing the 

organization’s compliance and ethics efforts; (II) training employees through 

informal staff meetings, and monitoring through regular "walk-arounds" or 

continuous observation while managing the organization; (III) using available 

personnel, rather than employing separate staff, to carry out the compliance and 
Docket No. PL10-4-000 - 39 - 

ethics program; and (IV) modeling its own compliance and ethics program on 

existing, effective compliance and ethics programs and best practices of other 

similar organizations. 

(D) Recurrence of Similar Violations.—Recurrence of similar violations creates doubt 

regarding whether the organization took reasonable steps to meet the requirements of 

this guideline. For purposes of this subdivision, "similar violations" has the meaning 

given that term in the Commentary to §1A1.1 (Application Instructions - Organizations). 

3. Application of Subsection (b)(2).—High-level personnel and substantial authority personnel of 

the organization shall be knowledgeable about the content and operation of the compliance and 

ethics program, shall perform their assigned duties consistent with the exercise of due diligence, 

and shall promote an organizational culture that encourages ethical conduct and a commitment 

to compliance with the law. 

If the specific individual(s) assigned overall responsibility for the compliance and ethics 

program does not have day-to-day operational responsibility for the program, then the 

individual(s) with day-to-day operational responsibility for the program typically should, no less 

than annually, give the organization’s governing authority or an appropriate subgroup thereof 

information on the implementation and effectiveness of the compliance and ethics program. 

4. Application of Subsection (b)(3).— 

(A) Consistency with Other Law.—Nothing in subsection (b)(3) is intended to require 

conduct inconsistent with any Federal, State, or local law, including any law governing 

employment or hiring practices. 

(B) Implementation.—In implementing subsection (b)(3), the organization shall hire and 

promote individuals so as to ensure that all individuals within the high-level personnel 

and substantial authority personnel of the organization will perform their assigned duties 

in a manner consistent with the exercise of due diligence and the promotion of an 

organizational culture that encourages ethical conduct and a commitment to compliance 

with the law under subsection (a). With respect to the hiring or promotion of such 

individuals, an organization shall consider the relatedness of the individual’s violations 

(including other conduct inconsistent with an effective compliance and ethics program) 

to the specific responsibilities the individual is anticipated to be assigned and other 

factors such as: (i) the recency of the individual’s violations; and (ii) whether the 

individual has engaged in other such violations. 

5. Application of Subsection (b)(6).—Adequate discipline of individuals responsible for a violation 

is a necessary component of enforcement; however, the form of discipline that will be appropriate 

will be case specific. 

6. Application of Subsection (c).—To meet the requirements of subsection (c), an organization shall: 

(A) Assess periodically the risk that violations will occur, including assessing the 

following: 

(i) The nature and seriousness of such violations. 
Docket No. PL10-4-000 - 40 - 

(ii) The likelihood that certain violations may occur because of the nature of the 

organization’s business. If, because of the nature of an organization’s business, 

there is a substantial risk that certain types of violations may occur, the 

organization shall take reasonable steps to prevent and detect that type of 

violation. For example, an organization that, due to the nature of its business, 

has employees whose compensation is dependent on the final settlement price of 

a certain product shall establish standards and procedures designed to prevent 

market manipulation of that final settlement price. 

(iii) The prior history of the organization. The prior history of an organization may 

indicate types of violations that it shall take actions to prevent and detect. 

(B) Prioritize periodically, as appropriate, the actions taken pursuant to any requirement set 

forth in subsection (b), in order to focus on preventing and detecting the violations 

identified under subdivision (A) of this note as most serious, and most likely, to occur. 

(C) Modify, as appropriate, the actions taken pursuant to any requirement set forth in 

subsection (b) to reduce the risk of violations identified under subdivision (A) of this note 

as most serious, and most likely, to occur. 

PART C – CIVIL PENALTIES 

1. GENERAL 

§1C1.1 

This Part governs the determination and implementation of civil penalties. 

2. DETERMINING THE PENALTY 

§1C2.1. Violation Level

(a) Use the applicable Chapter Two guideline to determine the base violation level 

and apply, in the order listed, any appropriate adjustments contained in that guideline. 

(b) Where there are multiple violations falling under different Chapter Two guidelines, e.g., a 

case involving both anticompetitive conduct and reliability violations, the Commission 

will determine the appropriate penalty on a case-by-case basis.

§1C2.2. Base Penalty 

(a) The base penalty is the greatest of: 

(1) the amount from the table in subsection (b) below corresponding to the 

violation level determined under §1C2.1 (Violation Level); or 

(2) the pecuniary gain to the organization from the violation; or 
Docket No. PL10-4-000 - 41 - 

(3) the pecuniary loss from the violation caused by the organization. 

(b) Violation Level Penalty Table

Violation Level Amount

6 or less $5,000 

7 $7,500 

8 $10,000 

9 $15,000 

10 $20,000 

11 $30,000 

12 $40,000 

13 $60,000 

14 $85,000

15 $125,000 

16 $175,000 

17 $250,000 

18 $350,000 

19 $500,000 

20 $650,000 

21 $910,000 

22 $1,200,000 

23 $1,600,000 

24 $2,100,000 

25 $2,800,000 

26 $3,700,000 

27 $4,800,000 

28 $6,300,000 

29 $8,100,000 

30 $10,500,000 

31 $13,500,000 

32 $17,500,000 

33 $22,000,000 

34 $28,500,000 

35 $36,000,000 

36 $45,500,000 

37 $57,500,000 

38 or more $72,500,000 

. 

§1C2.3. Culpability Score

(a) Start with 5 points and apply subsections (b) through (g) below. 

(b) Involvement in or Tolerance of Violations

If more than one applies, use the greatest: 

(1) If -- 
Docket No. PL10-4-000 - 42 - 

(A) the organization had 5,000 or more employees and 

(i) an individual within high-level personnel of the 

organization participated in, condoned, or was willfully 

ignorant of the violation; or 

(ii) tolerance of the violation by substantial authority 

personnel was pervasive throughout the organization; or 

(B) the unit of the organization within which the violation was 

committed had 5,000 or more employees and 

(i) an individual within high-level personnel of the unit 

participated in, condoned, or was willfully ignorant of 

the violation; or 

(ii) tolerance of the violation by substantial authority 

personnel was pervasive throughout such unit, 

add 5 points; or 

(2) If -- 

(A) the organization had 1,000 or more employees and 

(i) an individual within high-level personnel of the 

organization participated in, condoned, or was willfully 

ignorant of the violation; or 

(ii) tolerance of the violation by substantial authority 

personnel was pervasive throughout the organization; or 

(B) the unit of the organization within which the violation was 

committed had 1,000 or more employees and 

(i) an individual within high-level personnel of the unit 

participated in, condoned, or was willfully ignorant of 

the violation; or 

 

(ii) tolerance of the violation by substantial authority 

personnel was pervasive throughout such unit, 

add 4 points; or 

(3) If -- 

(A) the organization had 200 or more employees and 
Docket No. PL10-4-000 - 43 - 

(i) an individual within high-level personnel of the 

organization participated in, condoned, or was willfully 

ignorant of the violation; or 

(ii) tolerance of the violation by substantial authority 

personnel was pervasive throughout the organization; or 

(B) the unit of the organization within which the violation was 

committed had 200 or more employees and 

(i) an individual within high-level personnel of the unit 

participated in, condoned, or was willfully ignorant of 

the violation; or 

(ii) tolerance of the violation by substantial authority 

personnel was pervasive throughout such unit, 

add 3 points; or 

(4) If the organization had 50 or more employees and an individual within 

substantial authority personnel participated in, condoned, or was willfully 

ignorant of the violation, add 2 points; or 

(5) If the organization had 10 or more employees and an individual within 

substantial authority personnel participated in, condoned, or was 

willfully ignorant of the violation, add 1 point. 

(c) Prior History

If more than one applies, use the greater: 

(1) If the organization committed 

any part of the instant violation less than 10 years after a prior Commission adjudication 

of any violation or less than 10 years after an adjudication of similar misconduct by any 

other enforcement agency, add 1 point; or 

(2) If the organization committed 

any part of the instant violation less than 5 years after a prior Commission adjudication of 

any violation or less than 5 years after an adjudication of similar misconduct by any other 

enforcement agency, add 2 points. 

(d) Violation of an Order

 If the commission of the instant violation violated a judicial or Commission order or 

injunction directed at the specific organization by the Commission or other Federal and 

state enforcement agencies that adjudicate similar types of matters as the Commission, 

add 2 points. 

(e) Obstruction of Justice
Docket No. PL10-4-000 - 44 - 

If the organization willfully obstructed or impeded, attempted to obstruct or 

impede, or aided, abetted, or encouraged obstruction of justice during the 

investigation or resolution of the instant violation, or, with knowledge thereof, 

failed to take reasonable steps to prevent such obstruction or 

impedance or attempted obstruction or impedance, add 3 points. 

(f) Effective Compliance and Ethics Program

(1) If the violation occurred even though the organization had in place at the 

time of the violation an effective compliance and ethics program, as 

provided in §1B2.1 (Effective Compliance and Ethics Program), subtract 

3 points. 

(2) Subsection (f)(1) does not apply if, after becoming aware of a violation, 

the organization unreasonably delayed reporting the violation to 

appropriate governmental authorities. 

(3) (A) Except as provided in subdivision (B), subsection (f)(1) does not 

apply if an individual within high-level personnel of the 

organization, a person within high-level personnel of the unit of 

the organization within which the violation was committed where 

the unit had 200 or more employees, or an individual described 

in §1B2.1(b)(2)(B) or (C), participated in, condoned, or was 

willfully ignorant of the violation. 

(B) There is a rebuttable presumption, for purposes of subsection 

(f)(1), that the organization did not have an effective compliance 

and ethics program if an individual— 

(i) within high-level personnel of a small organization; or 

(ii) within substantial authority personnel, but not within 

high-level personnel, of any organization, 

participated in, condoned, or was willfully ignorant of, the 

violation. 

(g) Self-Reporting, Cooperation, and Acceptance of Responsibility

If more than one applies, use the greatest: 

(1) If the organization (A) prior to an imminent threat of disclosure or government 

investigation; and (B) within a reasonably prompt time after becoming aware of the 

violation, reported the violation to the Commission, exhibited full cooperation in the 

investigation, and resolved the matter without need for a trial-type hearing, subtract 4 

points. If the organization also clearly demonstrated recognition and affirmative 

acceptance of responsibility for its violation, subtract an additional 1 point. 
Docket No. PL10-4-000 - 45 - 

(2) If the organization exhibited full cooperation in the investigation and resolved the matter 

without need for a trial-type hearing, subtract 2 points. If the organization also clearly 

demonstrated recognition and affirmative acceptance of responsibility for its violation, 

subtract an additional 1 point. 

(3) If the organization resolved the matter without need for a trial-type hearing, subtract 1 

point. If the organization also clearly demonstrated recognition and affirmative 

acceptance of responsibility for its violation, subtract an additional 1 point. 

Commentary

Application Notes: 

1. Definitions.—For purposes of this guideline, "condoned," "prior adjudication," 

"similar violations," "substantial authority personnel," and "willfully ignorant of the violation" 

have the meaning given those terms in the Commentary to §1A1.1(Applicability of these 

Guidelines). 

"Small Organization", for purposes of subsection (f)(3), means an organization that, at the time 

of the instant violation, had fewer than 200 employees. 

2. For purposes of subsection (b), "unit of the organization" means any reasonably distinct 

operational component of the organization. For example, a large organization may have 

several large units such as divisions or subsidiaries, as well as many smaller units such as 

specialized manufacturing, marketing, or accounting operations within these larger units. For 

purposes of this definition, all of these types of units are encompassed within the term "unit of the 

organization." 

3. "High-level personnel of the organization" is defined in the Commentary to §1A1.1 

(Application Instructions - Organizations). With respect to a unit with 200 or more employees, 

"high-level personnel of a unit of the organization" means agents within the unit who set the 

policy for or control that unit. For example, if the managing agent of a unit with 200 employees 

participated in a violation, three points would be added under subsection (b)(3); if that 

organization had 1,000 employees and the managing agent of the unit with 200 employees were 

also within high-level personnel of the organization in its entirety, four points (rather than three) 

would be added under subsection (b)(2). 

4. Pervasiveness under subsection (b) will be case specific and depend on the number, and degree 

of responsibility, of individuals within substantial authority personnel who participated in, 

condoned, or were willfully ignorant of the violation. Fewer individuals need to be involved for a 

finding of pervasiveness if those individuals exercised a relatively high degree of authority. 

Pervasiveness can occur either within an organization as a whole or within a unit of an 

organization. For example, if a violation were committed in an organization with 1,000 

employees but the tolerance of the violation was pervasive only within a unit of the organization 

with 200 employees (and no high-level personnel of the organization participated in, condoned, 

or was willfully ignorant of the violation), three points would be added under subsection (b)(3). 

If, in the same organization, tolerance of the violation was pervasive throughout the organization 

as a whole, or an individual within high-level personnel of the organization participated in the 

violation, four points (rather than three) would be added under subsection (b)(2). 
Docket No. PL10-4-000 - 46 - 

5. Under subsection (c), in determining the prior history of an organization with separately 

managed lines of business, only the prior conduct or record of the separately managed line of 

business involved in the instant violation is to be used. A "separately managed line of business" 

is a subpart of a for-profit organization that has its own management, has a high degree of 

autonomy from higher managerial authority, and maintains its own separate books of account. 

Corporate subsidiaries and divisions frequently are separately managed lines of business. 

6. Under subsection (c), in determining the prior history of an organization, the conduct of 

the underlying economic entity will be considered without regard to its legal structure or 

ownership. For example, if two companies merged and became separate divisions and separately 

managed lines of business within the merged company, each division would retain the prior 

history of its predecessor company. If a company reorganized and became a new legal entity, the 

new company would retain the prior history of the predecessor company. In contrast, if one 

company purchased the physical assets but not the ongoing business of another company, the 

prior history of the company selling the physical assets would not be transferred to the company 

purchasing the assets. However, if an organization is acquired by another organization in 

response to solicitations by appropriate federal government officials, the prior history of the 

acquired organization will not be attributed to the acquiring organization. 

7. Under subsection (c)(1), the adjudication(s) must have occurred within the specified period (ten 

or five years) of the instant violation. 

8. Adjust the culpability score for the factors listed in subsection (e) whether or not the violation 

guideline incorporates that factor, or that factor is inherent in the violation. 

9. Subsection (f)(2) contemplates that the organization will be allowed a reasonable period of time 

to conduct an internal investigation. In addition, no reporting is required by subsection (f)(2) if 

the organization reasonably concluded, based on the information then available, that no violation 

had been committed. 

10. To qualify for a reduction under subsection (g)(1) or (g)(2), cooperation must be both timely and 

thorough. To be timely, the cooperation must begin essentially at the same time as the 

organization is notified by the Commission or Commission staff of an investigation. To be 

thorough, the cooperation should include the disclosure of all pertinent information known by the 

organization. A prime test of whether the organization has disclosed all pertinent information is 

whether the information is sufficient for the Commission to identify the nature and extent of the 

violation and the individual(s) responsible for the violation. However, the cooperation to be 

measured is the cooperation of the organization itself, not the cooperation of individuals within 

the organization. If, because of the lack of cooperation of particular individual(s), neither the 

organization nor the Commission are able to identify the culpable individual(s) within the 

organization despite the organization’s efforts to cooperate fully, the organization may still be 

given credit for full cooperation. The Commission will not require organizations to waive 

attorney-client privilege or work-product protections in order to qualify for a reduction under 

these subsections. 

11. The Commission has not always required organizations to admit responsibility in settlement 

agreements. This Guideline is designed to provide a reduction in the culpability score to 

organizations willing to resolve cases without the need for a trial-type hearing that is comparable 

to the reduction in the Sentencing Guidelines for acceptance of responsibility with an additional 
Docket No. PL10-4-000 - 47 - 

incentive for companies willing to affirmatively recognize their violations. 

Background: The increased culpability scores under subsection (b) are based on three interrelated 

principles. First, an organization is more culpable when individuals who manage the organization or who 

have substantial discretion in acting for the organization participate in, condone, or are willfully 

ignorant of violations. Second, as organizations become larger and their managements become more 

professional, participation in, condonation of, or willful ignorance of violations by such management is 

increasingly a breach of trust or abuse of position. Third, as organizations increase in size, the risk of 

violations beyond that reflected in the instant violation also increases whenever management’s tolerance 

of that violation is pervasive. Because of the continuum of sizes of organizations and professionalization 

of management, subsection (b) gradually increases the culpability score based upon the size of the 

organization and the level and extent of the substantial authority personnel involvement. 

§1C2.4. Minimum and Maximum Multipliers

Using the culpability score from §1C2.3 (Culpability Score) and applying any applicable 

special instruction for penalties in Chapter Two, determine the applicable minimum and 

maximum penalty multipliers from the table below. 

Culpability Minimum Maximum 

Score Multiplier Multiplier

10 or more 2.00 4.00 

9 1.80 3.60 

8 1.60 3.20 

7 1.40 2.80 

6 1.20 2.40 

5 1.00 2.00 

4 0.80 1.60 

3 0.60 1.20 

2 0.40 0.80 

1 0.20 0.40 

0 or less 0.05 0.20. 

§1C2.5. Guideline Penalty Range – Organizations

(a) The minimum of the guideline penalty range is determined by multiplying the 

base penalty determined under §1C2.2 (Base Penalty) by the applicable 

minimum multiplier determined under §1C2.3 (Minimum and Maximum 

Multipliers). 

(b) The maximum of the guideline penalty range is determined by multiplying the 

base penalty determined under §1C2.2 (Base Penalty) by the applicable 

maximum multiplier determined under §1C2.3 (Minimum and Maximum 

Multipliers). 

3. IMPLEMENTING THE PENALTY 

§1C3.1. Imposing a Penalty
Docket No. PL10-4-000 - 48 - 

(a) Except to the extent restricted by the maximum penalty authorized by statute or 

any minimum penalty required by statute, the penalty range will be that 

determined under §1C2.5 (Guideline Penalty Range - Organizations). 

(b) Where the minimum guideline penalty is greater than the maximum penalty 

authorized by statute, the maximum penalty authorized by statute will be the 

guideline penalty. 

§1C3.2. Reduction of Penalty Based on Inability to Pay

(a) The Commission will reduce the penalty below that otherwise required to the 

extent that imposition of such penalty would impair its ability to disgorge profits. 

(b) The Commission may impose a penalty below that otherwise required if the 

Commission finds that the organization is not able and, even with the use of a 

reasonable installment schedule, is not likely to become able to pay the minimum 

required by §1C2.5 (Guideline Penalty Range-Organizations) and §1B1.1 

(Disgorgement). 

Provided, that the reduction under this subsection will not be more than 

necessary to avoid substantially jeopardizing the continued viability of the 

organization. 

Commentary

Application Notes: 

1. For purposes of this section, an organization is not able to pay the minimum penalty if, even with 

an installment schedule, the payment of that penalty would substantially jeopardize the continued 

existence of the organization. 
Docket No. PL10-4-000 - 49 - 

CHAPTER 2: VIOLATION CONDUCT 

Guideline for Violations of Commission-Approved Reliability Standards 

§2A1.1 

(a) Base Violation Level: 16 

(b) Specific Violation Characteristics

(1) Risk of Loss. Apply the greatest of the following: 

 

(A) If the violation created a low risk of minor harm, no increase. 

(B) If the violation created either a moderate risk of minor harm OR a low risk of substantial 

harm, add 3. 

(C) If the violation created either a high risk of minor harm OR a moderate risk of substantial 

harm, add 5. 

(D) If the violation created either a high risk of substantial harm OR a low risk of major 

harm, add 7. 

(E) If the violation created a moderate risk of major harm, add 9. 

(F) If the violation created a high risk of major harm OR a low risk of extreme harm, add 12. 

(G) If the violation created a moderate risk of extreme harm, add 14. 

(H) If the violation created a high risk of extreme harm, add 16. 

Commentary

The following chart reflects the enhancements for risk of harm described in this Guideline: 

Minor harm Substantial Harm Major Harm Extreme Harm 

Low Risk +0 +3 +7 +12 

Moderate Risk +3 +5 +9 +14 

High Risk +5 +7 +12 +16 

Illustrative Examples:

(1) Risk of harm. 

 

(A) Low risk of minor harm 

Example: A Transmission Owner fails to produce evidence of maintenance and testing 

for 37 days after requested by its Regional Entity, i.e., 7 days after the 30-day deadline 

for production, creating a risk that no documentation exists to show the entity’s 

adherence to its maintenance and testing program for protection systems. 

(B.1) Moderate risk of minor harm 

Example: A medium-sized utility registered as a Balancing Authority has a documented 
Docket No. PL10-4-000 - 50 - 

and adequate training program, but the training plan does not address all the knowledge 

and competencies required for reliable system operations and the entity has provided 

90% of its operators with sufficient training time, creating a risk that a small percentage 

of operators have not received sufficient time for training to maintain all competencies 

needed for reliable system operations. 

(B.2) Low risk of substantial harm 

Example: A Generator Operator fails to, without any intentional time delay, notify its 

Balancing Authority and Transmission Operator of equipment failure that would limit the 

output of its 300 MW generator, which may make it difficult for the Generator Operator’s 

Balancing Authority to replace the power in a time period of high demand or low supply 

availability. 

(C.1) High risk of minor harm 

Example: A small utility registered as a Transmission Owner is three months behind on 

testing and maintaining 1% of its relays, all on its 115 kV radial transmission lines, 

meaning the entity faces a high risk of losing a small amount of radial load through an 

inability to isolate a fault in response to a contingency. 

(C.2) Moderate risk of substantial harm 

Example: Over a weekend when the system is lightly loaded, operating personnel for a 

small utility registered as a Transmission Operator fail to use three-part communication 

of directives, which leads to the wrong breaker being opened. Because there was 

sufficient capacity on a looped line, there was moderate risk that a substantial, otherwise 

unnecessary loss of load could occur because the breaker opened. 

(D.1) High risk of substantial harm 

Example: A medium to large utility registered as a Transmission Operator fails to have 

on duty NERC-certified operators for 50 hours per month for the last 2 years, placing the 

utility at an elevated risk of an operator error during any emergency while the noncertified operator is on duty that could lead to a substantial, otherwise unnecessary loss 

of load. 

(D.2) Low risk of major harm 

Example: A Reliability Coordinator’s modeling tool does not include several recent 

changes to the transmission system. Should an emergency occur, the Reliability 

Coordinator would lack situational awareness of its Reliability Coordinator Area and, as 

a result, issue improper directives that exacerbate the emergency. 

(E) Moderate risk of major harm 

Example: A medium to large utility registered as a Balancing Authority has an event 

occur on its system and fails to take actions necessary to return its area control error 

(ACE) to zero for more than 15 minutes, and while it has the necessary amount of 
Docket No. PL10-4-000 - 51 - 

reserves through a reserve sharing group, the full amount of reserves cannot be delivered 

to the BA due to transmission constraints resulting from the event. This violation 

threatens unnecessary losses of load within the Balancing Authority and in neighboring 

Balancing Authorities should another contingency occur. 

(F.1) High risk of major harm 

Example: A large Transmission Owner has a transmission vegetation management 

program that requires foot, vehicle and aerial patrols annually along rights-of-way for 

transmission lines having a capacity of 138 kV and above. The Transmission Owner 

decides to save $2 million by deferring the annual aerial patrols for two years. During 

that time period, a tree located within the right-of-way of a 500 kV line grew sufficiently 

to contact the line. An aerial patrol timely would have identified the tree as a potential 

threat of a vegetation contact or flashover that would cause an outage of the line. Such 

an outage likely would result in major harm through significant, unnecessary losses of 

load, as well as severe transmission constraints between neighboring Transmission 

Operators and Balancing Authorities. 

(F.2) Low risk of extreme harm 

 Example: A utility registered as a Balancing Authority does not have any required 

procedures for the recognition of and for making its operating personnel aware of 

sabotage events on its facilities and multi-site sabotage affecting larger portions of the 

Interconnection, and its operating personnel have received no training on recognizing 

sabotage events. Because of the Balancing Authority’s configuration and facilities, its 

lack of these procedures and training make it more likely that a large-scale sabotage 

attempt focused on the Balancing Authority’s facilities would be successful, causing 

widespread, unnecessary losses of load on the systems of the Balancing Authority and its 

neighboring Balancing Authorities. 

(G) Moderate risk of extreme harm 

Example: A medium-sized utility that serves native load and is registered as a Balancing 

Authority and Transmission Operator does not have sufficient manually-operated load 

shedding capability to shed load within fifteen minutes in the amount of the Balancing 

Authority’s most severe single contingency. The failure to shed sufficient load as a last 

resort in an emergency could cause the utility to lean on the Interconnection for too long 

and, were an Adjacent Balancing Authority to have a contingency, it could lead to 

widespread blackouts in either or both Balancing Authority Areas. 

(H) High risk of extreme harm 

This situation could occur as a result of multiple violations (vegetation contact, 

frequency oscillations, poor operator training and situational awareness, etc.) that are 

similar to the causes of the 2003 Northeast blackout. 

Application Notes:
Docket No. PL10-4-000 - 52 - 

1. The Guideline increases the violation level as the expected harm from the reliability violation 

increases. As a result, the violation level goes up as both the risk of harm and the severity of the 

potential harm increases. Many cases may involve multiple risks of multiple levels of harm. For 

instance, a case might involve a moderate risk of major harm and a high risk of substantial harm. 

The Guideline takes the greater of the two violation levels. In this case, the increase to the base 

violation level would be 9. 

2. In this context, “low risk” is not meant to include cases where there was virtually no risk of 

harm. It is meant to apply to cases where there was a significant, albeit small, chance of the 

relevant level of harm. 

3. The risk of the relevant harm is to be determined based on all of the facts and circumstances 

surrounding the violation(s). As an initial starting point, the violation risk factors will be 

considered in determining the relevant risk. However, the VRF might understate or overstate the 

actual risk resulting from the violation. For instance, a violation or combination of violations of 

Low VRF standards might, under certain circumstances, pose a high risk of harm. Alternatively, 

a violation of a standard with a High VRF might present little or no real risk of harm. Under 

such circumstances, the actual risk from the violation should be used to determine the offense 

level. The fact that little or no loss of load occurred is not, by itself, evidence that the violation 

involved a low or moderate risk. 
Docket No. PL10-4-000 - 53 - 

Guideline for Fraud, Anti-Competitive Conduct and 

Other Rule, Tariff and Order Violations 

§2B1.1 

(a) Base Violation Level: 6 

(b) Specific Violation Characteristics

(1) If the loss exceeded $5,000, increase the violation level as follows: 

 

Loss (Apply the Greatest) Increase in Level

(A) $5,000 or less no increase 

(B) More than $5,000 add 2 

(C) More than $10,000 add 4 

(D) More than $30,000 add 6 

(E) More than $70,000 add 8 

(F) More than $120,000 add 10 

(G) More than $200,000 add 12 

(H) More than $400,000 add 14 

(I) More than $1,000,000 add 16 

(J) More than $2,500,000 add 18 

(K) More than $7,000,000 add 20 

(L) More than $20,000,000 add 22 

(M) More than $50,000,000 add 24 

(N) More than $100,000,000 add 26 

(O) More than $200,000,000 add 28 

(P) More than $400,000,000 add 30 

(2) If more than one of the following enhancements applies, use only the greatest. 

If the violation-- 

(A) involved more than 70,000 MMBtus of natural gas or more than 10,000 MWh of 

electricity, or equivalent volumes of natural gas related or electricity related transactions, 

increase by 2 levels 

(B) involved more than 140,000 MMBtus of natural gas or more than 20,000 MWh 

of electricity, or equivalent volumes of natural gas related or electricity related 

transactions, increase by 4 levels 

(C) involved more than 700,000 MMBtus of natural gas or more than 100,000 MWh of 

electricity, or equivalent volumes of natural gas related or electricity related transactions, 

increase by 6 levels 

If the violation-- 

(D) continued for more than 10 days, increase by 2 levels 
Docket No. PL10-4-000 - 54 - 

(E) continued for more than 50 days, increase by 4 levels 

(F) continued for more than 250 days, increase by 6 levels 

(3) If the violation involved conduct that presented a serious threat to market transparency and the 

total violation level is less than level 16, increase to level 16. 

Commentary

Application Notes:

1. This Guideline is based on United States Sentencing Guidelines Section 2B1.1 and terms used in 

this Guideline are intended to have the same meaning as they do in Section 2B1.1. Section (b)(2) 

provides various enhancements for the scope and extent of the violation. If more than one of the 

enhancements is applicable, only the greatest enhancement should be used. 

2. Loss Under Subsection (b)(1).—This application note applies to the determination of loss 

under subsection (b)(1). 

(A) General Rule.—Subject to the exclusions in subdivision (D), loss is the greater of actual 

loss or intended loss. 

(i) Actual Loss.—"Actual loss" means the reasonably foreseeable pecuniary harm 

that resulted from the violation. 

(ii) Intended Loss.—"Intended loss" (I) means the pecuniary harm that was intended 

to result from the violation; and (II) includes intended pecuniary harm that 

would have been impossible or unlikely to occur. 

(iii) Pecuniary Harm.—"Pecuniary harm" means harm that is monetary or that 

otherwise is readily measurable in money. Accordingly, pecuniary harm does 

not include emotional distress, harm to reputation, or other non-economic harm. 

(iv) Reasonably Foreseeable Pecuniary Harm.—For purposes of this guideline, 

"reasonably foreseeable pecuniary harm" means pecuniary harm that the entity 

knew or, under the circumstances, reasonably should have known, was a 

potential result of the violation. 

(B) Gain.—The Commission will use the gain that resulted from the violation as an 

alternative measure of loss only if there is a loss but it reasonably cannot be determined. 

(C) Estimation of Loss.—The Commission need only make a reasonable estimate of the loss. 

 (D) Exclusions from Loss.—Loss does not include the following: 

(i) Interest of any kind, finance charges, late fees, penalties, amounts based on an 

agreed-upon return or rate of return, or other similar costs. 

(ii) Costs to the government of, and costs incurred by victims primarily to aid the 

government in, the prosecution and investigation of a violation. 
Docket No. PL10-4-000 - 55 - 

(E) Credits Against Loss.—Loss will be reduced by the following: 

(i) The money returned, and the fair market value of the property returned and the 

services rendered, by the entity or other persons acting jointly with the entity, to 

the victim before the violation was detected. The time of detection of the violation 

is the earlier of (I) the time the violation was discovered by a victim or the 

Commission; or (II) the time the entity knew or reasonably should have known 

that the violation was detected or about to be detected by a victim or the 

Commission. 

(ii) In a case involving collateral pledged or otherwise provided by the entity, the 

amount the victim has recovered at the time of penalty from disposition of the 

collateral, or if the collateral has not been disposed of by that time, the fair 

market value of the collateral at the time of penalty. 
Docket No. PL10-4-000 - 56 - 

Guideline for Misrepresentation and False Statements 

To the Commission or Commission Staff 

§2C1.1 

(a) Base Violation Level: 18 

(b) Specific Violation Characteristics 

 

(1) If the violation resulted in substantial interference with the administration 

of justice, increase by 3 levels. 

(2) If the violation (A) involved the destruction, alteration, or fabrication of a 

substantial number of records, documents, or tangible objects; (B) 

involved the selection of any essential or especially probative record, 

document, or tangible object, to destroy or alter; or (C) was otherwise 

extensive in scope, planning, or preparation, increase by 2 levels. 

Commentary

Application Notes:

1. This Guideline is based on United States Sentencing Guidelines Section 2J1.2 and terms used in 

this Guideline are intended to have the same meaning as they do in Section 2J1.2. 

2. Definitions.—For purposes of this guideline: 

"Records, documents, or tangible objects" includes (A) records, documents, or tangible objects 

that are stored on, or that are, magnetic, optical, digital, other electronic, or other storage mediums or 

devices; and (B) wire or electronic communications. 

"Substantial interference with the administration of justice" includes a premature or improper 

termination of a Commission investigation; any official action based upon perjury, false testimony, or 

other false evidence; or the unnecessary expenditure of substantial governmental or Commission 

resources.