UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

 

 

 

2019 REPORT ON ENFORCEMENT 

Docket No. AD07-13-013 

Prepared by Staff of the 

Office of Enforcement 

Federal Energy Regulatory Commission 

Washington, D.C. 

 

NOVEMBER 21, 2019 
The matters presented in this staff report do not necessarily represent the views 

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

Commissioners, and are not binding on the Commission. 
2019 Staff Report on Enforcement 

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TABLE OF CONTENTS 

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

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

OFFICE OF ENFORCEMENT PRIORITIES ................................................................................7

DIVISION OF INVESTIGATIONS................................................................................................9

Overview ....................................................................................................................................9

Significant Matters ...................................................................................................................11

District Court Litigation ............................................................................................................ 11

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

Inquiry into South-Central United States Cold Weather Event of January 17, 2018 ................ 17

Settlements ...............................................................................................................................18

Self-Reports .............................................................................................................................22

Statistics on Self-Reports........................................................................................................... 22

Illustrative Self-Reports Closed with No Action ....................................................................... 25

Investigations ...........................................................................................................................32

Statistics on Investigations ........................................................................................................ 33

Illustrative Investigations Closed with No Action ..................................................................... 38

MMU Referrals ........................................................................................................................41

Statistics on MMU Referrals ..................................................................................................... 43

Illustrative MMU Referrals Closed with No Action ................................................................. 43

Enforcement Hotline ................................................................................................................46

Other Matters ...........................................................................................................................46

DIVISION OF AUDITS AND ACCOUNTING ...........................................................................49

Overview ..................................................................................................................................49

Outreach and Guidance ............................................................................................................49

Compliance ..............................................................................................................................50

Compliance Programs ............................................................................................................... 50

Timely Remedy of Noncompliance ........................................................................................... 51

Compliance Alerts ..................................................................................................................... 51

Audit Matters ...........................................................................................................................57

Formula Rates ............................................................................................................................ 58

 Gas Tariff & Accounting ........................................................................................................... 60 

 Electric Tariff & Accounting ..................................................................................................... 63 

 Pending Contested Audit Matters .................................................................................................... 64 
2019 Staff Report on Enforcement 

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Accounting Matters ..................................................................................................................65

Overview of FY2019 Filings Reviewed by DAA ..................................................................... 66

Requests for Approval of the Chief Accountant ........................................................................ 66

Rate Proceedings ....................................................................................................................... 68

Certificate Proceedings .............................................................................................................. 68

Merger and Acquisition Proceedings ........................................................................................ 69

Debt and Security Issuance Proceedings ................................................................................... 69

Accounting Inquiries ................................................................................................................. 69

Accounting for the Tax Cuts and Jobs Act of 2017 (TCJA) ..................................................... 70

Accounting for Leases ............................................................................................................... 70

International Financial Reporting Standards ............................................................................. 71

DIVISION OF ANALYTICS AND SURVEILLANCE ...............................................................72

Overview ..................................................................................................................................72

Surveillance..............................................................................................................................73

1. Natural Gas ................................................................................................................................. 73

2. Electricity ................................................................................................................................... 74

3. Illustrative DAS Surveillance Inquiries Closed With No Referral............................................. 75

Analytics ..................................................................................................................................77

Data Management ....................................................................................................................78

DIVISION OF ENERGY MARKET OVERSIGHT .....................................................................79

Overview ..................................................................................................................................79

Market Monitoring ...................................................................................................................79

2018 State of the Markets Report .............................................................................................. 79

Seasonal Market Assessments ................................................................................................... 80

Market-Based Rate Ex Post Analysis ......................................................................................80

Commission Orders and Rulemakings.....................................................................................81

Forms Administration and Compliance ...................................................................................81

Electric Quarterly Reports ......................................................................................................... 81

eForms Refresh Project ............................................................................................................. 82

Outreach and Communication .................................................................................................82

Website ...................................................................................................................................... 82

Snapshot Calls ........................................................................................................................... 83

Domestic and Foreign Delegation Briefings ............................................................................. 83

APPENDIX A1: OFFICE OF ENFORCEMENT ORGANIZATION CHART (CURRENT) ....84

APPENDIX A2: OFFICE OF ENFORCEMENT ORGANIZATION CHART (thru 9/15/19) ...85

APPENDIX B: FY2019 CIVIL PENALTY ENFORCEMENT ACTIONS ................................86
2019 Staff Report on Enforcement 

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INTRODUCTION 

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

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

Policy Statement on Enforcement.1

 This report informs the public and the regulated community 

of Enforcement’s activities during Fiscal Year 2019 (FY2019),2 including an overview of, and 

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

Investigations (DOI), Division of Audits and Accounting (DAA), Division of Analytics and 

Surveillance (DAS), and Division of Energy Market Oversight (DEMO). 

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

and prepares this report with that objective in mind. Most of the information the public receives 

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

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

the status and resolution of various matters that were public in FY2019. However, not all of 

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

years, the FY2019 report provides the public with more information regarding the nature of nonpublic Enforcement activities, such as investigations that are closed without action, self-reported 

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

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

and accounting programs, monitoring market trends and market competitiveness, and performing 

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

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

Consistent with Enforcement’s continual efforts to increase transparency, this year’s report 

builds on the information presented in previous reports by providing further details about our 

processes, practices, and specific enforcement matters. Specifically, this year’s report includes 

greater and new details about: (1) DOI’s investigatory processes and practices; (2) the Market 

Monitoring Unit (MMU) referral process, including the rules requiring referrals of potential 

violations and examples of MMU referrals reviewed by Enforcement staff during FY2019; (3) 

DAA’s audit processes and practices, including the organization and new focus areas of DAA’s 

four audit branches, and the addition of citations to docket numbers for recurring, problematic 

compliance issues discussed in DAA’s Compliance Alerts section of this report; and (4) DAS’s 

processes and practices related to reviewing MMU referrals and data management, and the 

inclusion of additional examples of DAS inquiries closed with no action. 

On September 16, 2019, certain functions performed by DEMO and DAS were realigned 

within Enforcement, the Office of Energy Policy and Innovation (OEPI), and the Office of the 

Executive Director (OED). The primary objective of the realignment was to better reflect the key 

functions and mission statements of the three existing Commission offices. Compliance functions 

 

1

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

Policy Statement). Enforcement’s current organizational chart is attached as Appendix A1 to this 

report. 

2

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

FY2019, the subject of this report, began on October 1, 2018 and ended on September 30, 2019. 
2019 Staff Report on Enforcement 

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performed by DEMO, such as Electric Quarterly Report (EQR) and financial forms administration 

and market power monitoring, remain in Enforcement under DAA and DAS. Policy-related 

functions performed by DEMO that were more aligned with the mission of OEPI, such as the 

Annual State of the Markets Report and seasonal assessments, were transferred to that office under 

a new Division of Energy Markets Assessments. Additionally, some data management support 

functions performed by DAS were transferred to the newly created Data Governance Division 

within OED. This realignment will allow Enforcement staff to be more focused on its core mission: 

continuing oversight of market activities, investigations, and audits.3 

 

3

 Enforcement’s organizational chart before this realignment is attached as Appendix A2 to this 

report. 
2019 Staff Report on Enforcement 

7 

OFFICE OF ENFORCEMENT PRIORITIES 

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

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

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

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

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

cost.4 The Strategic Plan identifies three primary goals to fulfill this mission: (1) ensure just and 

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

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

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

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

surveillance. Enforcement also gathers information regarding energy infrastructure, as 

appropriate. Each of the divisions continues to work to bring entities into compliance with 

applicable statutes, Commission rules, orders, regulations, and tariff provisions. 

In FY2019, Enforcement’s priorities continued to focus on matters involving: 

 Fraud and market manipulation; 

 Serious violations of the Reliability Standards; 

 Anticompetitive conduct; and 

 Conduct that threatens the transparency of regulated markets. 

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

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

energy services at a reasonable cost because the losses imposed by fraud and manipulation are 

ultimately passed on to consumers. Similarly, anticompetitive conduct and conduct that threatens 

market transparency undermine confidence in the energy markets and harm consumers and 

competitors. Such conduct might also involve the violation of rules designed to limit market power 

or to ensure the efficient operation of regulated markets. Enforcement focuses on preventing and 

remedying misconduct involving the greatest harm to the public, where there may be significant 

gain to the violator or loss to the victims. 

The Reliability Standards established by the North American Electric Reliability Corporation 

(NERC), and approved by the Commission, protect the public interest by ensuring a reliable and 

secure bulk power system. Enforcement ensures compliance with these standards and focuses 

primarily on violations resulting in actual harm, through the loss of load or other means. 

Enforcement also focuses on cases involving repeat violations of the Reliability Standards or 

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

 

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

(Strategic Plan), available at https://www.ferc.gov/about/strat-docs/strat-plan.asp. 
2019 Staff Report on Enforcement 

8 

In FY2019, DOI staff opened 12 new investigations, while bringing 14 pending investigations 

to closure with no action. Additionally, during the fiscal year, staff negotiated two settlements of 

more than $14 million, which included $7.4 million in civil penalties and $7 million in 

disgorgement.5

 These Commission-approved settlements also included provisions requiring the 

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

regarding the results of those compliance enhancements. 

In FY2019, DAA completed 11 audits of public utility and natural gas companies covering a 

wide array of topics. The audits resulted in 76 findings of noncompliance, 286 recommendations 

for corrective action, the majority of which were implemented within six months, and directed 

$161.2 million in refunds and other recoveries. Additionally, during the fiscal year, DAA acted 

through the Chief Accountant’s delegated authority on 120 accounting filings requesting approval 

of a proposed accounting treatment or financial reporting matter. Among its other work, DAA 

also assisted with numerous rate, pipeline certificate, merger and acquisition, and debt and security 

issuance proceedings before the Commission. 

In FY2019, DAS surveillance reviewed numerous instances of potential misconduct, some of 

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

participant’s conduct, to determine whether to recommend an investigation. During the fiscal year, 

natural gas surveillance screens produced approximately 7,629 screen trips which resulted in 20 

natural gas surveillance inquiries and ultimately one referral to DOI for investigation. Electric 

surveillance screens produced approximately 369,230 screen trips which resulted in 23 electric 

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

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

work on six. DAS also worked and provided analytical support on approximately 45 investigations 

with DOI. 

DEMO continued its analysis of market fundamentals (including significant trends and 

developments) and enhancement of its analytical capabilities related to the ongoing eForms refresh 

project. As in prior years, DEMO presented its annual State of the Markets report assessing 

significant events in the energy markets during the previous year. This year’s report also reviewed 

the development of US pipeline infrastructure and the rapid increase in the LNG export industry. 

Additionally, during the fiscal year, DEMO presented its Winter Energy Market Assessment and 

Summer Energy Market and Reliability Assessment. DEMO also assisted with over 40 docketed 

Commission proceedings where it evaluated the efficacy of certain regulatory policies in light of 

evolving energy markets. DEMO held one EQR user group meeting in FY2019 to conduct 

outreach with the filing community and to discuss potential system improvements and 

enhancements. 

 

 

5

 A table of FY2019 Civil Penalty Enforcement Actions is attached as Appendix B to this report. 
2019 Staff Report on Enforcement 

9 

DIVISION OF INVESTIGATIONS 

Overview 

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

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

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

investigation. 

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

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

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

divisions within Enforcement; referrals from Independent System Operators (ISOs) and Regional 

Transmission Organizations (RTOs) in organized markets or their market monitoring units; 

referrals from other agencies; self-reports; calls to the Enforcement Hotline; whistleblowers; and 

information gathered in other investigations. After learning of a potential violation, DOI staff 

evaluates whether to open an investigation based on the factors outlined in the Commission’s 

Revised Policy Statement on Enforcement.6 

 If, after gathering and reviewing relevant facts, DOI staff finds no violation or finds that a 

violation should not be subject to sanctions, DOI staff closes the investigation without action and 

informs the subject.7 Most of DOI staff’s investigations are closed without further action.8 On the 

other hand, if DOI staff finds that a violation occurred that warrants sanctions, it provides the 

subject with its preliminary findings, either orally, in writing, or both. The subject then has the 

opportunity to respond to staff’s preliminary findings with any additional information or defenses. 

This stage presents an important opportunity for the subject to supplement factual information or 

to point out its views and theories of the case. Where warranted, staff conducts additional factfinding after reviewing a subject’s response and may modify its findings based on the response 

and further fact-finding.

 

6

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

7 DOI closed seven investigations in FY2019 either because staff found no violation or because 

there was not enough evidence to conclude that a violation had occurred. In addition, DOI closed 

five investigations where it found violations but concluded that further proceedings were not 

warranted. 

8 In some circumstances, DOI finds that, while the investigation should terminate, there are broader 

market issues that may warrant attention. For example, the investigation may expose vague or 

ambiguous market rules that appear to undermine, distort, or otherwise inject uncertainty into 

market performance and participant obligations. To address these types of issues, Enforcement 

has a process whereby staff can share its concerns about existing tariffs, market rules, or business 

practice manuals with senior management in Enforcement and the Commission’s Office of Energy 

Market Regulation (OEMR), Office of the General Counsel (OGC), and OEPI and explain how 

the issues may be resulting in poor or inefficient market outcomes. 
2019 Staff Report on Enforcement 

10 

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

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

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

Commission to enter into settlement negotiations with the subject.9 This request for settlement 

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

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

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

staff seeks negotiated resolutions within the provided settlement authority range and with terms 

that will transparently inform the regulated industry about what conduct constitutes the violation. 

If an agreement is reached between Enforcement and the subject, it will be submitted to the 

Commission for approval. If approved, the Commission issues a public order that typically states 

why the settlement serves the public interest and attaches the settlement agreement. In FY2019, 

Enforcement staff resolved two investigations via settlements approved by the Commission: (1) a 

natural gas company’s violation of its certificate of public convenience and necessity issued by the 

Commission under section 7(c) of the Natural Gas Act (NGA) (15 U.S.C. § 717f(c)) and Part 157 

of the Commission’s regulations (18 C.F.R. Part 157); and (2) an electric utility’s violation of the 

Commission’s Anti-Manipulation Rule (18 C.F.R. § 1c.2).10 These settlements are described more 

fully below in DOI Section C. 

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

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

pursuant to section 1b.19 of the Commission’s regulations. After reviewing this response, staff, if 

it continues to believe violations have occurred, drafts an Enforcement Staff Report and 

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

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

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

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

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

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

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

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

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

subjects as participants and the Commission as a neutral adjudicator.11 The Commission therefore 

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

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

underlying investigation. 

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

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

 

9

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

including through settlement, at any time during an investigation. 

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

11 See 18 C.F.R. §§ 2201, 2202 (2019) (outlining the Commission’s rules governing off-the-record 

communications and separation of functions). See also 5 U.S.C. § 554(d) (2014). 
2019 Staff Report on Enforcement 

11 

relevant statute. Under the NGA and under a default process under the Federal Power Act (FPA), 

the Commission can either rule on the pleadings or set the matter for hearing before an 

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

the ALJ holds a hearing and issues an initial decision, which is followed by a final Commission 

decision that can be appealed to a U.S. Court of Appeals. Alternatively, if a civil penalty is 

proposed in an FPA matter, a subject can elect a process different from the ALJ route described 

above. A subject has 30 days following the OSC issuance in which to affirmatively elect a penalty 

assessment by the Commission followed by “review de novo” of the assessment before a district 

court. If such an election is made, the Commission follows its OSC paper hearing procedures but 

determines whether a violation occurred and, if so, assesses penalties through an order. If the 

subject does not pay the civil penalty within 60 days of the penalty assessment, the Commission 

is required by statute to file an action in district court for an order affirming the civil penalty. As 

of the end of FY2019, staff is litigating three such actions in federal court (all filed in previous 

years), seeking to enforce the Commission’s combined assessment of more than $97.5 million in 

penalties and disgorgement. One NGA-related proceeding remains pending on rehearing before 

the Commission as of the end of the fiscal year.12

Significant Matters 

DOI staff spent substantial time in FY2019 preparing briefs, reports, and other public filings 

related to litigation in federal courts and administrative proceedings before the Commission, as 

well as on the Commission’s joint inquiry with NERC into the January 17, 2018 cold weather 

event. In addition, during FY2019, staff requested that the Commission issue one new OSC. 

DOI staff continues to represent the Commission in three litigation matters in United States 

District Courts. Currently pending at the Commission are two OSC proceedings and one NGA 

proceeding, in which the respondent’s motion for rehearing is under consideration. A third OSC 

proceeding was terminated by the Commission upon the recommendation of Enforcement staff. 

As of the end of FY2019, a total of approximately $76 million in civil penalties and $9 million 

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

 District Court Litigation 

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

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

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

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

civil penalties for the violation to file an action in District Court to enforce the assessed penalties; 

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

follow the Federal Rules of Civil Procedure; (3) the sufficiency of FERC’s notice of fraud and 

deceptive conduct pleadings; (4) what constitutes individual culpability under the FPA; (5) 

 

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

investigations, see Revised Policy Statement, 123 FERC ¶ 61,156 at PP 23-40. 
2019 Staff Report on Enforcement 

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

requirement under Section 222 of the FPA. 

In FY2019, Enforcement staff continued litigating three matters in United States District 

Courts to enforce the Commission’s penalty assessments under the FPA. Those District Court 

litigation matters were: 

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

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

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

(CES), and Richard Silkman (CES’s Managing Partner) (collectively, Respondents) violated the 

Commission’s Anti-Manipulation Rule by engaging in a scheme related to ISO New England, 

Inc.’s (ISO-NE’s) day-ahead load response program. Specifically, the Commission found that the 

Respondents had engaged in a scheme to fraudulently inflate energy load baselines for a resource 

and then offer load reductions against that inflated baseline. It assessed civil penalties of $7.5 

million against CES and $1.25 million against Silkman and ordered disgorgement of $166,841, 

plus interest, from CES. 

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

the District of Massachusetts to enforce the penalty assessment order against Respondents. The 

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

2016. In its order denying the Respondents’ motion to dismiss, the Court specifically rejected the 

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

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

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

violating the Anti-Manipulation Rule. The Court then transferred the cases to the United States 

District Court for the District of Maine. 

 On January 26, 2017, after briefing and oral argument, the Maine District Court granted the 

Respondents’ motion to treat the proceeding as an ordinary civil action subject to the Federal Rules 

of Civil Procedure. The parties participated in mediation before a magistrate judge in Portland, 

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

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

April 30, 2018. 

 On January 29, 2018, upon agreement of the parties, the court ordered summary judgment 

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

summary judgment was completed on April 20, 2018. On January 4, 2019, the Court issued an 

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

motion was granted and Respondents’ motion was denied. Respondents subsequently sought 

certification of the Court’s decision to the First Circuit Court of Appeals. Following briefing of 

the matter, the Court denied Respondents’ motion for certification on June 26, 2019. 

 Trial in the matter is currently scheduled for April 27, 2020 in Bangor, Maine, with various 

pre-trial deadlines set for March and April 2020. 
2019 Staff Report on Enforcement 

13 

b) FERC v. Powhatan Energy Fund LLC, et al., No. 3:15-cv-00452 (E.D. Va.) 

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

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

Chen, HEEP Fund, Inc. (HEEP), and CU Fund, Inc. (CU) (collectively, Respondents) had violated 

the Commission’s Anti-Manipulation Rule by engaging in fraudulent Up-To Congestion (UTC) 

trades in the PJM Interconnection, LLC (PJM) market during the summer of 2010. The 

Commission determined that the Respondents had engaged in trades to improperly collect certain 

market payments (called Marginal Loss Surplus Allocation, or “MLSA”). Specifically, the 

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

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

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

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

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

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

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

Eastern District of Virginia to enforce the Commission’s Order. Following briefing requested by 

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

directed FERC to re-file its petition or file an amended complaint. The Commission filed an 

amended complaint on January 29, 2018, and Respondents moved to dismiss in part on February 

28, 2018, based on statute of limitations grounds. On September 24, 2018, the Court found that 

the Commission had met the statute of limitations, but authorized Respondents to seek 

interlocutory appeal. On October 4, 2018, Respondents petitioned the United States Court of 

Appeals for the Fourth Circuit to review the order, and the Commission did not oppose the appeal. 

The Fourth Circuit granted the petition for review on November 5, 2018. Following briefing, the 

Fourth Circuit has scheduled oral argument for December 11, 2019. 

The District Court case has been stayed pending resolution of the appeal. 

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

On May 27, 2016, in Docket No. IN16-4-000, the Commission issued an order assessing civil 

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

and Robert Jones, Jeff Miller, and Jack Wells, who developed and implemented the relevant 

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

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

PJM market during the summer of 2010. In so doing, it determined that Respondents’ “overcollected loss” or “OCL” trading strategy, which sought to capture payments by placing large 

volumes of UTC trades between trading points with negligible price separation, was fraudulent 

and manipulative. The Commission found that the Respondents’ OCL trading strategy involved 

three types of trades to improperly collect MLSA payments: (1) trading between export and import 

points (SOUTHIMP and SOUTHEXP) that had identical prices; (2) trading between export and 

import points (NCMPAIMP and NCMPAEXP) that had de minimis price differences; and (3) 

trading along various other paths and combinations of paths with minimal price differences. In 

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

transmission volumes in order to collect MLSA payments. 
2019 Staff Report on Enforcement 

14 

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

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

Coaltrain’s communications with Enforcement staff during the investigation in order to conceal 

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

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

interest. It also imposed civil penalties of $26 million on Coaltrain, $5 million each on Peter Jones 

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

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

Southern District of Ohio to enforce the Commission’s Order. The Respondents filed motions to 

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

commenced shortly thereafter, and is currently scheduled to run into November 2019. Initial 

expert reports were exchanged by both sides on September 19, 2019; rebuttal expert reports are 

scheduled to be exchanged by November 18, 2019. Motions for summary judgment are scheduled 

to be filed in early 2020. As yet, there is no trial date. 

 Administrative Proceedings at the Commission 

a) Vitol Inc. and Federico Corteggiano, Docket No. IN14-4-000 

On July 10, 2019, the Commission issued an OSC to Vitol Inc. and its individual trader 

Federico Corteggiano (collectively, Respondents) directing them to show cause why they should 

not be found to have violated the Commission’s Anti-Manipulation Rule and section 222 of the 

FPA by selling physical power at a loss in October and November 2013 in the California 

Independent System Operator’s (CAISO) day-ahead market for the purpose of eliminating 

congestion costs that they expected to cause losses on Vitol’s Congestion Revenue Rights (CRR) 

positions. The OSC also directed Respondents to show cause why disgorgement and civil penalties 

should not be assessed in the following amounts: disgorgement of $1,227,143, plus interest, from 

Vitol; a civil penalty of $6,000,000 against Vitol; and a civil penalty of $800,000 from 

Corteggiano. 

After the parties submitted various procedural pleadings, Respondents filed their answers to 

the OSC on August 23, 2019. Enforcement staff filed its reply on September 20, 2019. Subsequent 

to the close of FY2019, on October 25, 2019, the Commission issued an order assessing civil 

penalties against Vitol and Corteggiano, finding that they engaged in a scheme to sell physical 

power, not to try to profit based on supply and demand fundamentals, but, rather, to eliminate 

congestion that they anticipated would cause losses on their CRR position. The Commission 

assessed a penalty of $1,515,738 against Vitol and $1,000,000 against Corteggiano. The 

Commission also ordered Vitol to disgorge $1,227,143 in unjust profits. Vitol and Corteggiano 

have sixty days from the date of the Commission’s order to pay the penalty assessments. If they 

fail to pay, the Commission is required by statute to file an action in district court for an order 

affirming the civil penalties. 
2019 Staff Report on Enforcement 

15 

b) Footprint Power LLC, Footprint Power Salem Harbor Operations LLC, 

Docket No. IN18-7-000 

On June 18, 2018, the Commission issued an OSC directing Footprint Power LLC and 

Footprint Power Salem Harbor Operations (collectively, Respondents) to show cause why they 

should not be found to have violated the Transmission, Markets and Services Tariff (Tariff) of 

ISO-NE and sections 35.41(a) and (b) of the Commission’s regulations. Enforcement Staff alleged 

violations by Respondents for: (1) submitting false and misleading supply offers for Footprint’s 

capacity resource - Unit 4 of Footprint’s multi-unit Salem Harbor Power Plant in Salem, 

Massachusetts; (2) failing to report the fuel status and related operational status of the capacity 

resource to ISO-NE in June and July of 2013; (3) submitting false and misleading supply offers in 

violation of ISO-NE’s Tariff; and (4) submitting false or misleading information and/or omitting 

material information regarding Salem Harbor and Unit 4 in their communications with ISONE. Additionally, the OSC directed Respondents to show cause why disgorgement and civil 

penalties should not be assessed in the following amounts: disgorgement of $2,049,571, which 

reflected the capacity payments received during the relevant period, and a civil penalty of 

$4,200,000. 

On August 2, 2018, Respondents filed their Answer to the OSC denying they committed the 

violations and raising a new argument regarding Unit 4’s start-up requirements and how that 

affected the unit’s ability to provide capacity during a certain portion of the relevant period. While 

the start-up requirements of Unit 4 were referenced at times during the investigation, the import of 

those start-up requirements as a specific defense to the four tariff provisions at issue had not been 

apparent before Respondents raised this argument. Upon review, staff concluded that the supply 

offers on those days did not constitute a violation. 

On September 19, 2018, Enforcement staff filed a Reply to Respondents’ Answer, wherein 

staff acknowledged that it found merit in the new defense presented by Respondents. Based on 

that conclusion, and the resulting reduction in scope of the case for the remainder of the relevant 

period, staff recommended that the Commission vacate its OSC and that no penalties be assessed 

against Respondents. 

The Commission agreed with Enforcement staff’s assessment and recommendation. On 

February 25, 2019, the Commission issued an order terminating the OSC proceeding. 

c) Total Gas & Power North America, Inc., et al., Docket No. IN12-17-000

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

America, Inc. (TGPNA), Aaron Hall, and Therese Tran (collectively, Respondents) to show cause 

why they should not be found to have violated section 4A of the NGA and the Commission’s AntiManipulation Rule by engaging in a scheme to manipulate the price of natural gas at four locations 

in the southwest United States between June 2009 and June 2012. The OSC further directed 

TGPNA’s ultimate parent company, Total, S.A. (Total), and TGPNA’s affiliate, Total Gas & 

Power, Ltd. (TGPL), to show cause why they should not be held liable for the Respondents’ 

conduct and held jointly and severally liable for their disgorgement and civil penalties based on 

Total’s and TGPL’s significant control and authority over TGPNA’s daily operations. Finally, the 

OSC directed the Respondents to show cause why disgorgement and civil penalties should not be 
2019 Staff Report on Enforcement 

16 

assessed in the following amounts: $9,180,000 in disgorgement and $213,600,000 in civil penalties 

against TGPNA, Total, and TGPL, jointly and severally; $1,000,000 civil penalty against Hall 

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

(jointly and severally with TGPNA, Total, and TGPL). 

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

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

Commission’s authority to assess penalties for violations of the NGA.13 After the case was 

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

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

U.S. Court of Appeals for the Fifth Circuit on September 26, 2016, which on June 8, 2017 affirmed 

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

was denied on August 8, 2017. The Respondents then petitioned the United States Supreme Court 

for certiorari, which the Court denied on June 18, 2018. The matter is pending before the 

Commission. 

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

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

cause why the Commission should not: (1) find that BP violated the Anti-Manipulation Rule and 

section 4A of the NGA by manipulating the next-day, fixed-price natural gas market at Houston 

Ship Channel from September 2008 to November 2008; (2) impose a civil penalty in the amount 

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

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

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

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

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

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

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

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

decision. 

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

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

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

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

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

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

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

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

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

 

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

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

https://www.ferc.gov/legal/staff-reports/2018/11-15-18-enforcement.pdf. 
2019 Staff Report on Enforcement 

17 

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

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

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

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

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

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

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

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

 Inquiry into South-Central United States Cold Weather Event of January 17, 

2018 

On January 17, 2018, a large area of the south central region of the United States experienced 

unusually cold weather, which had been predicted five days earlier. The below-average 

temperatures resulted in a total of 183 individual generating units within the Reliability 

Coordinator (RC) footprints of the Southwest Power Pool, Inc. (SPP), the Midcontinent 

Independent System Operator, Inc. (MISO), the Tennessee Valley Authority (TVA), and Southern 

Company’s Southeastern RC experiencing either an outage, a derate, or a failure to start between 

January 15 and January 19, 2018. The unexpected generation outages caused a capacity 

emergency in MISO South and widespread transmission system constraints across all or part of 

nine states. In September 2018, the Commission announced the formation of a joint inquiry with 

NERC and four Regional Reliability Entities to determine the causes of the event and make 

recommendations to prevent such events in the future. Enforcement staff, including individuals 

from DOI, were part of the FERC team that conducted an inquiry into the matter. Staff reviewed 

entity data and conducted interviews to determine the causes of the generation losses and to 

develop recommendations.

The inquiry team issued its report on July 18, 2019.14 FERC and NERC staff found that at 

least 44 percent of the generation losses were directly or indirectly related to the extreme cold, and 

70 to 74 percent of the units that experienced an outage, derate, or failure to start were gaspowered. Despite guidance since 2011 on the need to prepare generating units for winter weather, 

approximately one-third of the generating units involved did not have plans to do so. The system 

in MISO South was so stressed on January 17, 2018 that the loss of one additional large generating 

unit would have required MISO to shed firm load to restore its reserves while shedding additional 

firm load to maintain voltage within limits. 

The report made 13 recommendations to prevent similar future events. The recommendations 

were shared with the affected entities and applicable trade groups for their consideration and 

feedback before being finalized. The report repeated a recommendation from a 2011 cold weather 

inquiry for NERC to draft a new or revised Reliability Standard to address the issue of generation 

owners failing to prepare for winter weather. NERC has accepted a Standards Authorization 

 

14 FERC and NERC Staff Report, The South Central United States Cold Weather Bulk Electric 

System Event of January 17, 2018 (July 2019), available at https://www.ferc.gov/legal/staffreports/2019/07-18-19-ferc-nerc-report.pdf. 
2019 Staff Report on Enforcement 

18 

Request, which begins the process to potentially approve a new Reliability Standard. Additional 

recommendations included: (1) RCs performing voltage stability analysis; (2) transmission 

planners performing additional studies to better forecast constrained conditions; (3) MISO South 

improving its five-to-three-day-ahead load forecasts and communicating when it is relying on nonfirm transmission to serve its firm load; and (4) transmission operators using summer and winter 

ratings where possible. 

Settlements 

In FY2019, the Commission approved two settlement agreements between Enforcement and 

subjects to resolve pending matters. The settlements totaled $7.4 million in civil penalties and 

disgorgement of $7 million. Since 2007, Enforcement has negotiated settlements totaling 

approximately $783.4 million in civil penalties and approximately $518 million in disgorgements.

In 2010, the Commission issued revised Penalty Guidelines.15 Under the Penalty Guidelines, 

an organization’s civil penalty can vary significantly depending on the amount of market harm 

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

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

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

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

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

lowering the base penalty by as much as 95 percent.16 

In FY2019, the Commission approved settlement agreements that resolved investigations 

concerning violations of the Commission’s Anti-Manipulation Rule as well as violations of a 

Commission Order issued pursuant to the NGA’s pipeline certification requirements, and 

associated Commission regulations. 

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

Years 2015-2019. Some settlements concerned multiple types of violations. 

 

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

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

16 Id. P 109. 
2019 Staff Report on Enforcement 

19 

Types of Violations Settled, FY2019

Violation of Commission

Order

Market Manipulation

and/or False Statements

Types of Violations Settled, FY2018

OATT/Tariff

Reliability Standards

Market Manipulation

and/or False Statements
2019 Staff Report on Enforcement 

20 

Types of Violations Settled, FY2017

OATT/Tariff

Market Manipulation

and/or False Statements

Merger/Consolidation

Authorization

Filing Requirements

Types of Violations Settled, FY2016

OATT/Tariff

Reliability Standards

Market Manipulation

and/or False Statements
2019 Staff Report on Enforcement 

21 

The Commission approved the following settlement agreements in FY2019: 

Algonquin Gas Transmission, LLC, Docket No. IN19-2-000 

On January 7, 2019, the Commission issued an order approving the settlement of 

Enforcement’s investigation of Algonquin Gas Transmission, LLC (Algonquin) regarding the 

company’s obligations under its Commission-issued Certificate of Public Convenience and 

Necessity (Project Certificate). Enforcement’s investigation found that Algonquin violated its 

Project Certificate, issued under section 7(c) of the NGA (15 U.S.C. § 717f(c)) and Part 157 of the 

Commission’s regulations (18 C.F.R. Part 157), when it entered a wetland area with construction 

equipment in an attempt to retrieve a broken drill stem in August 2016 before obtaining a required 

variance. Enforcement found that Algonquin’s work in the wetland area failed to comply with the 

Commission’s Project Certificate issued to Algonquin. Under the terms of the settlement, 

Algonquin admitted to the facts, but neither admitted nor denied the violations. Algonquin agreed 

to pay a civil penalty of $400,000, and to submit semi-annual environmental compliance 

monitoring reports for one year, with a potential one-year extension at Enforcement’s discretion. 

Dominion Energy Virginia, Docket No. IN19-3-000 

On May 3, 2019, the Commission issued an order approving the settlement of Enforcement’s 

investigation of Virginia Electric and Power Company (d/b/a Dominion Energy Virginia (DEV)) 

relating to its receipt of lost opportunity cost credits (LOCs) in the PJM market. Enforcement’s 

investigation found that DEV violated the Commission’s Anti-Manipulation Rule by targeting and 

maximizing its receipt of LOCs paid to combustion turbine units that cleared the day-ahead market 

and were not dispatched in the real-time market, during the period April 2010 to March 2011. 

Staff determined that DEV engaged in a strategy that sought to obtain more day-ahead 

commitments by discounting the units’ incremental energy offers, and at the same time, sought to 

Types of Violations Settled, FY2015

OATT/Tariff

Reliability Standards

Market Manipulation

and/or False Statements
2019 Staff Report on Enforcement 

22 

reduce the chance the units would be dispatched in the real-time market by substantially increasing 

the start-up values in their day-ahead offers. Staff found that DEV offered its units in this manner 

not based on supply and demand fundamentals, but, rather, for the purpose of targeting and 

obtaining LOCs. Under the terms of the settlement, DEV stipulated to the facts, but neither 

admitted nor denied the violations. DEV agreed to pay a civil penalty of $7 million and 

disgorgement to PJM of $7 million, and also to submit an annual compliance monitoring report, 

with a potential one-year extension at Enforcement’s discretion. 

Self-Reports 

Over the previous five fiscal years (Fiscal Years 2015-19), staff received approximately 574 

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

action because there was no material harm (or the reporting companies already had agreed to 

remedy any harms) and the companies had taken appropriate corrective measures (including 

appropriate curative filings), both to remedy the violation and to avoid future violations through 

enhancements to their compliance programs. 

 Statistics on Self-Reports 

In FY2019, staff received 149 new self-reports from a variety of market participants, including 

public utilities, natural gas companies, generators, and ISOs/RTOs. The majority of these selfreports (91) were from ISOs/RTOs and involved relatively minor violations of tariff provisions. 

Two of the self-reports received were the source for two investigations opened this fiscal year. 

Staff closed 130 self-reports in FY2019, 13 of which were carried over from the previous fiscal 

year. Of the self-reports received in FY2019, 32 remained pending at the end of the fiscal year. 

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

can significantly mitigate penalties if a self-report is made.17 Staff continues to encourage the 

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

compliance. 

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

Fiscal Years 2015 through 2019.18 Some self-reports include more than one type of violation. 

 

17 Revised Penalty Guidelines, 132 FERC ¶ 61,216 at P 127. 

18 Consistent with the FY2018 Annual Report, the FY2019 Self Reports Closed chart includes the 

substantive violation reported from an ISO/RTO, and replaces the ISO/RTO category used in 

previous years. 
2019 Staff Report on Enforcement 

23 

0

10

20

30

40

50

60

70

80

90

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2019 by Type of Violation

0

10

20

30

40

50

60

70

80

90

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2018 by Type of Violation
2019 Staff Report on Enforcement 

24 

0

10

20

30

40

50

60

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2017 by Type of Violation

0

10

20

30

40

50

60

70

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2016 by Type of Violation
2019 Staff Report on Enforcement 

25 

 Illustrative Self-Reports Closed with No Action 

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

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

DOI staff closed in FY2019 without conversion to an investigation. In determining whether to 

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

Revised Policy Statement on Enforcement.19 As examples, in FY2019 several ISOs/RTOs and 

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

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

violations, four natural gas companies reported pipeline certificate violations, and several 

companies reported notice and regulatory filing violations resulting from inadvertent oversight or 

changes in ownership. The illustrative summaries below are intended to provide guidance to the 

public and to regulated entities as to why staff chose not to pursue an investigation or enforcement 

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

FPA Section 203 Violation (Disposition of Assets) and Late Change in Status Filing. A public 

utility self-reported that one of its subsidiaries had failed to seek Commission approval before 

selling its ownership interest in one of its generating facilities in violation of section 203(a)(1)(A) 

of the FPA. Certain financing characteristics of the sale resulted in a change in the subsidiary’s 

status for purposes of retaining its market-based rate authority, and it also failed to timely report 

this change of status, in violation of section 35.42 of the Commission’s regulations. To remediate 

the violations, the subsidiary late-filed the required documents to obtain Commission approval, 

 

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

0

5

10

15

20

25

30

35

Number of Self‐Reports

Type of Violation

Self‐Reports Closed in FY2015 by Type of Violation
2019 Staff Report on Enforcement 

26 

and submitted the outstanding change in status filings. The public utility also implemented various 

compliance improvements to ensure similar noncompliance will not occur in the future, and 

conducted additional employee training. For these reasons, and because the violation was isolated, 

inadvertent, had little practical effect, and caused no economic harm, staff closed this self-report 

without further action. 

FPA Section 205 Violation (Market Based Rate Authorization). A generation company selfreported that it made wholesale sales without market based rate authorization (MBR) in violation 

of section 205 of the FPA. The company had sold power to a buyer pursuant to a Power Purchase 

Agreement (PPA) that complied with the Public Utility Regulatory Policies Act (PURPA) and the 

Commission’s regulations. When that agreement ended the company continued to sell to the same 

buyer, after executing a new PPA. These sales violated section 205 of the FPA because the seller 

did not have MBR authority for sales under the new PPA. Upon discovery, the company promptly 

filed for MBR authority, which the Commission granted. The company was obligated to make 

time value refunds for the unauthorized sales it made between the end of the first PPA and the 

Commission’s grant of MBR authority. Because the company made this refund and took steps to 

prevent future recurrence of this violation, staff closed this self-report without further action. 

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

Agreements and EQR). An energy services company self-reported that it failed to file certain 

agreements in violation of section 205 of the FPA and various Commission filing requirements 

outlined in Part 35 of the Commission’s regulations. Specifically, the company failed to: (1) 

timely file transmission-related agreements; (2) timely file a Facilities Reimbursement Agreement 

and Phase Two Permitting and Engineering Agreement; (3) timely file a Transmission Asset Lease 

Agreement; and (4) report agreements in its EQR for certain reporting periods. The company 

identified these agreements after undertaking a comprehensive review of its records and took the 

necessary steps to come into full compliance by making the required filings. In a majority of cases, 

the services provided under these agreements were provided at no charge and to the extent there 

was a charge, it was only a pass-through of the company’s costs on a dollar-for-dollar basis (i.e., 

no margin was collected). As such, no economic harm resulted from the late filings. For these 

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

Interstate Commerce Act Violation. An oil pipeline self-reported that it inadvertently disclosed 

confidential shipper information in violation of section 15(13) of the Interstate Commerce Act, 

which prohibits common carrier product pipelines from disclosing information relating to the 

“nature, kind, quantity, destination, consignee, or routing” of the products being transported 

without the shipper’s consent. See 49 U.S.C. app. § 15(13) (1988). A scheduler at the pipeline 

sent an email with the schedule of a third-party shipper’s movements to the wrong distribution 

list. Within five minutes, the scheduler was notified of the error and sent an email stating “Please 

discard.” The incident was reported within the company, ultimately to the company’s legal 

department. The company investigated and determined the incident was inadvertent, the scheduler 

followed up with each recipient to confirm the email was discarded and not shared, the substance 

of the email was very limited and therefore presented no harm to the shipper or gain to the email 

recipients, and the shipper informed the company that the barrels were ultimately sold to other 

parties and not shipped. For these reasons, and because the company took steps to prevent future 

violations, staff closed this self-report without further action. 
2019 Staff Report on Enforcement 

27 

Market Manipulation (Material Misrepresentations). A curtailment service provider operating 

within an ISO/RTO self-reported a potential violation of the Commission’s Anti-Manipulation 

Rule. Some of its sales managers and employees made false statements to several of its demand 

resource customers in connection with the customers’ demand response contracts for two recent 

delivery years. Upon learning of the false statements, the curtailment service provider initiated an 

internal investigation, issued sanctions to its sales staff (including terminating the sales managers 

and several of the senior sales staff), notified customers and paid them refunds, and updated the 

relevant portions of its training for sales staff. Because the curtailment service provider took timely 

and effective remedial measures to address the potential violations and prevent reoccurrence, staff 

closed this self-report without further action. 

Market Manipulation (Scheme to Defraud). An energy trading company self-reported a 

potential violation of the Commission’s Anti-Manipulation Rule. A former trader, while employed 

with the company, made virtual trades in an ISO/RTO based on recommendations and trading 

strategies received from another company that the trader eventually went to work for. Some of 

these trades were placed on days when the other company was also placing trades in the same 

ISO/RTO. The company reported the trading because of concerns about possible collusive or 

manipulative behavior. Staff analyzed the trading and did not find evidence of collusion, 

manipulation, or other violations of market rules. For these reasons, staff closed this self-report 

without further action. 

Misrepresentation to a Jurisdictional Transmission Provider. A company that provides energy 

marketing services to public utility companies and municipalities self-reported that one of its 

traders made a misrepresentation to a jurisdictional transmission provider in violation of section 

35.41(b) of the Commission’s regulations. After incorrectly tagging an energy sale for one of its 

member-clients to another region, the trader attempted to correct the error by finding an alternative 

buyer. In the process of doing so, the trader told a transmission provider that the transaction needed 

to flow 15 MW of power for reliability reasons to avoid a unit trip, and provided the same incorrect 

information to a reliability coordinator. The trader appeared to have engaged in the conduct 

independent of any direction from its member-client. In reviewing the self-report, staff determined 

that the company did not qualify as a Seller under section 35.41(b) of the Commission’s 

regulations. For this reason, and because the company has active compliance and training 

programs that it has committed to review and improve, and has taken steps to prevent the conduct 

from recurring, staff closed this self-report without further action. 

Natural Gas Transportation Violation (Shipper Must Have Title Violation). A company 

(Company 1) self-reported that it had violated the Commission’s shipper-must-have-title (SMHT) 

requirement by transporting natural gas it owned on interstate pipelines using capacity reserved 

for a second Company (Company 2). For seven years Company 1 and Company 2 entered into 

repeated long-term capacity releases so Company 1 could ship its gas using Company 2’s capacity 

while satisfying the Commission’s SMHT requirement. However, when the last long-term 

capacity release expired, the person who served as the capacity manager had left employment at 

Company 1 and no one at either company took note of the expiration of the long-term release. 

Accordingly, Company 1 continued to use the capacity for an additional eight years without 

renewing the long-term release. Upon discovering the violations, based on a question from the 

pipeline owner, Company 1 and Company 2 immediately entered into a short-term and then a longterm capacity release. Company 1 also hired outside counsel to develop procedures for tracking 
2019 Staff Report on Enforcement 

28 

its capacity and gas contracts. Counsel also developed and conducted training on the SMHT 

requirement and created a manual for employees to consult. Because of these prompt mitigation 

measures, and because the violations were inadvertent, and, despite their duration, caused no harm, 

staff closed this self-report without further action. 

NGA Section 1(c) Violation (Hinshaw Exemption). A natural gas pipeline self-reported a 

potential violation of section 1(c) of the NGA, which exempts pipelines from Commission 

regulation provided they satisfy certain eligibility criteria, including that the pipeline operates 

entirely within a single state (Hinshaw Exemption). The pipeline learned through ongoing 

compliance audits that its intrastate facilities included several limited border crossings. Upon 

learning of the potential crossings, the company immediately performed a thorough investigation 

to determine the existence and extent of the border crossings, physically eliminated some of the 

crossings, and made appropriate filings at the Commission to preserve its Hinshaw exemption. 

For these reasons, and because the violations were inadvertent and resulted in no market harm, 

staff closed this self-report without further action. 

NGA Section 7(b) Violation (Abandonment). A natural gas pipeline self-reported that it 

abandoned two different jurisdictional facilities without Commission authorization in violation of 

section 7(b) of the NGA. After discovering the violations, the pipeline filed for, and received, 

Commission approval to formally abandon the facilities. For this reason, and because the 

violations were inadvertent and resulted in no market harm, staff closed this self-report without 

further action. 

OASIS Posting Violation and Tariff/OATT Violation. A public utility self-reported its failure 

to post certain information to its Open Access Same-Time Information System (OASIS) platform 

in violation of section 37.6 of the Commission’s regulations and the company’s Open Access 

Transmission Tariff. The utility had failed to: (1) post narratives explaining its Available Transfer 

Capacity (ATC) reductions; and (2) timely complete notifications of impacts resulting from a 

transmission outage. The first issue stemmed from the disablement of an automated functionality 

that initiates the posting of ATC narratives within its OASIS software platform. The second issue 

resulted from utility personnel failing to recognize the full impact that the outage of a transformer 

owned by another utility would have on one of its transmission lines. Staff determined that the 

posting and outage issues were inadvertent and caused no harm to other entities. For these reasons, 

and because the utility implemented remedial actions to prevent future compliance issues, staff 

closed this self-report without further action. 

Qualifying Facility Violation (Unauthorized Power Sales). The owner of a cogeneration plant 

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

making wholesale power sales in violation of section 205 of the FPA. Although section 292.601 

of the Commission’s regulations affords QFs under 20 MW, such as the cogeneration plant, an 

exemption from section 205 of the FPA, the Commission’s regulations require owners of such QFs 

to either file a notice of self-certification or apply for a Commission certification in order to obtain 

QF status pursuant to 18 C.F.R § 292.207 (QF Filing Requirement). To remedy this violation, the 

owner submitted a FERC Form No. 556 to certify the project as a QF. No refunds were due 

because the project owner had not yet collected any revenues for the sales that occurred. Because 
2019 Staff Report on Enforcement 

29 

the violation was inadvertent and resulted in no economic harm, staff closed this self-report 

without further action. 

Regulatory Filing Violation (Electric Quarterly Reports). A public utility self-reported several 

errors in its EQRs in violation of section 35.10b of the Commission’s regulations (EQR Filing 

Requirement). Pursuant to the EQR Filing Requirement, each public utility and non-public utility 

with more than a de minimis market presence must file an updated EQR covering jurisdictional 

services it provides. EQRs are required to be filed within 30 days after the end of each 

quarter. The public utility identified multiple reporting errors in its EQRs between 2015 and 

2019. These errors included: (1) reporting a quarterly cumulative capacity payment when it 

should have reported at least three individual capacity transactions with unique rate and volume 

information; (2) failing to report various energy and capacity transactions; and (3) reporting one 

transaction that should have been reported in the EQR of an affiliate. The reporting errors resulted 

from a misunderstanding of the specific filing requirements and from a change in ownership. The 

utility worked with staff to cure its reporting deficiencies and implemented procedures and training 

to limit the likelihood that additional violations will occur. For these reasons, staff closed this selfreport without further action. 

Regulatory Filing Violation (FERC Form No. 552). A small gas exploration and development 

company self-reported that it had failed to file FERC Form No. 552 in violation of section 260.401 

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

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

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

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

calendar year. After acquiring a gas marketing unit from another company, the gas exploration 

company had failed to file FERC Form No. 552 the following two years. The company worked 

with staff to ensure that all missing Form No. 552s were filed. For this reason, and because the 

violations were inadvertent and resulted in no economic harm, staff closed this self-report without 

further action. 

Regulatory Filing Violation (FERC Form No. 566). The owner of a generation facility selfreported that it failed to file FERC Form No. 566, listing its 20 largest retail customers, for three 

calendar years in violation of section 46.3 of the Commission’s regulations. The company had 

never had any retail customers, but was still required to file the form. This oversight resulted from 

the company’s failure to transfer the FERC Form No. 566 reporting responsibility after the 

responsible employee left the company. At staff’s request, the company filed the three FERC 

Form No. 566s out-of-time. Staff determined that the violation would not recur because the 

company is now an Exempt Wholesale Generator (EWG), and thus exempt from the filing 

requirement. For this reason, and because the violations were inadvertent and resulted in no harm, 

staff closed this self-report without further action. 

Regulatory Filing Violation (Failure to Update Tariff). A FERC jurisdictional oil pipeline selfreported that it failed to update its tariff to reflect third-party agreements with one of its shippers 

in violation of section 341.3(b)(7) of the Commission’s regulations. Pursuant to this regulation, a 

regulated oil pipeline may not charge rates for its services other than those properly filed with the 

Commission. The pipeline’s violation occurred when it failed to incorporate the agreements it 
2019 Staff Report on Enforcement 

30 

made with the shipper into its tariff at the time they were executed. The pipeline also failed to 

update its tariff to reflect rates adjusted by these agreements in 2016, 2017, and 2018. The pipeline 

explained that the agreements were made to provide financial assistance to its anchor and only 

committed shipper. Staff determined that the violation did not permanently impact any other 

shipper and the only party directly impacted by the rate in question, the pipeline’s anchor shipper, 

benefited under the rate change. For these reasons, staff closed this self-report without further 

action. 

Regulatory Filing Violation (Interlocking Directorate). A public utility self-reported a 

violation of the Commission’s requirements regarding Interlocking Directorates (18 C.F.R. Part 

45) for failing to: (1) report the appointment of a new director; and (2) give notice of the 

contemporaneous resignation of the prior director. The utility’s failure to make the requisite filings 

was an oversight due to the fact that the new director shadowed the prior director for some period 

of time, and the person responsible for the filing, who subsequently left the utility, failed to make 

the filing when the actual transition took place. The utility worked diligently with staff to cure the 

reporting deficiencies and implemented procedures and training to limit the likelihood additional 

violations will occur. For these reasons, staff closed this self-report without further action. 

Regulatory Filing Violation (Late Change in Status – Category Seller Designation). The 

owner of several wind projects self-reported that after purchasing the projects it failed to timely 

change its ownership status for the projects, as required by section 35.42 of the Commission’s 

regulations. The owner remedied the violation by making the late change in status filings and 

taking steps to prevent recurrence of this violation in the future. The only harm caused by this 

delay impacted the owner, who was unable to take advantage of certain exemptions associated 

with its status. For these reasons, and because the violation was unintentional, staff closed this 

self-report without further action. 

Standards of Conduct (No Conduit Rule). A public utility self-reported that, over a period of 

up to six years, certain transmission function information stored on intranet websites was 

inadvertently available to all employees, including marketing function employees, in violation of 

section 358.6 of the Commission’s regulations (Standards of Conduct - No Conduit Rule). The 

problem resulted from a software setting which allowed employees to give any other company 

employee access to documents stored in management folders, one of which contained a substantial 

number of transmission-related documents. The utility learned of the violation following a 

corporate compliance training and, within 3 days, revoked access to the documents and began an 

investigation which included interviews of all marketing function employees with access to the 

transmission materials, all of whom stated that they did not access the transmission-related 

information. In addition, the utility reviewed other document management systems and verified 

they did not contain the same flaws. Staff determined that the utility had conducted a thorough 

internal investigation of the matter and implemented changes to prevent recurrence. Although the 

duration of the violations was substantial, they were inadvertent and it was not clear that any harm 

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

Standards of Conduct (Transparency Rule). A transmission provider self-reported that it failed 

to timely update the job title of a transmission function employee on OASIS, in violation of section 

358.7 of the Commission’s Regulations (Standards of Conduct – Transparency Rule). The 
2019 Staff Report on Enforcement 

31 

company updated the information on OASIS 12 days after the 7-day time frame required by the 

Standards of Conduct. Upon discovery, a senior compliance analyst discussed this issue with the 

responsible employee and performed individual training to ensure future compliance with the 

Standards of Conduct. Further, the company implemented a new control whereby IT provides it 

with a weekly report to monitor whether any personnel changes create any Standards of Conduct 

obligations. Staff determined that the company acted quickly to remedy the situation and prevent 

recurrence. For these reasons, and because no harm resulted, staff closed this self-report without 

further action. 

Tariff/OATT Violation (Electric). An investor-owned utility self-reported its failure to provide 

historical fuel data to two ISO/RTOs’ market monitors for certain months in 2017 and 2018 in 

violation of the ISO/RTOs’ Tariffs. Regarding the violation in one ISO/RTO, the company 

explained that the responsible employee twice encountered technical issues when attempting to 

upload fuel data to the ISO/RTO market monitor’s software system. The employee contacted the 

ISO/RTO market monitor for assistance, but continued to have technical issues loading the data. 

Regarding the violation in the other ISO/RTO, the company explained that its failure to provide 

fuel data resulted from employee turnover. By February 2019, the company provided the market 

monitors with the missing historical fuel data. The company has implemented process 

improvements to avoid future data submission errors and to enhance its overall compliance efforts. 

Those process improvements include increasing the number of responsible staff, implementing 

auto-reminders for submission deadlines and confirmations for receipt of submissions, and 

conducting annual training on data submittals. For these reasons, and because of the technical 

issues encountered by the employee when attempting to load fuel data, staff closed this self-report 

without further action. 

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

failed to undesignate a network resource prior to an off-system sale for two early morning hours, 

in violation of its OATT. The company had previously arranged for a day-ahead off-system sale, 

scheduled power flow from the appropriate unit (Unit), purchased firm transmission, and 

undesignated the Unit as a network resource as required. Before the power flow was scheduled to 

occur, the Unit tripped offline. Company employees took steps to change all firm sales from the 

Unit to other units, not realizing that a firm off-system sale was scheduled, and that sourcing the 

off-system power from a unit that had not been undesignated as a network resource violated its 

OATT. Upon discovery, employees began completing a request to undesignate the new unit but 

did not complete the request until after power had sourced from the network-designated unit for 

two hours. Staff determined that no transmission customers were impacted and no revenues were 

inappropriately collected. For these reasons, and because the violation was inadvertent and the 

company acted quickly to address it, staff closed this self-report without further action. 

Tariff/OATT Violation (Oil Pipeline). An oil pipeline self-reported two potential violations of 

its Commission-approved tariff: (1) it did not post its tariff on its website; and (2) it charged its 

only customer more than the Commission-authorized rate. Regarding the first issue, the company 

did not know how long the tariff was missing from its website, but it remedied the violation by 

posting it. The violation occurred because the company was not aware of its obligation to post the 

tariff. Its customer was provided a copy of the tariff as an attachment to its contract. Regarding 

the second issue, the company determined that, due to an employee’s misunderstanding, it 
2019 Staff Report on Enforcement 

32 

increased its rate without filing a tariff revision with the Commission. Upon discovery, the 

company reduced its rates to the amount in its tariff, began an investigation, and refunded the 

overpayments with interest (approximately $19,000). Staff determined that these violations 

resulted in little harm to its customer, market participants who may have wanted to become 

customers, or the Commission’s regulatory process. For these reasons, and because the violations 

were inadvertent and were remedied by the company, staff closed this self-report without further 

action. 

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

relatively minor violations of their tariffs, resulting from either software errors or human 

errors. Such errors included: small miscalculations of the reserves that resources could provide; 

miscalculating uplift payments; failing to take required actions against assets in default of financial 

assurance obligations; failing to take required actions against market participants who had been 

assessed a penalty for submitting inaccurate fuel cost information; the incorrect inclusion or 

exclusion of costs in a manner inconsistent with the tariff; software errors that created the potential 

for incorrect market participant compensation; the inadvertent temporary grant of access to 

confidential market participant information; software errors that resulted in inaccurate modeling 

inputs; and failure to post certain links on its website pursuant to its tariff and North American 

Energy Standards Board (NAESB) standards. The ISOs/RTOs also reported certain other potential 

errors stemming from ambiguity in their tariffs or mistakes in implementing tariff 

provisions. Examples included the calculation of make-whole payments for resources with 

minimum run times spanning multiple days and committing generators with a “Reliability” status 

for reasons other than an emergency or local reliability issue. In all such instances, the violations 

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

mitigate the harm and prevent future violations. Accordingly, staff closed these self-reports 

without further action. 

Violation of Commission Order (Pipeline Certificate). A natural gas pipeline company selfreported that its construction of a storage area access road to support a pipeline replacement project 

impacted a wetland in violation of the blanket certificate authority it had been granted by prior 

Commission order. The company promptly and effectively worked with government officials to 

complete a formal plan to remove the access-road fill material and developed a detailed wetland 

restoration and monitoring project. Staff determined that restoration was an appropriate and viable 

response to the company’s violation. For this reason, staff closed this self-report with no action 

but required that the company report this issue in its FERC Form No. 537 (Annual Certificate 

Report). 

Investigations 

In FY2019, DOI staff opened 12 new investigations, as compared with 24 investigations 

opened in FY2018. The majority of these investigations arose from referrals by ISO/RTO market 

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

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

settlement, staff closed 14 investigations in FY2019 without further action, as compared to 23 

investigations closed without further action in FY2018. In addition to closing these investigations 

during the fiscal year, DOI staff closed several MMU Referrals following inquiries into and 
2019 Staff Report on Enforcement 

33 

analyses of the referred conduct and alleged violations. These matters, discussed in DOI Section 

F below, were closed without being converted into investigations. 

 Statistics on Investigations 

Of the 12 investigations staff opened this fiscal year (some of which involved more than one 

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

seven involved potential tariff violations, six involved misrepresentations prohibited by the 

Commission’s market behavior rules, and two involved regulatory filing violations. The 12 

investigations involved a wide range of additional issues, including safety concerns, Critical 

Infrastructure Protection standards, demand response, and failure to update the prices in a gas 

tariff. 

DOI staff closed 14 investigations in FY2019. Of the closed investigations, seven were closed 

without further action because staff concluded that the evidence did not support finding a violation. 

In five other investigations, a violation was found but staff did not pursue a sanction. DOI also 

closed two investigations following Commission Orders relevant to the matters being investigated. 

The 14 closings were in addition to the two investigations closed pursuant to settlements that staff 

reached with subjects. The Commission-approved settlements in these investigations are 

summarized above in DOI Section C and listed in Appendix B. Illustrative examples of 

investigations closed without enforcement action are discussed below. 

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

past five years (FY2015-2019) and the aggregate disposition of investigations that closed over the 

previous decade from fiscal years 2009 through 2019. 

Disposition of Investigations, FY2019

Closed ‐ Finding of

Violation/No Sanctions

Closed ‐ Insufficient

Evidence or No Violation

Other

Proceeded to Order to

Show Cause

Settlement
2019 Staff Report on Enforcement 

34 

Disposition of Investigations, FY2018

Closed ‐ Finding of

Violation/No Sanctions

Closed ‐ Insufficient

Evidence or No Violation

Proceeded to Order to

Show Cause

Settlement

Disposition of Investigations, FY2017

Closed ‐ Insufficient

Evidence or No Violation

Settlement
2019 Staff Report on Enforcement 

35 

 

Disposition of Investigations, FY2016

Closed ‐ Insufficient

Evidence or No Violation

Proceeded to Order to

Show Cause

Settlement

Disposition of Investigations, FY2015

Closed ‐ Finding of

Violation/No Sanctions

Closed ‐ Insufficient

Evidence or No Violation

Proceeded to Order to

Show Cause

Settlement
2019 Staff Report on Enforcement 

36 

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

that were closed without action in Fiscal Years 2015-2019. 

Disposition of Investigations,

FY2009 ‐ FY2019

Closed ‐ Finding of

Violation/No Sanctions

Closed ‐ Insufficient

Evidence or No Violation

Other

Proceeded to Order to

Show Cause

Settlement

0

2

4

6

8

10

12

FPA Section 205 Market

Manipulation

Misrepresentation Other Tariff Violation Violation of

Commission Order

Types of Alleged Violation in Investigations Closed With

No Action, FY2019
2019 Staff Report on Enforcement 

37 

 

0

2

4

6

8

10

12

14

16

Market Manipulation Misrepresentation Other Reliability Tariff Violation

Types of Alleged Violation in Investigations Closed With

No Action, FY2018

0

1

2

3

4

5

6

7

8

9

10

Market Manipulation Misrepresentation Standards of Conduct Tariff Violation Violation of

Commission Order

Types of Alleged Violation in Investigations Closed With

No Action, FY2017
2019 Staff Report on Enforcement 

38 

 Illustrative Investigations Closed with No Action 

 The following summaries of investigations that Enforcement closed without action in FY2019 

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

investigations. In most of the examples, staff provides the relevant market and products involved 

0

2

4

6

8

10

12

False Statement to

Commission

Market Behavior

Rules

Market Manipulation Reliability Tariff Violation

Types of Alleged Violation in Investigations Closed With

No Action, FY2015

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Market Manipulation Tariff Violation

Types of Alleged Violation in Investigations Closed With

No Action, FY2016
2019 Staff Report on Enforcement 

39 

in order to provide the maximum level of transparency. However, staff omitted such information 

in the few examples where such information would risk identifying the investigative subject. 

FPA Section 205 Violation and Tariff Violation (Electric). Following a referral from the ISONE market monitor, staff opened an investigation to determine whether a generator failed to submit 

accurate energy supply offers related to certain physical parameters in ISO-NE’s day-ahead and 

real-time energy markets, consistent with applicable tariff provisions. During the course of the 

investigation, staff also learned of a separate potential issue – specifically, that the generator had 

been making sales for resale without Commission authorization in violation of section 205 of the 

FPA. Consistent with precedent, the Commission ordered, and the generator made, time-value 

refunds on the revenues collected on sales made during the period that the generator lacked 

authorization. On the tariff issue, staff ultimately determined that while certain aspects of the 

supply offers were inconsistent with the tariff, the generator had made those offers at the direction 

of ISO-NE employees. In light of this fact, and the generator’s payment of time-value refunds on 

the FPA section 205 issue, staff closed the investigation without further action. 

Hydropower Licensing, Filing Requirements, Misrepresentation, Violation of Commission 

Order (Hydro). Following a referral from OEP, staff opened an investigation into a hydropower 

licensee’s failure to comply with the reservoir elevation and water flow requirements in its 

Commission-issued license and the possible submission of false water flow reports. Staff 

determined that the licensee is working on a license amendment to resolve the violations regarding 

the elevation and flow requirements. Staff also determined that the potential false reporting 

violations ended when the licensee terminated the responsible operator. Finally, staff learned that 

the licensee is in the process of selling this project (which lessens concerns about future 

noncompliance by this licensee at this particular project). Accordingly, staff closed the 

investigation without further action. 

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

opened an investigation to determine whether two natural gas traders at a commodities trading 

company violated the Commission’s Anti-Manipulation Rule by trading next-day fixed-price 

natural gas at the Columbia Gulf-Mainline trading hub to benefit index swap positions at that 

location. Staff’s investigation concluded that the traders had not engaged in market manipulation. 

Staff determined that each trader pursued a separate trading strategy based on market fundamentals 

and did not find evidence that either trader had made the next-day fixed-price trades to benefit the 

index swap positions. Staff concluded that one trader’s cash trading and index swaps were 

consistent with a storage arbitrage strategy and that the other trader’s cash trading at the hub during 

the months in question was consistent with his trading behavior at other hubs and in other months, 

regardless of his financial positions. Accordingly, staff closed the investigation without further 

action. 

Market Manipulation and Tariff Violation (Electric-Hydro). Following a market monitor 

referral, staff opened an investigation to determine whether a power generation and marketing 

company had violated the Commission’s Anti-Manipulation Rule and an ISO’s tariff by operating 

hydroelectric resources in order to obtain unjustified make-whole payments. The market monitor’s 

referral indicated that the company had received in excess of $650,000 in make-whole payments 

in 2016 by self-scheduling and submitting offers in a way that would make it eligible for the makewhole payments when the hydroelectric resources generated small amounts of energy above their 
2019 Staff Report on Enforcement 

40 

self-schedules, but within the ISO’s threshold for uninstructed deviations (Tolerance Band). 

Staff’s investigation found no evidence that the company had engaged in manipulative conduct. 

Staff concluded that the deviations in this case (which resulted in the make-whole payments) were 

inherent in the resource type and not the result of improper activity. Moreover, staff found that 

the company regularly amended its offers to avoid receiving far greater amounts of make-whole 

payments. Accordingly, staff closed the investigation without further enforcement action. 

Market Manipulation and Tariff Violation (Electric). Following a referral from the SPP market 

monitor, staff opened an investigation to determine whether a commodities trading company had 

violated the Anti-Manipulation Rule and SPP’s Tariff by submitting bids for Transmission 

Congestion Rights (TCRs) between collocated and “Electrically Equivalent Settlement Locations” 

(EESLs), even after both the MMU and SPP personnel had advised the company that SPP’s Tariff 

prohibited this practice. Working with the MMU and the investigative subject, staff confirmed 

that the alleged trades in fact had been submitted. There was no resulting market harm, however, 

because SPP had identified and removed those trades before the market clearing process took 

place. Staff also determined that the trader had not deliberately violated the restrictions – a lack 

of automation in the bidding software allowed for some degree of confusion on the part of the 

trader. For these reasons, as well as the limited scope of the violations and changes the company 

made to its trading systems that will ensure no further violations occur, staff closed the 

investigation without further action. 

Market Manipulation and Tariff Violation (Electric). Following a referral from the SPP market 

monitor, staff opened an investigation to determine whether an electric utility: (1) manipulated 

the physical parameters of its energy offers from a power plant for the purpose of collecting 

unjustified make-whole payments; or (2) violated SPP’s Tariff provisions on offer parameters. 

The energy offers had unusually high economic minimum limits and were often block-loaded 

(meaning the economic minimum and economic maximum parameters were set at the same level). 

The electric utility handled the offers from the plant on behalf of the plant owner, which had 

obtained qualifying facility (QF) status for the plant under PURPA. Staff found that the utility’s 

offering strategy was not designed to collect make-whole payments and was consistent with the 

plant’s right to sell power as a QF under PURPA. Staff also concluded there was insufficient basis 

to find a violation of the tariff, which allowed QFs to offer power into the market using a control 

status that effectively overrode the physical parameters. Accordingly, staff closed the 

investigation without further action. 

Misrepresentation and Tariff Violation (Electric-Wind). Following a referral from the MISO 

market monitor, staff opened an investigation to determine whether certain market participants had 

violated MISO’s Tariff and made misrepresentations to MISO by providing forecasts of output 

from wind facilities that persistently exceeded actual output. The MMU’s referral indicated that 

the forecasting practices of the referred market participants violated the tariff because they were 

not unbiased “50/50” forecasts with an equal probability of being high or low. While staff 

concluded that the market participants were submitting upward biased forecasts, it was not clear 

whether the specific conduct violated the applicable MISO Tariff language regarding the forecast 

maximum limit (FML) parameter submitted by market participants to forecast output. Moreover, 

at the time of the conduct, MISO had yet to specify the requirements for FMLs or how marketparticipant submitted FMLs would be evaluated by MISO, as directed by a Commission Order on 
2019 Staff Report on Enforcement 

41 

the relevant tariff provisions. For these reasons, staff determined that the facts did not support 

pursuit of a violation and staff closed the investigation without further action. 

Misrepresentation and Tariff Violation (Electric-Hydro). Following a referral from an 

ISO/RTO’s market monitor, staff opened an investigation to determine whether a scheduling 

coordinator for a hydroelectric resource: (1) violated its duty of candor and accuracy in 

communications with the ISO/RTO, as required by Commission regulations; and (2) violated the 

ISO/RTO’s Tariff for submitting inaccurate bids for energy and ancillary services and failing to 

update the resource’s availability in the ISO/RTO’s outage management system. Staff’s 

investigation found that the scheduling coordinator did not have a repeated pattern of submitting 

inaccurate, or infeasible, bids. Moreover, the outage coordinator largely complied with the 

ISO/RTO’s Tariff’s requirement to submit outage cards when water levels rendered the resource’s 

day-ahead bids infeasible in real-time and its limited failures to submit outage cards were 

inadvertent. The limited violations which occurred resulted in only minimal market harm. Also, 

during staff’s investigation, the subject stopped serving as the scheduling coordinator for the 

hydroelectric resource in question. Accordingly, staff closed the investigation without further 

action. 

Tariff Violation (Electric). Following a referral from the NYISO market monitor, staff opened 

an investigation into an entity’s failure to submit energy offers into NYISO’s Day-Ahead Market 

(DAM) on three days in 2017 for two generation facilities it operated. At the time of these 

incidents, both generators were capacity resources for which the entity was receiving installed 

capacity payments. Pursuant to its tariff, NYISO assessed penalties for the violations. For one of 

the generators, staff determined that the entity’s failure to bid into the DAM was due to human 

error. The employee tasked with making the bid accidentally inserted the wrong date into the 

system. In the case of the other generator, a large hole was discovered in the duct work at the 

generation facility, leading to a forced outage. The generator notified its transmission operator of 

the outage but failed to similarly notify NYISO. Staff’s investigation found no deliberate 

misconduct and no market price impact. For these reasons, and because significant actions were 

taken to prevent re-occurrence, staff closed the investigation without further action. 

MMU Referrals 

ISO and RTO Market Monitoring Units (MMUs) perform a critical function surveilling 

organized electric markets to detect potential violations, including market manipulation, 

anticompetitive behavior, and tariff noncompliance. As the Commission has recognized, 

“effective market monitoring requires close collaboration between the [MMUs], RTOs, ISOs, and 

[Enforcement].”20 This collaboration occurs formally, through certain reporting requirements in 

Commission regulations, as well as informally, through regular dialogue with Enforcement. Both 

types of collaboration facilitate a high level of situational awareness among Enforcement staff and 

ensures a robust knowledge base for investigations. In an effort to promote transparency and 

provide guidance to regulated entities and MMUs, this section highlights the MMUs’ functions, 

describes the types of conduct MMUs monitor and refer to Enforcement, and provides illustrative 

 

20 Southwest Power Pool, Inc., 137 FERC ¶ 61,046, at P 20 (2011). 
2019 Staff Report on Enforcement 

42 

examples of MMU referrals that Enforcement closed in FY2019 as initial inquires without 

conversion to an investigation. 

By regulation, MMUs are required “to make a non-public referral to the Commission in all 

instances where the [MMU] has reason to believe that a Market Violation has occurred.”21 This 

referral requirement applies to potential “misconduct by the RTO or ISO, as well as by a market 

participant.”22 The Commission has not prescribed a specific level of detail or length for referrals. 

However, they must be (1) non-public, (2) in writing, and (3) addressed to the head of Enforcement 

with copies to the heads of OEMR and OGC.23 In addition, they must include: (1) “sufficient 

credible information to warrant further investigation by the Commission;” (2) the names and 

contact information for suspected violators; (3) the dates of the violations and whether the behavior 

is ongoing; (4) the rule, regulation, or tariff provisions violated; (5) the specific conduct; (6) the 

consequences to the market; (7) if the referral includes manipulation, a description of the 

manipulative effect; and (8) any other information the MMU wishes to include.24 There is also a 

continuing obligation to update referrals with any information the MMU learns that is “related to 

the referral.”25 After receiving a referral, Enforcement conducts an inquiry into the alleged conduct 

and determines whether to open a full investigation. 

To help facilitate these regulatory requirements, Enforcement assigns staff to serve as liaisons 

with the MMUs for each RTO or ISO as well as with the RTO and ISO itself. MMUs refer a wide 

range of potential violations – both in terms of type and seriousness. Examples of referrals 

illustrating this broad range include: (1) referral of JP Morgan Ventures Energy Corporation for 

manipulation and tariff violations related to allegedly abusive bidding practices in CAISO and 

MISO;26 (2) referral of Westar Energy for potential violations of the SPP Tariff and Commission 

 

21 18 C.F.R. § 35.28(g)(3)(iv)(A) (2019). A Market Violation is a violation of a tariff, Commission 

order, rule or regulation, market manipulation, or inappropriate dispatch that creates substantial 

concerns regarding unnecessary market inefficiencies. Id. § 35.28(b)(8). 

22 Wholesale Competition in Regions with Organized Electric Markets, Order No. 719, 125 FERC 

¶ 61,071, at P 311 (2008). 

23 18 C.F.R. § 35.28(g)(3)(iv)(B)-(C) (2019). 

24 Id. § 35.28(g)(3)(iv)(D). 

25 Id. § 35.28(g)(3)(iv)(E). Separate and apart from this referral requirement, MMUs also must 

“[i]dentify and notify [Enforcement] of instances in which a market participant’s or [ISO’s/RTO’s] 

behavior may require investigation, including, but not limited to, suspected Market Violations.” 

18 C.F.R. § 35.28(g)(3)(ii)(C) (2019). These notifications are more informal, can be made orally 

or in writing, and do not require the documentation involved in a referral. 

26 In Re Make-Whole Payments and Related Bidding Strategies, 144 FERC ¶ 61,068 (2013) 

(approving settlement agreement that included a $285 million civil penalty and $125 million in 

disgorgement). 
2019 Staff Report on Enforcement 

43 

regulations for allegedly submitting inaccurate cost inputs in its mitigated energy offers;27 and (3) 

referral of Etracom LLC for an alleged cross-market manipulation scheme in CAISO.28

Statistics on MMU Referrals 

In FY2019, staff received 16 new MMU referrals. Of these referrals (some of which involved 

more than one type of violation or multiple subjects), 11 involved potential market manipulation, 

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

Commission’s market behavior rules. Three of these MMU referrals were the source for three 

investigations opened this fiscal year. Enforcement also received two supplemental referrals of 

two entities that were already being investigated for the conduct described in the referrals. As 

such, these supplemental referrals were rolled into those existing investigations. Of the MMU 

referrals received in FY2019, seven remained pending at the end of the fiscal year. 

DOI staff elected not to open full investigations of 10 MMU referrals in FY2019, four of which 

were carried over from the previous fiscal year. These were analyzed and closed as inquiries. Of 

these referrals (some of which involved more than one type of violation or multiple subjects), 

seven involved potential market manipulation, eight involved potential tariff violations, and five 

involved misrepresentations prohibited by the Commission’s market behavior rules. 

Of the 10 MMU referrals that staff did not convert to full investigations, six were closed 

without further action because staff concluded that the evidence did not support finding a violation. 

In four other MMU referrals, a violation was found but staff did not pursue a sanction. 

Illustrative MMU Referrals Closed with No Action 

Enforcement presents the following illustrative examples of MMU referral inquiries that DOI 

staff closed in FY2019 without conversion to an investigation. In determining whether to open an 

investigation based on an MMU referral, staff considers the factors set forth in the Commission’s 

Revised Policy Statement on Enforcement.29 The illustrative summaries below are intended to 

provide guidance to the public and to regulated entities as to why staff chose not to pursue an 

investigation or enforcement action, while preserving the non-public nature of the MMU referral. 

Market Manipulation. Following a referral from the SPP MMU, staff analyzed but did not open 

an investigation into whether the two separate ownership groups of a jointly-owned unit (JOU) 

violated the Commission’s Anti-Manipulation Rule when they submitted similar cost-based and 

competitive offer curves. The MMU questioned whether the similar curves resulted from collusion 

between the two groups. The referral noted that each ownership group had received one unjustified 

 

27 Westar Energy, Inc., 160 FERC ¶ 61,025 (2017) (approving settlement agreement that included 

a civil penalty of $180,000 and an admission to the violations). 

28 Etracom LLC, 155 FERC ¶ 61,284 (2016) (Order Assessing Penalties) (Etracom). Etracom 

ultimately settled with Enforcement. See Etracom LLC, 163 FERC ¶ 61,022 (2018) (approving 

settlement agreement that included a civil penalty of $1.9 million). 

29 Revised Policy Statement, 123 FERC ¶ 61,156 at P 25. 
2019 Staff Report on Enforcement 

44 

make-whole payment during this period. Staff determined that although SPP’s Tariff permitted 

each unit share of the JOU to be modeled and committed independently, the owners’ inability to 

actually operate the shares independently required that the resource be registered under a provision 

in which commitment decisions were based on aggregated data from each ownership share 

(Combined Resource Option). Staff concluded that it was reasonable that unit-wide costs would 

lead to similar cost-based offers for each ownership group. As for the similarity of the competitive 

offer curves, staff concluded that this was largely explained by tariff specifications that eliminated 

variation with respect to certain offer parameters and the central role of the owner-operator in 

supplying parameters for each of the two ownership shares. Subsequent to the MMU’s referral, 

the Commission accepted SPP’s elimination of the Combined Resource Option because of 

difficulties in administering this registration option. Finally, staff concluded that there was 

insufficient evidence to demonstrate that the single unjustified make-whole payment to each 

ownership group was necessarily the result of collusion. For these reasons, staff closed this MMU 

Referral without further action. 

Market Manipulation. Following a referral from the CAISO MMU, staff analyzed but did not 

open an investigation into whether six market participants violated the Commission’s AntiManipulation Rule by cutting scheduled exports from CAISO to the Centro Nacional de Control 

de Energia (CENACE) Baja Norte system. CENACE operates Mexico’s wholesale electricity 

markets, including the Baja California region of Mexico. The MMU questioned whether the 

market participants were engaged in an arbitrage scheme whereby they sold in CENACE’s dayahead market at a high price, then cut the schedule, did not deliver power in real time, and then 

bought back the power at lower real-time prices. Staff determined that there were a variety of 

acceptable reasons for the observed cuts, which occurred primarily for reasons out of the market 

participants’ control. Given the relative deadlines for submission of offers in the CENACE and 

CAISO day-ahead markets, inter-market coordination on bidding was extremely difficult. The 

CAISO day-ahead market offers had to be submitted before the market participant could know the 

exact amount of power that its counterparty cleared in the CENACE day-ahead market. Staff also 

confirmed with the CENACE market monitor that, except when CENACE or CAISO orders a cut, 

an entity cannot profit by buying back its day-ahead schedule. For these reasons, staff closed this 

MMU referral without further action. 

Market Manipulation and Misrepresentation. Following a referral from the SPP MMU, staff 

analyzed but did not open an investigation into whether a large owner-operator of renewable 

generation projects had: (1) violated the Commission’s Anti-Manipulation Rule by trading virtual 

products to benefit certain of its Transmission Congestion Revenue (TCR) positions; and (2) 

violated section 35.41(b) of the Commission’s regulations by making certain misrepresentations 

to the MMU as part of its explanation that these trades were part of a hedging strategy. Staff 

reviewed the company’s trades over a five-month period in 2018 and determined that the company 

had not placed virtual trades in large enough quantities or at the right times to have a deliberate 

impact on its associated TCR positions. As such, no harm resulted from the company’s virtual 

trading nor did the company benefit from it. Staff also spoke with relevant personnel at the 

company, who explained that its virtual trading aimed to hedge the real-time congestion exposure 

of three of its wind resources by using virtual transactions, and it, therefore, based its virtual 

volume on the wind forecast. Staff confirmed that the company’s minimum and maximum virtual 

supply offers matched SPP’s wind forecast, on average, 86.6 percent of the time. The company 

also credibly explained the mismatch between its virtual and TCR volumes which had been 
2019 Staff Report on Enforcement 

45 

observed and questioned by the MMU. Staff also confirmed that the company did not engage in 

any speculative virtual trading at the locations of interest – every virtual supply offer/demand bid 

at a node was connected to an asset. Finally, since the MMU’s referral, the company took steps to 

eliminate the need for these virtual transactions by implementing dynamic scheduling at two of 

the three wind resources. For these reasons, staff closed this MMU referral without further action. 

Misrepresentation and Tariff Violation. Following a referral from MISO’s MMU, staff 

analyzed but did not open an investigation into whether a combined cycle unit violated MISO’s 

Tariff and section 35.41(b) of the Commission’s regulations by failing to update real-time offers 

to reflect a reduction in the unit’s production capability. The unit did not follow MISO dispatch 

instructions to ramp up output for several hours due to an emission issue causing insufficient steam 

production. The unit’s operator informed its real-time desk of the need to reduce the unit’s 

economic maximum, but the real-time dispatcher failed to do so. Staff determined that, although 

the failure to update real-time offers to reflect the unit’s reduced capability was likely a tariff 

violation, the conduct was inadvertent, and staff was unaware of any similar past incidents 

involving the unit. In addition, staff determined that the resulting uplift payments were minimal 

and that the market participant had taken corrective measures to ensure offers are properly updated 

in the future. For these reasons, staff closed this MMU referral without further action. 

Misrepresentation and Tariff Violation. Following a referral from MISO’s MMU, staff 

analyzed but did not open an investigation into whether a unit of a coal-fired generation plant 

violated MISO’s Tariff and section 35.41(b) of the Commission’s regulations by failing to update 

its real-time offers to reflect a reduction in the unit’s output caused by a mechanical problem. The 

unit’s dispatcher immediately entered an off-control designation when the equipment problem 

occurred, but did not revise the unit’s real-time offer to reduce its economic maximum. As a result, 

when the off-control designation lapsed, the unit failed to follow MISO dispatch instructions to 

ramp up based on its offered capability. Staff determined that, although the failure to update realtime offers to reflect the unit’s reduced capability was likely a tariff violation, the conduct was 

inadvertent and the market participant refunded to MISO the uplift payments it had received for 

the period when the unit failed to ramp up. The market participant also implemented remedial 

measures to prevent such incidents in the future and cooperated with staff in providing information 

about the incident. For these reasons, staff closed this MMU referral without further action. 

Tariff Violation. Following a referral from PJM’s MMU, staff analyzed but did not open an 

investigation into whether two market participants had violated the PJM Tariff by improperly 

including certain variable operating expenses in their cost-based offers. The MMU alleged that 

not only had these costs been included in violation of the PJM Tariff, but also that some of the 

costs had been double counted. The MMU raised these concerns to staff following PJM’s approval 

of the costs at issue. Following the referral, staff discussed the matter with the companies, PJM, 

and the MMU. Additionally, staff analyzed data related to the claimed costs and conducted 

extensive research into the relevant portions of the PJM Tariff. Staff determined that it was not 

clear whether the tariff prohibited the types of costs at issue. For this reason, and because PJM 

had approved the costs, staff closed this MMU referral without further action. 

Tariff Violation. Following a referral from MISO’s MMU, staff analyzed but did not open an 

investigation into whether a generation unit violated MISO’s Tariff by failing to follow MISO’s 

dispatch instructions. The dispatch deviations occurred when the unit, which is pseudo-tied to 
2019 Staff Report on Enforcement 

46 

PJM, received instructions from both MISO and PJM to ramp up. In response, the unit’s overall 

output and its PJM share of output increased, but its MISO output remained flat or decreased. The 

market participant determined that the cause of the MISO dispatch deviations was an error in the 

unit’s generation control system’s allocation of ramp and output between PJM and MISO. Staff 

determined that, although the dispatch deviations possibly violated the applicable business practice 

manual and the tariff, they were not intentional. In addition, the market participant acknowledged 

the deviations, promptly investigated their cause and instituted corrective measures, cooperated 

with staff in providing information about the deviations, and did not receive uplift payments for 

the unit on the days when the deviations occurred. For these reasons, staff closed this referral 

without further action. 

Enforcement Hotline 

DOI staff fields calls and other inquiries made to the Enforcement Hotline (Hotline).30 The 

Hotline is a means for people, anonymously if preferred, to inform Enforcement staff of potential 

violations of statutes, Commission rules, orders, regulations, and tariff provisions. When staff 

receives information concerning possible violations, such as allegations of market manipulation, 

abuse of an affiliate relationship, or violation of a tariff or order, staff researches the issue presented 

and often consults other members of the Commission’s staff with expertise in the subject matter 

of the inquiry. In some cases, Hotline calls lead to investigations by DOI. 

In FY2019, Enforcement received 153 Hotline calls and inquiries, 148 of which were promptly 

resolved within the fiscal year through advice provided by staff, because the caller stopped 

responding to staff’s communications, or because the matter was already before the Commission 

and so staff could not discuss it with the caller. Staff also closed two Hotline matters that had been 

pending from the previous year. One Hotline call was the source of an investigation opened this 

fiscal year. Of the Hotline calls received in FY2019, five remained pending at the end of the fiscal 

year. 

Every year, a significant percentage of the Hotline calls and inquiries relate to subjects outside 

of the Commission’s jurisdiction or contested matters pending before the Commission. DOI staff 

resolves these matters by advising the callers where they may find the information they need, or 

directing them to the appropriate Commission office or docketed proceeding. 

Other Matters 

In addition to its investigative work, DOI staff worked on other important matters in FY2019, 

including: 

Collaboration with Other Commission Offices. DOI staff regularly coordinates with other 

Commission program offices regarding potential enforcement matters. This includes working 

closely with OEP and OGC on pipeline certificate and hydroelectric licensing matters to ensure 

compliance with statutory and regulatory obligations, as well as the terms and conditions of 

pipeline certificates and hydroelectric licenses and exemptions. In addition, DOI staff works 

 

30 See 18 C.F.R. § 1b.21 (2019). 
2019 Staff Report on Enforcement 

47 

closely with OGC, OEMR, and OEPI regarding late filings submitted under sections 203 or 205 

of the FPA. There were more than 170 such late filings during FY2019 that DOI staff 

reviewed. Staff also worked closely with OGC and OEMR on evaluating refund reports related to 

the late filings. OGC and OEMR regularly consult with DOI staff when a qualifying facility 

submits a request for a declaratory order and/or a request for waivers of various provisions of Part 

292 of the Commission’s regulations related to small power production and cogeneration under 

PURPA. Regulated entities can submit questions to the Compliance Help Desk to reduce their 

risk of subsequent findings of noncompliance and potential enforcement actions. DOI staff 

assisted in four Compliance Help Desk inquiries in FY2019. Finally, OGC and OEMR confer 

with DOI staff for prefiling meetings and/or regarding requests involving the Standards of Conduct 

under Order No. 717 or Affiliate Restrictions under Order No. 697. During FY2019, DOI staff 

was involved in ten such matters.

Hydropower Compliance. OEP’s Division of Hydropower Administration and Compliance 

(DHAC) has authority over hydropower compliance matters until such matters are referred to 

Enforcement. DOI staff provided significant input and advice to DHAC regarding three projects 

involving dam safety and other violations within DHAC’s authority during FY2019. 

No-Action Letters. Enforcement is one of several offices within the Commission that is jointly 

responsible for processing requests seeking a determination whether staff would recommend 

enforcement action against the requestor if it pursued particular transactions or practices. The 

“No-Action Letter” can be a useful tool for entities subject to the Commission’s authority to reduce 

the risk of failing to comply with the statutes the Commission administers, the orders, rules or 

regulations thereunder, or Commission-approved tariffs.31 FERC staff is generally available to 

confer on a pre-filing basis for possible “No-Action Letter” requests. During FY2019, 

Enforcement assisted with processing one such request. 

Reliability Coordinator. As part of its cooperation with other program offices, Enforcement has 

a designated Reliability Coordinator who is a member of DOI staff. In addition to serving a 

leadership role in inquiries or investigations involving reliability of the Bulk-Power System, the 

Reliability Coordinator serves as a team member on reliability-related matters including NERC 

and Regional Reliability Entity filings (e.g., Notices of Penalty, changes to NERC Rules, 

amending or retiring Reliability Standards, NERC Five-Year Assessments, and similar periodic 

filings). Enforcement’s Reliability Coordinator also makes presentations to NERC and at Regional 

Entity meetings, such as those of the Member Representative, Operating, and Planning 

Committees. 

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

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

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

agencies.32 Pursuant to that statutory obligation, DOI proposed for Commission approval an 

 

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

for Obtaining Guidance, 123 FERC ¶ 61,157 (2008). 

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

74, § 701, 129 Stat. 584, 599 (2015). 
2019 Staff Report on Enforcement 

48 

instant final rule increasing the civil penalties that the Commission may assess under the FPA, the 

NGA, the Natural Gas Policy Act of 1978, and/or the Interstate Commerce Act.33 The 

Commission adopted that rule on January 8, 2019, and the revised maximum penalties took effect 

on February 1, 2019.

 

33 See Civil Monetary Penalty Inflation Adjustments, Order No. 853, Docket No. RM19-9-000, 

166 FERC ¶ 61,014 (2019), 84 Fed. Reg. 966 (Feb. 1, 2019). 
2019 Staff Report on Enforcement 

49 

DIVISION OF AUDITS AND ACCOUNTING 

Overview 

The Division of Audits and Accounting (DAA) administers Enforcement’s audit and 

accounting programs to support the Commission’s mission to assist consumers in obtaining 

reliable and efficient energy service, at a reasonable cost, through appropriate regulatory and 

market means. DAA’s primary goal in conducting its audit and accounting activities is to enable 

the Commission to achieve its strategic objectives by assisting in the development of just and 

reasonable rates and increasing compliance with Commission regulations and policies. 

DAA’s audit program supports the Commission’s strategic objectives through public riskbased audits. DAA performs various types of audits that respond to the needs of the Commission, 

public, and industry, and advises the Commission on compliance and other matters. The audit 

program serves as a resource for the Commission to examine risk areas within the regulated 

industries and inform the Commission’s actions regarding rates, tariffs, financial and operational 

transparency, policy initiatives, law, reliability, and other areas in the electric, natural gas, and oil 

industries. DAA audits also provide jurisdictional entities an opportunity to work with audit staff 

to evaluate and improve their overall compliance, and to identify potential areas of noncompliance 

before they escalate. For the Commission’s regulated industries, DAA’s publicly issued audit 

commencement letters and audit reports provide insight into and valuable guidance on areas of 

emphasis and concern. 

DAA’s accounting program is a vital component of the Commission’s strategic goal of 

establishing just and reasonable cost of service rates, terms, and conditions by: (1) overseeing the 

accounting and reporting of financial information affecting cost of service rates; (2) acting as the 

focal point for interpretive guidance concerning the Commission’s financial accounting and 

reporting rules, orders, regulations, and statutes; and (3) advising the Commission and industry on 

accounting and other financial issues. The accounting program facilitates the consistent reporting 

of financial information and ensures that an entity’s operations are reported in a manner that most 

appropriately supports ratemaking analysis. DAA’s accounting program also provides accounting 

expertise to the Commission’s other program offices and assists in the development of 

Commission policies and proposed rulemakings to ensure these initiatives properly consider and 

evaluate the related accounting and financial issues. 

Outreach and Guidance 

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

others about what constitutes effective compliance, accountability, and transparency. The goal of 

DAA’s outreach is to provide jurisdictional entities with ample opportunity to achieve compliance 

and avoid noncompliance that may result in harm to jurisdictional customers and energy markets. 

DAA actively engages in regular industry outreach with trade associations, such as the Interstate 

Natural Gas Association of America, Edison Electric Institute, Association of Oil Pipe Lines, and 

Natural Gas Supply Association, and encourages interested parties to contact DAA with any 

inquiries or concerns. As a result of such interactions, DAA considers opportunities to enhance 

the efficiency, transparency, and effectiveness of its audit and accounting programs. For example, 
2019 Staff Report on Enforcement 

50 

in response to industry comments, DAA adopted a process of formally notifying a company by 

email from the Director of DAA of the close of an audit proceeding when the compliance 

implementation stage has been completed. DAA also engages with state regulators and the public 

accounting firms that audit and certify jurisdictional entities’ financial reports. Such industry 

outreach contributes to DAA’s analysis of accounting trends affecting jurisdictional entities and 

issuances of accounting guidance by the Chief Accountant. For example, in FY2019, guidance 

was issued for lease accounting in Docket No. AI19-1-000. DAA continues to provide formal 

accounting guidance in response to accounting requests filed with the Commission. Informal 

accounting guidance may be requested and obtained from DAA via email 

(accountinginquiries@ferc.gov) and phone ((202) 502-8877). Informal guidance on all other 

compliance matters may be obtained through the Compliance Help Desk.34 

Compliance 

Compliance Programs 

It is imperative that companies establish and maintain effective compliance programs. Such 

programs should foster a culture of compliance that begins at the executive level and permeates 

throughout the organization. Effective compliance programs increase the likelihood that 

jurisdictional companies will understand and follow the Commission’s rules, regulations, and 

orders, as well as their own tariff provisions, both in letter and spirit. However, since each 

company is unique in terms of size, region, organizational structure, and other relevant 

characteristics, no two compliance programs are alike. Each company must tailor its program to 

the specific challenges it faces. Notwithstanding these differences, DAA has found that the 

strongest compliance programs include: 

 A proactive program that: 

o Equips staff and management with sufficient training, education, tools, and other 

resources to detect issues in a timely manner to correct or prevent noncompliance; 

o Provides effective lines of communication and notifies staff of standards through wellpublicized policies and procedures; 

o Stays abreast of compliance trends by reviewing Commission orders and audit reports, 

and evolves based on these trends and other developments in the industry. 

 The active involvement of senior management to provide a tangible demonstration of 

“tone-from-the-top” as well as the allocation of funds necessary for such programs. 

 A designated compliance officer and compliance committee, charged with development 

and oversight of compliance activities and metrics that assess program effectiveness. 

 

34 Information about the Commission’s Compliance Help Desk is available at 

www.ferc.gov/contact-us/compliance-help-desk.asp. 
2019 Staff Report on Enforcement 

51 

 The active involvement of internal audit and monitoring functions to routinely assess 

compliance with tariff provisions and Commission rules, orders, and regulations, to foster 

a strong and sustainable culture of commitment to compliance on an enterprise-wide basis. 

 A policy and culture of seeking guidance from the Commission as necessary to ensure 

compliance, including an effective process to self-report noncompliance identified through 

internal oversight activities. 

DAA appreciates the time, effort, and cooperation that each company puts forth during the 

course of an audit. A company’s willingness to proactively assist DAA not only demonstrates its 

commitment to compliance, but also can have a positive impact on the timeliness of the audit itself. 

Timely Remedy of Noncompliance 

Equally important to a robust compliance program is the timely remedy of noncompliance. 

Although an effective compliance program will often prevent noncompliance with Commission 

rules, regulations, and orders, any instances of noncompliance should be addressed immediately. 

Timely implementation of audit recommendations helps maximize their impact, demonstrates 

commitment to compliance, and supports fair, competitive markets. DAA tracks every audit 

recommendation it makes, and works with each company until all recommendations have been 

fully implemented. Further, the Commission’s FY2018-2022 Strategic Plan encourages strong 

compliance programs and places emphasis on timely implementation of corrective actions within 

six months of audit completion.35 In FY2019, 97 percent of DAA’s audit recommendations were 

implemented within six months. 

Compliance Alerts 

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

entities. DAA believes that highlighting these areas for jurisdictional entities and their corporate 

officials will increase awareness of these concerns and facilitate compliance efforts. The topics 

presented below represent areas where DAA has found recurring compliance concerns or 

noncompliance of significant impact. DAA believes that greater attention in these areas will 

enable jurisdictional entities to prevent noncompliance, thereby avoiding enforcement actions. To 

assist in gaining a better understanding of a particular topic, the docket number(s) of one or more 

recent audit reports or Commission orders dealing with that topic are provided in the discussions 

below. 

Allocated Labor. Companies have charged labor and labor-related costs to construction projects 

without using an appropriate cost allocation method or time tracking process to ensure capitalized 

labor costs have a definite relation to construction. Specifically, DAA has observed that allocation 

methods were not properly designed, nor were the allocation results sufficiently monitored to 

ensure that costs charged were appropriately allocated to capital projects when employees: (1) 

performed activities that only supported the operations of the existing infrastructure; (2) spent a 

portion of their time performing construction-related activities and a portion on other jurisdictional 

 

35 See Strategic Plan, supra note 4, at 7 (Objective 1.2: Performance Measure). 
2019 Staff Report on Enforcement 

52 

activities; or (3) performed activities supporting both jurisdictional and nonjurisdictional activities. 

(PA16-2-000, PA16-4-000). 

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

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

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

calculation, and the short-term debt rate is derived using an estimate of the cost of short-term debt 

for the current year. DAA has found instances where a company used commitment fees associated 

with lines of credit in the calculation of the short-term debt rate. Under Order No. 561, 

Commission approval is required to include such fees as part of the AFUDC short-term rate 

derivation (PA18-2-000). 

Other common findings related to AFUDC during audits include: 

 Failure to exclude goodwill-related equity from the equity component of the AFUDC rate 

(PA10-13-000); 

 Computing AFUDC on contract retention and other noncash accruals (FA17-6-000); 

 Compounding AFUDC more frequently than semi-annually (AC12-53-000); 

 Improperly using monthly equity and long-term debt balances instead of prior-year-end 

balances in computing the AFUDC rate (FA17-1-000, PA18-2-000); 

 Improperly including Account 216.1, Unappropriated Undistributed Subsidiary Earnings, 

and Account 219, Accumulated Other Comprehensive Income, balances as part of the 

equity component of the AFUDC formula (FA18-2-000, FA18-3-000, PA18-2-000); 

 Employing the net-of-tax approach when performing AFUDC calculations (AC18-63-000); 

and 

 Improperly using an AFUDC methodology not prescribed by the Commission that results 

in capitalized AFUDC above the maximum permitted by the Commission’s regulations 

(PA16-4-000). 

Formula Rate Matters. A focal point of DAA’s formula rate audits continues to be compliance 

with the Commission’s accounting and FERC Form No. 1, Annual Report of Major Electric 

Utilities, Licensees and Others (FERC Form No. 1), requirements for costs that are included in 

formula rate recovery mechanisms used to determine billings to wholesale customers. DAA notes 

that certain areas of noncompliance could have been prevented with more effective coordination 

between jurisdictional entities’ accounting and rate staffs to prevent the recovery of costs that 

should have been excluded from the formula rate. Additionally, formula rate audits in recent years 

have identified patterns of noncompliance in the following areas: 

 Revenue Credits – Public utilities understated the revenue credits that were used to reduce 

the revenue requirements of their transmission formula rates by improperly excluding 

certain transmission-related revenues. (FA17-2-000 (pole attachment revenue), FA18-3-

000 (rent from affiliate)). 
2019 Staff Report on Enforcement 

53 

 Income Tax Overpayments – Public utilities have incorrectly recorded in Account 165, 

Prepayments, income tax overpayments for which they elected to receive a refund and not 

have such overpayments applied to a future tax year’s obligation. This has led to excess 

recoveries through formula rate billings. These costs are properly recorded in Account 

146, Accounts Receivable from Associated Companies, or Account 143, Other Accounts 

Receivable, as appropriate. (FA17-4-000, FA13-1-000). 

 Excess Accumulated Deferred Income Taxes (ADIT) – To address the tax effects of the 

Tax Cuts and Jobs Act of 2017 (TCJA), public utilities adjusted ADIT balances to reflect 

the change in the effective corporate tax rate from 35 percent to 21 percent. Under certain 

formula rate tariffs, public utilities were required to make adjustments to neutralize the rate 

base impacts of these TCJA adjustments to ADIT balances. Audit staff found instances 

where utilities removed balances from the ADIT accounts but did not make the necessary 

adjustments to keep rate base neutral. This led to rate base being overstated and wholesale 

transmission customers being overbilled. (FA18-3-000). 

 Storm Damage – Public utilities have collected excess storm damage amounts from 

wholesale customers by either recovering estimates that did not reflect actual experience 

or recovering both estimated and actual storm damage expenses. (FA15-5-000, FA15-6-

000, FA16-4-000). 

 Investment Tax Credits (ITCs) – Public utilities have improperly accounted for ITCs 

associated with utility plant as income tax prepayments in Account 165. ITCs are 

generated as a result of investments made in utility plant. DAA found instances in which 

tax credits were used to reduce taxable income, but not all of the ITCs were used at once 

and resulted in an ITC carry-forward. DAA found that ITC carry-forwards were recorded 

in an incorrect account and factored into formula rate billings, leading to customer 

overbillings. (FA15-8-000). 

 Internal Merger Costs – Public utilities have included merger-related transaction costs in 

operating expense accounts, contrary to the long-standing Commission policy that such 

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

companies misrepresenting utility operating income and expenses reported in their FERC 

Form No. 1. In addition, public utilities subject to hold-harmless commitments have 

incorrectly recovered merger-related transaction and transition costs, including internal 

labor costs, in rates. Public utilities should obtain Commission approval to recover such 

costs and otherwise should have appropriate controls and procedures to ensure that the 

costs are tracked and excluded from formula rates. (FA16-3-000, FA17-1-000, FA18-3-

000, FA14-10-000, PL15-3-000). 

 Asset Retirement Obligations (ARO) – Public utilities included ARO amounts in formula 

rates without explicit Commission approval, including the asset component that increases 

rate base, the depreciation expense related to the asset, and the accretion expense related 

to the liability. (PA18-2-000, FA13-1-000). 

 Commitment Fees – Public utilities improperly recorded commitment fees associated with 

lines of credit in Account 165, Prepayments, which led to excess recoveries through 

formula rate billings. (FA15-5-000, FA15-6-000, FA15-7-000). 
2019 Staff Report on Enforcement 

54 

 Formula Rate Errors – Public utilities’ transmission formula rates contained errors, 

omissions, and miscalculations related to various accounts. Some accounts that should 

have been added were incorrectly subtracted. In other instances, the formula pulled 

information from the wrong FERC Form No. 1 line. Finally, there were instances where 

items specifically excluded by formula rate protocols were included in the formula rate. 

(FA15-6-000). 

 Administrative and General (A&G) Expenses – Most audits find that public utilities 

recorded non-operating expenses and functional operating and maintenance expenses in 

A&G expense accounts, leading to inappropriate inclusion of such costs in revenue 

requirements produced by their formula rates. Examples of these costs include: 

employment discrimination settlement payments, lobbying expenses, charitable 

contributions, storm damage to distribution systems, and payments of penalties. (FA18-3-

000, FA17-1-000). 

 Unused Inventory and Equipment – Public utilities included in the cost of construction 

projects the cost of materials, supplies, and equipment purchased for the project, without 

removing the cost of items ultimately unused in whole or in part. (FA13-3-000). 

Transmission Rate Incentives. The Commission has granted many public utilities transmission 

incentive rate treatments as a means of promoting and developing a more efficient and robust 

transmission system. Recent audit activity has found that effective procedures and controls were 

lacking to ensure full compliance with the conditions of Commission orders approving 

transmission incentive rate treatments. In particular, projects that did not qualify for the 

transmission incentive to include construction work in progress in rate base were inappropriately 

including it. DAA believes more robust procedures and controls to ensure compliance with the 

application of transmission incentive rate treatments could have prevented noncompliance in this 

area. (FA16-1-000). 

Open Access Transmission Tariffs (OATT). An essential goal of open access is to support 

efficient and competitive markets. On recent OATT audits, DAA noted instances where company 

actions did not support this goal due to noncompliance with OATT terms and conditions. 

Specifically, DAA identified issues relating to improper use of network transmission service and 

secondary network transmission service (PA18-2-000), improper sales from designated network 

resources (PA17-7-000), transmission capacity not released in accordance with Commissionapproved tariffs (PA13-4-000), inaccurate available transmission capacity data posted on the Open 

Access Same-Time Information System (OASIS) (PA17-7-000), and transmission service 

provided to customers under expired transmission service agreements (PA13-6-000). 

Data Reporting by ISO/RTO Market Participants. In recent audits, DAA identified instances 

when market participants did not submit accurate data to the ISOs/RTOs (PA17-5-000, PA17-3-

000, PA15-5-000). Inaccurate data submitted by market participants weakens the ISOs’/RTOs’ 

ability to operate effective and efficient energy markets. For example, DAA identified instances 

when market participants submitted generation resource offers that did not reflect the actual known 

physical capabilities and characteristics of the resources. This affected the ability of the 

ISOs/RTOs to optimize dispatch in order to reflect the actual marginal cost of energy and to 
2019 Staff Report on Enforcement 

55 

manage transmission congestion. DAA encourages all market participants to have adequate 

controls in place to ensure accurate, complete, and timely data are submitted to the ISOs/RTOs. 

Natural Gas Accounting and Tariff Matters. Natural gas audits have evaluated compliance 

with the Commission’s accounting and FERC Form No. 2, Annual Report of Major Natural Gas 

Companies (FERC Form No. 2), reporting requirements to ensure that transparent and accurate 

data is reported for use by all stakeholders in developing and monitoring rates. The audits also 

covered the administration and application of transportation services and rates among customers 

in accordance with approved gas tariffs. In recent natural gas audits, DAA has found 

noncompliance in the following areas: 

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

specifically with regard to: (1) using the method specified in the tariff for valuing system 

gas activities (PA16-2-000, PA13-5-000); (2) enforcing stipulations in operational 

balancing agreements to manage and monitor gas imbalance activities between interstate 

and intrastate pipelines (PA16-4-000); (3) updating their tariffs to fully reflect the 

Commission’s reservation charge crediting policy36 for force majeure and non-force 

majeure events (PA16-4-000); and (4) penalty revenues collected from offending 

shippers and refunded to non-offending shippers (FA18-2-000). 

 Accounting – Natural gas pipelines did not comply with Commission accounting 

requirements, specifically with regard to: certain activities pertaining to system gas 

accounting (PA16-2-000); penalty revenues assessed to noncompliant shippers (PA16-4-

000, PA10-3-000); shipper imbalances and cash-outs (FA15-1-000, PA13-5-000, PA10-

3-000); lost and unaccounted-for gas (FA15-1-000, PA16-4-000, PA13-5-000); and fuel 

used in compressor stations (FA15-1-000). Other common areas of noncompliance 

included: (1) use of AFUDC rates above the maximum allowed rate (PA16-4-000); (2) 

improper derivation of certain components included in the AFUDC rate (FA13-7-000); 

(3) accrual of AFUDC on unpaid amounts and non-eligible construction costs (FA13-9-

000, FA12-4-000); (4) misclassification of non-operating expenses associated with 

donations, fines, and employment discrimination compromise settlements (FA15-16-

000), or with penalties and lobbying activities (PA13-5-000, FA13-7-000, FA12-4-000), 

or membership dues (FA18-2-000); (5) misclassification of operating expenses as general 

and administrative expenses (PA16-2-000, PA16-4-000); (6) improper allocation of 

shared service costs (PA16-2-000); and (7) application of cost allocation methodologies 

absent a time study or other supporting records (PA16-2-000, FA15-16-000). 

 Reporting – FERC Form No. 2 reporting was inaccurate, incomplete, and omitted 

required information and footnote disclosures required for various schedules supporting 

the financial reporting (FA18-2-000, FA17-6-000). Other reporting matters pertained to 

unfiled nonconforming service agreements and cash management agreements (FA17-6-

000). 

 

36 Natural Gas Supply Ass’n, 135 FERC ¶ 61,055, order on reh’g, 137 FERC ¶ 61,051 (2011). 
2019 Staff Report on Enforcement 

56 

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

accounting and operating data included on page 700 of the FERC Form No. 6, Annual Cost of 

Service-Based Analysis Schedule. This Schedule requires each oil pipeline company to report its 

total annual cost of service (as calculated under the Order No. 154-B methodology), operating 

revenues, and throughput in barrels and barrel-miles for the current and previous reporting year.

The amounts reflected on page 700 represent only interstate service (i.e., FERC-jurisdictional) 

amounts, while the rest of the FERC Form No. 6 includes both interstate and intrastate amounts. 

The information reported on page 700 is used by the Commission and interested parties to evaluate 

interstate pipeline rates and facilitate the Commission’s review of the five-year index.37 Recent 

oil pipeline audits have identified accounting errors that impacted the accuracy of amounts 

reported on page 700, including: incorrect determination of interstate revenues and expenses and 

designating intrastate amounts as interstate (FA16-7-000); misclassification of carrier and 

noncarrier property, and of charitable donations, fines/penalties, lobbying activities, and affiliate 

transaction mark-ups as operating rather than non-operating expenses (FA16-6-000, FA16-7-000); 

and use of the consolidated rather than the equity method of accounting for investments in joint 

ventures and subsidiary companies (FA16-5-000). DAA also found that some companies were 

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

actual service lives of the plants, and ultimately to asset groups with negative book balances 

(FA16-5-000). 

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

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

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

decommissioning trust fund reports (PA13-5-000), or clearly distinguish Commissionjurisdictional from nonjurisdictional monies held in the funds, and accurately report the amount of 

Commission-jurisdictional money in the trusts (PA13-15-000, FA15-6-000. FA15-7-000). 

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

all investments in subsidiaries. Recent audits continued to find jurisdictional companies 

incorrectly using the consolidation method of accounting for subsidiaries instead of the equity 

method. As a result, improper amounts were included in formula rate billings (PA14-2-000). 

Entities must seek a waiver from the Commission to use the consolidation method for an 

investment in a subsidiary. 

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

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

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

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

 

37 Page 700 is used as a preliminary screening tool for shippers and other stakeholders to gauge 

whether an oil pipeline’s cost of service substantially diverges from revenues generated by its 

rates. The Commission also uses the expense and barrel mile data from this page to support the 

Commission’s determination of its proposed oil pipeline transportation rate index adjustment for 

a five-year, forward looking period. The next five-year index will be based on the Commission’s 

evaluation of the increase in costs, on a dollar per barrel-mile basis from 2014 to 2019, as 

reflected on page 700 in oil pipelines’ filings, and will become effective in 2021.
2019 Staff Report on Enforcement 

57 

transparency and creates doubt regarding the effectiveness of these companies’ compliance 

programs. 

Audit Matters 

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

selected for an audit are not typically suspected of any wrongdoing. DAA consults with other 

divisions within Enforcement and other Commission program offices to inform DAA’s risk-based 

methodology for selecting audit scope areas and audit candidates. DAA is not limited in the types 

of audits it conducts; rather, it responds to the needs and priorities of the Commission and the 

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

a review of the audited entity’s internal compliance program. 

DAA’s public audit reports detail each audit’s scope, methodology, findings of 

noncompliance, and corrective recommendations, with the expectation that all jurisdictional 

entities will use this information to be better informed, avoid noncompliance, and improve 

operational performance. Although not all audits result in findings of noncompliance, when they 

do, timely implementation of the audit report’s corrective recommendations is expected. Timely 

implementation demonstrates an entity’s commitment to improving compliance with the 

Commission’s regulations and precedents and to reducing the risk of future noncompliance. 

In FY2019, DAA completed 11 audits of public utility and natural gas companies covering a 

wide array of topics. The audits resulted in 76 findings of noncompliance, 286 recommendations 

for corrective action, and directed approximately $161.2 million in refunds and other recoveries. 

Specifically, DAA directed $11.8 million to be 

refunded to jurisdictional customers and 

prevented approximately $149.4 million from 

being inappropriately amortized and collected 

through future rates. These refunds and other 

recoveries addressed, among other subjects, the 

improper application of merger-related costs; 

lobbying, charitable donation, membership 

dues, and employment discrimination 

settlement costs; revenue credits; pending 

income tax and insurance premium refunds 

being treated as prepayments; and the 

regulatory AFUDC formula. Audit 

recommendations also directed improvements 

to the audited companies’ internal accounting 

processes and procedures, financial reporting 

for accuracy and transparency, web site 

postings, and efficiency of operations. 

Collectively, these refunds and 

recommendations prevented unjust charges in jurisdictional rates, and provided procedural and 

process enhancements that benefit ratepayers and market participants. The audits summarized 

below were completed in FY2019 and provide a sample of DAA findings and results. Further 

Creating Greater Audit 

Efficiencies 

In FY2019, DAA assigned its four audit branches 

to specific industry and audit coverage areas. 

Previously, DAA staff were assigned to various 

industries and audit coverage areas 

simultaneously. Now, each audit branch and its 

staff will focus on a specific industry and 

coverage area. The new branches are organized 

as follows: Electric (formula rates), Electric 

(other financial topics), Energy Markets, and Oil 

and Gas. This change was made to enable the 

branches and their staffs to develop greater 

expertise on the industries and topics they audit. 

In turn, this will translate into greater efficiency 

and effectiveness on each audit coverage area. 

DAA’s other branches were not impacted by the 

realignment. 
2019 Staff Report on Enforcement 

58 

samples are contained in prior years’ enforcement reports. The complete audit reports are publicly 

available in the Commission’s eLibrary system.38

Formula Rates 

Black Hills Power Inc. (BHP) – Docket No. FA16-3-000. At BHP, DAA evaluated compliance 

with: (1) the approved terms, rates, and conditions of BHP’s transmission formula rate mechanism 

as provided in Attachment H of its Joint Open Access Transmission Tariff (Joint OATT); (2) the 

accounting requirements of the Uniform System of Accounts Prescribed for Public Utilities and 

Licensees in 18 C.F.R. Part 101 (Uniform System of Accounts (Public Utilities)); and (3) the 

reporting requirements of the FERC Form No. 1 under 18 C.F.R. § 141.1.39 The audit identified 

six findings and 24 recommendations that required BHP to take corrective action. The six findings 

covered the following areas: (1) incorrect accounting for utility and nonutility operating income 

payroll taxes and improper inclusion of payroll taxes in BHP’s transmission formula rate 

calculations; (2) prepaid annual software license renewal fees and prepaid maintenance costs that 

were recorded in Account 107, Construction Work in Progress (CWIP), rather than correct 

Account 165, Prepayments; (3) double counting litigation costs that flowed through formula rates 

to wholesale customers; (4) misclassifying various lobbying costs and merger-related consulting 

fees in expense accounts included in BHP’s formula rate mechanism; (5) the inappropriate transfer 

of pension and benefit expenses into Account 253, Other Deferred Credits, instead of correct 

Account 228.3, Accumulated Provision for Pensions and Benefits; and (6) calculating the cost of 

long-term debt in a manner inconsistent with the Commission’s regulations under 18 C.F.R. § 

35.13(h)(22)(ii). As a result of the audit, BHP made refunds to wholesale transmission customers 

and revised its accounting policies and procedures in identified areas of noncompliance. 

Ohio Power Company (Ohio Power) – Docket No. FA17-2-000. At Ohio Power, DAA 

evaluated compliance with: (1) the approved terms, rates, and conditions of Ohio Power’s 

transmission formula rate mechanism as provided in Attachment H-14 of the PJM OATT, and 

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

Uniform System of Accounts (Public Utilities) under 18 C.F.R. Part 101; and (3) the reporting 

requirements of the FERC Form No. 1 and the Supplemental Form 3-Q: Quarterly Financial Report 

(Supplemental Form 3-Q), under 18 C.F.R. § 141.1.40 The audit identified four findings and 18 

recommendations that required Ohio Power to take corrective action. The four findings covered 

the following areas: (1) understating revenue credits by excluding pole attachment revenue from 

revenue credit calculations; (2) not returning to transmission customers amounts collected in 

excess of Ohio Power’s total investment in certain customer-funded projects; (3) treating as 

operating expenses various non-operating expenses relating to the servicing of accounts 

receivables sold to a third party on a non-recourse basis; and (4) not reporting certain required 

information on select pages of the FERC Form No. 1. As a result of the audit, Ohio Power made 

 

38 The Commission’s eLibrary system can be accessed at www.ferc.gov/docs-filing/elibrary.asp. 

39 Black Hills Power Inc., Docket No. FA16-3-000 (Dec. 14, 2018) (delegated letter order). 

40 Ohio Power Co., Docket No. FA17-2-000 (Sept. 6, 2019) (delegated letter order). 
2019 Staff Report on Enforcement 

59 

refunds to wholesale transmission customers and updated its accounting policies and procedures 

in areas of noncompliance.

Northern States Power Company (Minnesota) (NPSM) – Docket No. FA17-4-000. At NSPM, 

DAA evaluated compliance with: (1) the approved terms, rates, and conditions of NSPM’s 

transmission formula rate mechanism provided in Attachment O of MISO’s FERC Electric Tariff, 

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

Uniform System of Accounts (Public Utilities) under 18 C.F.R. Part 101; (3) the reporting 

requirements of the FERC Form No. 1 and the Supplemental Form 3-Q, under 18 C.F.R. § 141.1; 

and (4) preservation of records requirements under 18 C.F.R. Part 125.41 The audit identified six 

findings and 24 recommendations that require NSPM to take corrective action. The six findings 

covered the following areas: (1) recording an income tax receivable that represented a refund of 

a tax overpayment in Account 165, Prepayments, instead of Account 143, Other Accounts 

Receivable, resulting in an overstatement of rate base; (2) recording other costs (unspent 

contributions to joint venture trusts and estimated pending insurance premium refunds) as 

prepayments in Account 165 that did not qualify as prepayments; (3) the misclassification as 

operating expenses of certain costs that should be recorded in non-operating expense accounts, 

including settlement payments relating to employment discrimination claims, contrary to 

Accounting Release AR-12; (4) the improper recording of amounts relating to contingent liabilities 

in Account 282.2, Accumulated Provision for Injuries and Damage, without having obtained 

Commission permission; (5) the use of depreciation rates that had not been approved by the 

Commission; and (6) failing to follow a consistent capitalization policy for transmission insulators. 

As a result of the audit, NSPM was directed to submit refund analyses and make subsequent 

refunds with respect to findings 1 through 3, and update accounting practices and policies, correct 

journal entries, and submit a corrected FERC Form No. 1 with respect to particular areas of 

noncompliance identified in the audit report.

Cleco Power LLC (Cleco Power) – Docket No. FA18-3-000. At Cleco Power, DAA evaluated 

compliance with: (1) the tariff requirements governing Cleco Power’s FERC jurisdictional rates, 

including its transmission formula rate mechanism in Attachment O of MISO’s FERC Electric 

Tariff; (2) conditions established in the July 17, 2015 Commission Order authorizing a merger 

involving Cleco Power; (3) the accounting requirements of the Uniform System of Accounts 

(Public Utilities) under 18 C.F.R. Part 101; and (4) the reporting requirements of the FERC Form 

No. 1 under 18 C.F.R. § 141.42 The audit identified 12 findings and 59 recommendations that 

required Cleco Power to take corrective action. The 12 findings covered the following areas: (1) 

improper computation of AFUDC by grossing up the return on equity rate and including 

undistributed subsidiary earnings in the equity balance; (2) improper exclusion of excess and 

deficient ADIT, created as a result of the 2017 Tax Cut and Jobs Act, from the wholesale 

transmission formula rate computation; (3) improper inclusion of merger-related internal labor 

costs and debt cancellation costs in wholesale transmission formula rate cost determinations; (4) 

improper inclusion of ADIT related to merger commitment costs in wholesale transmission 

 

41 Northern States Power Company (Minnesota), Docket No. FA17-4-000 (Aug. 29, 2019) 

(delegated letter order). 

42 Cleco Power LLC, Docket No. FA18-3-000 (Sept. 27, 2019) (delegated letter order). 
2019 Staff Report on Enforcement 

60 

formula rates; (5) recording of rent received from an affiliate in Account 455, Interdepartmental 

Rents, rather than correct Account 454, Rent from Electric Property, thereby understating revenue 

credits; (6) recording operating and maintenance costs associated with a renewable electric 

generation plant in Account 923, Outside Services Employed, instead of Account 553, 

Maintenance of Generating and Electric Equipment (Major Only); (7) recording the cost of a 

transmission asset not owned by Cleco Power in Account 353, Station Equipment, and including 

the cost in transmission formula rate computations; (8) recording compromise settlement payments 

relating to a discriminatory employment practice suit in Account 921, Office Supplies and 

Expenses, instead of Account 426.5, Other Deductions; (9) improperly including the cost of 

generation, distribution, and gas pipeline assets in the formula rate as Account 105, Electric Plant 

Held for Future Use, when Cleco Power’s formula rate specified that items in Account 105 are 

only included in the computation of the wholesale transmission revenue requirement to the extent 

they are transmission-related costs; (10) improper accounting treatment of various non-operating 

or non-transmission expenses as A&G expenses or functional transmission expenses, including 

lobbying costs, charitable contributions, membership dues, and storm damage costs incurred on 

Cleco Power’s distribution system; (11) recovery of regulatory assets for which Cleco Power had 

not obtained the necessary prior authorization from FERC; and (12) not reporting all required 

information in FERC Form No. 1 filings. As a result of the audit, Cleco Power was directed to 

submit refund analyses and make subsequent refunds with respect to findings 1 through 10. Other 

costs that were incorrectly accounted for in plant-in-service and similar accounts were reclassified 

to appropriate accounts to ensure proper treatment of the costs in the development of future rates. 

Cleco Power was also directed to update accounting practices and policies, correct journal entries, 

and update FERC Form No. 1 reporting practices with respect to particular areas of noncompliance 

identified in the audit report. 

Gas Tariff & Accounting 

Northern Natural Gas Company (Northern Natural) – Docket No. PA16-2-000. At Northern 

Natural, DAA evaluated compliance with: (1) selected provisions of Northern Natural’s FERC 

Gas Tariff; (2) accounting regulations of the Uniform System of Accounts Prescribed for Natural 

Gas Companies (Uniform System of Accounts (Natural Gas)), under 18 C.F.R. Part 201; and (3) 

reporting requirements of the FERC Form No. 2, under 18 C.F.R. § 260.1.43 The audit identified 

five findings and 15 recommendations that required Northern Natural to take corrective action. 

The five findings covered the following areas: (1) misclassifying certain labor costs averaging 

about $2.6 million annually as A&G expenses rather than O&M expenses, and between certain 

O&M expense accounts; (2) misallocating certain payroll costs and not assigning compressor 

electric costs to Northern Natural’s market-based rate storage project; (3) not maintaining proper 

records to support payroll allocations to all O&M expense accounts; (4) not performing annual 

surveys and maintaining records to support the allocation of employee labor costs to construction 

overheads; and (5) misclassifying operational gas sales revenues and other related activities for 

system gas imbalance accounting purposes. As a result of the audit, Northern Natural committed 

to update its accounting procedures and practices in the areas of noncompliance, and make 

 

43 Northern Natural Gas Co., Docket No. PA16-2-000 (May 14, 2019) (delegated letter order). 
2019 Staff Report on Enforcement 

61 

corrections in its next FERC Form No. 2 filing to rectify certain affected account balances and 

statements. 

Trunkline Gas Company (Trunkline) – Docket No. PA16-4-000. At Trunkline, DAA evaluated 

compliance with: (1) select portions of Trunkline’s FERC Gas Tariff; (2) the Uniform System of 

Accounts (Natural Gas), under 18 C.F.R. Part 201; and (3) the reporting requirements of the FERC 

Form No. 2, under 18 C.F.R. § 260.1.44 The audit identified ten findings and made 28 

recommendations that required Trunkline to take corrective action. The ten findings covered the 

following areas: (1) absence of a tariff provision for reservation charge credits to shippers with 

firm service affected by force majeure and non-force majeure events, and the improper inclusion 

of maintenance activities in the tariff’s force majeure definition; (2) tariff language not consistent 

with the Commission’s requirement that all interconnecting pipelines enter into Operational 

Balancing Agreements (OBAs), and inconsistencies between the administration and management 

of imbalances and the terms of Trunkline’s Tariff and standard OBA; (3) misreporting gas 

equivalents in annual fuel reimbursement filings in a manner that did not impact the accuracy of 

the fuel reimbursement rate charges but reduced the transparency of the gas equivalents reported 

in the deferred fuel reimbursement account component schedule; (4) recording cash management 

and affiliate transactions carried for less than a year as long-term investments or cash advances 

rather than short-term receivables or payables; (5) incorrectly applying an AFUDC rate that 

exceeded the rate of return reflected in Trunkline’s recourse rates and that did not take into account 

the effects of Trunkline’s cash management program on its AFUDC rate calculation; (6) 

classifying labor and other system gas control employee costs as A&G expenses rather than 

transmission operating expenses, and treating general supervision costs associated with 

underground storage facilities as transmission, rather than storage, operating expenses; (7) 

accounting for penalty revenues collected from offending shippers and refunded to non-offending 

shippers in Account 142, Customer Accounts Receivable, and Account 242, Miscellaneous 

Current and Accrued Liabilities, rather than Account 495, Other Gas Revenues, and Account 254, 

Other Regulatory Liabilities; (8) incorrectly accounting for lost-and-unaccounted-for fuel (LAUF) 

as compressor fuel, rather than in accounts designated for system gas losses; (9) not timely 

removing from Trunkline’s books certain assets and a regulatory liability for an asset retirement 

obligation (ARO) associated with facilities Trunkline had sold; and (10) recording incorrect 

volumes in Account 808.1, Gas Withdrawn from Storage-Debit, and Account 808.2, Gas Delivered 

to Storage-Credit. As a result of the audit, Trunkline updated its accounting policies and 

procedures in areas of noncompliance, submitted corrected FERC Form No. 2s, and removed from 

its plant or operating expense accounts certain improperly recorded expenses. 

 

Transcontinental Gas Pipe Line Company (Transco) – Docket No. FA18-2-000. At Transco, 

DAA evaluated compliance with: (1) selected provisions of Transco’s FERC Gas Tariff; (2) 

accounting regulations of the Uniform System of Accounts (Natural Gas), under 18 C.F.R. Part 

201; and (3) reporting requirements of the FERC Form No. 2, under 18 C.F.R. § 260.1.45 The 

audit identified ten findings and 31 recommendations that required Transco to take corrective 

 

44 Trunkline Gas Co., Docket No. PA16-4-000 (Oct. 19, 2018) (delegated letter order). 

45 Transcontinental Gas Pipe Line Co., Docket No. FA18-2-000 (June 25, 2019) (delegated letter 

order). 
2019 Staff Report on Enforcement 

62 

action. The ten findings covered the following areas: (1) capitalizing as plant the cost of replacing 

minor items of property rather than recording the cost in maintenance accounts; (2) improperly 

accounting for allocated direct and indirect overhead operating expenses; (3) accounting for 

allocated direct and indirect overhead non-operating expenses, such as charitable contributions, 

advertising expenses, and lobbying and political expenses, in utility plant and operating expense 

accounts rather than non-operating expense accounts; (4) improperly including the cost of unused 

materials in Account 106, Completed Construction Not Classified; (5) improperly including 

undistributed subsidiary earnings, accumulated other comprehensive income, and unamortized 

discounts on long-term debt in the equity and long-term debt balances when computing the 

AFUDC rate; (6) improperly accounting for feasibility evaluation costs on contemplated 

construction in a manner that overstated expenses in some periods, and understated them in others, 

in FERC Form No. 2 filings; (7) reporting expenses in FERC Form No. 2 relating to incremental 

rate facilities in an inaccurate manner; (8) a lack of required information in FERC Form No. 2 

filings; (9) distributing penalty revenues to the shippers that caused the penalties, thereby reducing 

the amount of penalty revenues that should have gone to non-offending shippers, and not properly 

accounting for the regulatory liabilities associated with the penalty revenue collected; and (10) 

adding required reservation charge crediting provisions to three firm storage rate schedules in 

Transco’s FERC Gas Tariff. As a result of the audit, Transco submitted proposed revised 

accounting entries and FERC Form No. 2 entries in the areas of noncompliance, thereby preventing 

amounts from potentially being inappropriately collected through future rates, and developed 

revised accounting policies and practices in the areas of noncompliance. 

Equitrans, L.P. (Equitrans) – Docket No. FA17-6-000. At Equitrans, DAA evaluated 

compliance with: (1) selected provisions of Equitrans’ FERC Gas Tariff; (2) accounting 

regulations of the Uniform System of Accounts (Natural Gas), under 18 C.F.R. Part 201; and (3) 

reporting requirements of the FERC Form No. 2, under 18 C.F.R. § 260.1.46 The audit identified 

eight findings and 28 recommendations that required Equitrans to take corrective action. The eight 

findings covered the following areas: (1) the inappropriate inclusion of unpaid contract retention 

accruals in the calculation of AFUDC; (2) the incorrect inclusion of approximately $1.3 million of 

unused construction materials in construction work orders, CWIP, and ultimately plant-in-service, 

which also resulted in the overstatement of AFUDC; (3) accounting for an income tax receivable 

that represented a refund for an overpayment in Account 165, Prepayments, rather than Account 

146, Accounts Receivable from Associated Companies; (4) recording non-operating expenses, 

such as charitable donations, penalties, and nonutility expenses, in plant cost accounts and 

operating expense accounts; (5) recording assets in Account 105, Plant Held for Future Use, when 

there was no definite plan for their future use in gas service, instead of Account 121, Nonutility 

Property; (6) failing to file two nonconforming interruptible gathering service agreements with the 

Commission; (7) not filing Equitrans’ effective cash management agreement with the Commission 

as required by 18 C.F.R. § 260.400; and (8) not including certain required information in its FERC 

Form No. 2 filings. As a result of the audit, Equitrans submitted proposed revised accounting 

entries and revised FERC Form No. 2 entries relating to areas of noncompliance, thereby 

preventing amounts from potentially being inappropriately collected through future rates, and 

developed revised accounting policies and practices in the areas of noncompliance.

 

46 Equitrans, L.P., Docket No. FA17-6-000 (Oct. 19, 2019) (delegated letter order). 
2019 Staff Report on Enforcement 

63 

Electric Tariff & Accounting 

Avista Corporation (Avista) – Docket No. PA18-2-000. At Avista, DAA evaluated compliance 

with: (1) the terms, conditions, and rates of Avista’s OATT; (2) the accounting requirements of 

the Uniform System of Accounts (Public Utilities), under 18 C.F.R. Part 101; (3) the reporting 

requirements of the FERC Form No. 1 and the Supplemental Form 3-Q, under 18 C.F.R. § 141.1; 

and (4) the regulations regarding OASIS platforms prescribed in 18 C.F.R. Part 37.47 The audit 

identified six findings of noncompliance and made 23 recommendations for corrective action. The 

six findings covered the following areas: (1) improper reservation of hourly secondary network 

transmission service to support off-system sales to non-network customers; (2) when computing 

AFUDC, improperly including undistributed subsidiary earnings in the equity component; 

including Account 219, Accumulated Other Comprehensive Income, in the equity component; 

using monthly (instead of the required prior-year-end) balances to compute equity and long-term 

debt; excluding Account 234, Notes Payable to Associated Companies, from the short-term debt 

component; and accounting for the excess AFUDC accrual arising from higher state-approved 

versus Commission-approved AFUDC rates as a cost of plant rather than a regulatory asset in 

Account 182.3; (3) improper accounting for deferred income taxes relating to the equity 

component of the AFUDC rate; (4) when removing approximately $2.8 million of system planning 

costs improperly capitalized as CWIP, failing to remove the cost of plant amounts relating to 

AFUDC, the accumulated provision for depreciation, and current and deferred income taxes that 

stemmed from the improper capitalization; (5) improperly accounting for certain items related to 

its Asset Retirement Obligations; and (6) failing to comply with the instructions on Page 398, 

Purchase and Sale of Ancillary Services, in its FERC Form No. 1 filings. The Avista audit also 

identified an additional matter regarding Avista’s use of Transmission Service Numbers. As a 

result of the audit, Avista was prevented from potentially recovering amounts inappropriately 

included in AFUDC or otherwise capitalized, and updated its accounting policies and practices in 

areas of noncompliance. 

American Electric Power Company, Inc. (AEP) – Docket No. FA17-1-000. At AEP, DAA 

evaluated compliance with: (1) cross-subsidization restrictions on affiliate transactions under 18 

C.F.R. Part 35; (2) accounting, recordkeeping, and reporting requirements under 18 C.F.R. Part 

366; (3) the Uniform System of Accounts For Centralized Service Companies under 18 C.F.R. 

Part 367; (4) preservation of records requirements for holding companies and service companies 

under 18 C.F.R. Part 368; and (5) FERC Form No. 60, Annual Report of Centralized Service 

Companies (FERC Form No. 60), requirements under 18 C.F.R. Part 369. The audit also evaluated 

the associated public utilities’ transactions with affiliated companies for compliance with the 

Commission's accounting requirements under the Uniform System of Accounts (Public Utilities), 

under 18 C.F.R. Part 101, the applicable reporting requirements in the FERC Form No. 1, under 

18 C.F.R. Part 141, and jurisdictional rates on file.48 The audit identified four findings and made 

22 recommendations requiring corrective action. The findings addressed the following areas: (1) 

when calculating AFUDC, certain AEP jurisdictional utilities improperly included Account 219, 

 

47 Avista Corp., Docket No. PA18-2-000 (Sept. 19, 2019) (delegated letter order). 

48 American Electric Power Company, Inc., Docket No. FA17-1-000 (Apr. 23, 2019) (delegated 

letter order). 
2019 Staff Report on Enforcement 

64 

Accumulated Other Comprehensive Income, as part of the equity component, and multiple AEP 

jurisdictional utilities improperly computed AFUDC rates on a monthly basis; (2) AEP improperly 

included approximately $295,000 of merger-related transition costs in formula rate determinations 

and wholesale transmission customer bills; (3) AEP recorded charitable contributions and a 

penalty payment in various A&G and operation and maintenance (O&M) expense accounts, 

instead of using the appropriate non-operating expense accounts; and (4) various A&G labor, 

membership dues, outside services, and advertising expenses were misclassified. As a result of 

the audit, AEP or its jurisdictional utility subsidiaries made refunds to wholesale customers, 

updated accounting policies and practices in areas of noncompliance, and reclassified amounts that 

otherwise might have been improperly used in the development of future rates. 

Xcel Energy Inc. (Xcel) – Docket No. FA17-4-000. At Xcel, DAA evaluated compliance with: 

(1) cross-subsidization restrictions on affiliate transactions under 18 C.F.R. Part 35; (2) 

accounting, recordkeeping, and reporting requirements under 18 C.F.R. Part 366; (3) preservation 

of records requirements for holding companies and service companies under 18 C.F.R. Part 368; 

and (4) the Uniform System of Accounts for Centralized Service Companies under 18 C.F.R. Part 

367. The audit also evaluated the associated public utilities’ compliance with the Commission’s 

accounting requirements for transactions with associated companies under the Uniform System of 

Accounts (Public Utilities), under 18 C.F.R. Part 101 and the applicable reporting requirements in 

the FERC Form No. 1, under 18 C.F.R. Part 141.49 The audit identified five findings and made 14 

recommendations requiring corrective action. The findings addressed the following areas: (1) 

Xcel’s centralized service company, Xcel Energy Services Inc. (XES), allocated capital costs of 

corporate software only to the Xcel public utilities, but such capital costs should have been 

allocated to all Xcel companies benefiting from XES’ use of the software, as required by 18 C.F.R. 

§ 376.11; (2) XES incorrectly calculated a cost allocation method used on shared costs for 

operation, maintenance, and management of the Xcel companies’ information technology 

network; (3) XES allocated income tax expense only to the Xcel public utilities, but such expense 

should have been allocated to all Xcel companies that caused Xcel to incur income tax liabilities, 

per the requirements of 18 C.F.R. § 376.11; (4) payments relating to settlement of employment 

discrimination claims were recorded in operating expense accounts, instead of Account 426.5, 

Other Deductions, as required by Accounting Release AR-12, and the expenses were passed 

through to wholesale transmission customers; and (5) XES did not disclose all allocation 

methodologies that it used to assign costs in its FERC Form No. 60 filings. As a result of the audit, 

Xcel was directed to submit refund analyses relating to the areas of noncompliance, and update its 

accounting and FERC Form No. 60 procedures and policies. 

Pending Contested Audit Matters 

Dominion Energy Transmission, Inc. (DETI) – FA15-16-000. At DETI, DAA evaluated 

compliance with: (1) its FERC Gas tariff; (2) the accounting requirements of the Uniform System 

of Accounts (Natural Gas), under 18 C.F.R. Part 201; and (3) the reporting requirements of the 

 

49 Xcel Energy Inc., Docket No. FA17-4-000 (Aug. 29, 2019) (delegated letter order). 
2019 Staff Report on Enforcement 

65 

FERC Form No. 2, under 18 C.F.R. § 260.1.50 The audit identified six findings and 24 

recommendations that required DETI to take corrective action. On September 27, 2017, DETI 

notified DAA that it accepted five of the six findings and intended to contest one finding. As a 

result of the accepted findings, incorrectly accounted for were reclassified to accounts not used in 

the development of future cost of service rates. 

On December 8, 2017, DETI formally contested the Audit Report’s finding that DETI did not use 

its own book balances and cost rates associated with its debt, equity, and CWIP to compute its 

AFUDC rate as required by the Commission’s accounting requirements. DETI elected to have a 

paper hearing under the procedures in 18 C.F.R. Part 158. Initial and reply memoranda have been 

filed by interested entities. This matter is pending before the Commission. 

Accounting Matters 

DAA administers the Commission’s accounting programs established for the electric, natural 

gas, and oil industries, which are vital components of the Commission’s strategy of setting just 

and reasonable cost-of-service rates. The foundation of the Commission’s accounting programs 

is the Uniform System of Accounts codified in the Commission’s regulations for public utilities 

and licensees, centralized service companies, natural gas companies, and oil pipeline companies. 

In addition, the Commission issues accounting rulings relating to specific transactions and 

applications through orders and Chief Accountant guidance letters based upon a consistent 

application of the uniform systems of accounts. This body of accounting regulations, orders, and 

guidance letters comprises the Commission’s accounting requirements and promotes consistent, 

transparent, and decision-useful accounting information for the Commission and other 

stakeholders to set and monitor cost-of-service rates. DAA enables the Commission to achieve 

this strategic goal through careful consideration of the Commission’s ratemaking policies, past 

Commission actions, industry trends, and external factors (e.g., economic, environmental, and 

technological changes, and mandates from other regulatory bodies) that impact the industries under 

the Commission’s jurisdiction. 

A substantial part of DAA’s accounting workload involves coordination across various 

Commission program offices to provide regulatory accounting input and analysis on various types 

of filings made by jurisdictional entities. In addition, DAA provides accounting expertise to 

Commission program offices in developing Commission policies and rulemakings to ensure these 

initiatives fully consider and evaluate accounting and financial issues affecting jurisdictional 

entities. DAA also holds pre-filing meetings with jurisdictional entities seeking to make filings 

with the Commission to inform them of relevant accounting requirements. To better serve the 

Commission and other stakeholders in these capacities, DAA monitors and participates in projects 

initiated by the Financial Accounting Standards Board (FASB), Securities and Exchange 

Commission, and International Accounting Standards Board to address issues that may impact the 

Commission or its jurisdictional entities. 

 

50 Dominion Energy Transmission, Inc., Docket No. FA15-16-000 (Nov. 8, 2017) (delegated letter 

order). 
2019 Staff Report on Enforcement 

66 

DAA also receives accounting inquiries and provides informal feedback on the Commission’s 

accounting and financial reporting regulations. These inquiries come directly from jurisdictional 

entities, industry trade groups, legal and consulting firms, and other industry stakeholders, as well 

as through the Commission’s Compliance Help Desk, Office of External Affairs (OEA), 

Enforcement Hotline, and other Commission program offices. DAA encourages jurisdictional 

entities to also seek formal guidance on accounting issues of doubtful interpretation to ensure 

compliance with the Commission’s accounting and financial reporting regulations. Finally, a 

critical part of DAA’s workload includes educating regulated entities and promoting compliance 

with the Commission’s regulations through participation in various formal speaking engagements 

and industry accounting meetings. 

Overview of FY2019 Filings Reviewed by DAA 

In FY2019, DAA advised and acted on 433 proceedings at the Commission covering various 

accounting matters with cost-of-service rate implications, such as accounting for mergers and 

divestitures, asset transactions, early plant retirements, AFUDC, pensions and other postretirement benefits, and income taxes. These proceedings included petitions for declaratory orders, 

natural gas certificate applications, merger and acquisition applications, electric and natural gas 

rate filings, applications for issuance of securities, and requests for accounting approval. In many 

of these cases, DAA served in an advisory role, identifying and analyzing the accounting 

implications of those requests. Over the past five years, DAA has reviewed over 2,000 

Commission proceedings to ensure proper accounting is followed and to advise the Commission 

of potential rate impacts related to accounting decisions. 

Requests for Approval of the Chief Accountant 

 In FY2019, DAA took action under the Chief Accountant’s delegated authority on 120 

accounting filings requesting approval of a proposed accounting treatment or financial reporting 

matter.51 These filings raised various issues related to the Commission’s accounting and financial 

 

51 The accounting filings are docketed in the Commission’s eLibrary with the “AC” docket prefix 

(AC Dockets).

0

50

100

150

200

Accounting Filings Rate Filings Certificate Filings Mergers and Asset

Transactions Filings

Securities Filings

Filings to the Commission Reviewed by DAA

2015 2016 2017 2018 2019
2019 Staff Report on Enforcement 

67 

reporting requirements for electric, natural gas, and oil pipeline entities. Of note in FY2019, there 

was a continued high volume of accounting filings related to asset acquisitions, similar to FY2018. 

There was also a notable increase in the number of filings related to deferral of early plant 

retirement costs in regulatory accounts in response to applications by jurisdictional entities to 

recover those stranded costs in rates. The stranded costs, upon approval by the Chief Accountant, 

are held in regulatory accounts and amortized in concert with the period of rate recovery approved 

by the rate regulator. 

 The Chief Accountant also issued a number of orders approving the proposed accounting for 

certain Account Standards Updates (ASU) and new Accounting Standards Codifications (ASC) 

issued by the FASB. The areas affected by the ASUs during FY2019 included changes in the fair 

value of equity instruments previously recorded in accumulated other comprehensive income 

(ASU 2016-01),52 changes to revenue recognition of contracts with customers (ASC 606),53 and 

the stranded tax effects of the Tax Cuts and Jobs Act of 2017 (TCJA) within accumulated other 

comprehensive income (ASU 2018-02).54 The orders pertaining to ASU 2018-02 are further 

discussed below with other accounting issuances related to the TCJA. 

 When jurisdictional entities would like to make changes or corrections in accounting that 

require a prior period adjustment and may affect their regulatory accounting, the Commission’s 

regulations require them to file a request with the Commission and receive approval before using 

Account 439, Adjustments to Retained Earnings, for public utilities and licensees, centralized 

service companies, and natural gas companies, and Account 705, Prior Period Adjustments to 

Beginning Retained Income Account, for oil pipeline companies. In reviewing these filings, DAA 

staff considers the changes to retained earnings as a result of the prior period adjustments and their 

effects on each entity’s capital structure. In FY2019, the Chief Accountant considered 10 of these 

filings, concluded that the requested prior period adjustments were adequately supported, and 

issued letter orders approving the requests. The Chief Accountant letter orders also noted that the 

approval is not intended to influence the outcome of any rate treatment established for the 

accounting adjustments. DAA encourages companies making similar filings to include all relevant 

historical evidence and analyses to support the proposed adjustments. 

 

52 See FASB Accounting Standards Update No. 2016-01, Recognition and Measurement of 

Financial Assets and Financial Liabilities (January 2016). 

53 See FASB Accounting Standards Codification Topic 606, Revenue from Contracts with 

Customers. 

54 See FASB Accounting Standards Update No. 2018-02, Reclassification of Certain Tax Effects 

from Accumulated Other Comprehensive Income (February 2018). 
2019 Staff Report on Enforcement 

68 

Rate Proceedings 

In FY2019, DAA participated in 123 rate proceedings that continued predominately to involve 

electric formula rate proceedings, but also included natural gas and oil rate proceedings. DAA 

worked with other Commission program offices to make recommendations related to accounting 

and financial issues and their effects on rates. Since many electric and natural gas rates are derived 

from accounting information in FERC Form Nos. 1 and 2, DAA sought to ensure that accounting 

information in rate proceedings was computed and presented consistently with the Commission’s 

requirements. DAA also worked with other Commission program offices to enhance the 

transparency of financial information affecting formula rates so that all stakeholders have an 

opportunity to review the costs included in rates. Recurring areas of emphasis in DAA’s rate filing 

reviews during FY2019 included stranded costs associated with early plant retirements, asset 

retirement obligations, pensions and post-retirement benefits other than pensions, and allocation 

of expenses to production, transmission, and distribution. 

Certificate Proceedings 

In FY2019, DAA reviewed 38 natural gas pipeline certificate applications seeking various 

authorizations, including to: (1) construct, own, and operate new pipeline facilities; (2) acquire 

pipeline facilities; (3) abandon pipeline facilities in place, by removal, or by sale; and (4) establish 

initial recourse rates for new pipeline service. DAA continued to assist other Commission program 

offices in the development of just and reasonable rates by reviewing construction costs and other 

items used to determine initial recourse rates, including O&M expenses, depreciation, taxes, and 

overall rate of return. In reviewing such information during FY2019, DAA continued to focus on 

whether applicants followed Commission accounting requirements related to asset abandonment, 

construction, AFUDC, contributions in aid of construction, regulatory assets and liabilities, leases, 

and system gas. 

0 5 10 15 20 25 30 35 40 45 50

Other Miscellaneous

Record Retention

Regulatory Assets/Liabilities

Deferred Income Taxes

Construction Period Costs

Prior Period Adjustment

Accounting Policy

Sale of Assets

Purchase of Assets

Mergers and Divestitures

Accounting Filings (AC Dockets)

2017 2018 2019
2019 Staff Report on Enforcement 

69 

Merger and Acquisition Proceedings 

In FY2019, DAA reviewed four merger and divestiture applications and approximately 143 

asset acquisition and sales applications from public utilities under section 203 of the Federal Power 

Act (FPA). The accounting review for merger transactions entails examining proposed accounting 

for costs to execute the transaction, costs to achieve integration and synergies, purchase accounting 

adjustments to assets and liabilities, and goodwill. DAA also examines whether the accounting is 

consistent with any hold-harmless or other rate requirements discussed in a merger order. For 

asset acquisition transactions, staff conducts accounting reviews to examine whether applicants 

properly accounted for the purchase and sale of plant assets consistent with Commission 

regulations. The review focuses on whether jurisdictional entities maintained the appropriate 

original cost and historical accumulated depreciation of acquired utility plant and properly 

recorded acquisition premiums or discounts. DAA also reviewed merger and acquisition 

accounting entries to determine whether they provided enough transparency to the Commission 

and all interested parties to evaluate the impact on rates. DAA also consistently reminded 

jurisdictional entities to file accounting entries timely, within six months of a finalized merger or 

asset transaction, in accordance with Electric Plant Instruction No. 5 and the requirements of 

Account No. 102, Electric Plant Purchased or Sold. 

Debt and Security Issuance Proceedings 

In FY2019, DAA reviewed six public utility security issuance applications. Section 204(a) of 

the FPA requires jurisdictional entities to receive Commission authorization before issuing 

securities or assuming liabilities as guarantor, endorser, surety, or otherwise in respect of any 

security of another person. In reviewing these filings, the Commission evaluates an applicant’s 

viability based on a review of financial statements submitted with the application, the applicant’s 

interest coverage ratio, debt maturities, and cash-flow projections. DAA’s review of debt and 

security applications provides critical analysis that helps prevent public utilities from borrowing 

excessive amounts of money and inappropriately using the proceeds to finance nonutility 

businesses without demonstration of the ability for repayment. This also ensures that future 

issuances of debt are consistent with the public interest. 

Accounting Inquiries 

In FY2019, DAA responded to 74 accounting inquiries from jurisdictional entities and other 

stakeholders on various accounting and financial topics. Accounting inquiries are made through 

the Compliance Help Desk, the Accounting Inquiries phone line and email, or directly to DAA 

staff. A large number of accounting inquiries during FY2019 sought accounting and financial 

reporting direction on capitalization of various costs, taxes, and functional classifications of 

electric plant. DAA responds to such accounting inquiries by providing informal accounting and 

financial reporting guidance based on Commission precedent and regulations, in addition to 

instructing individuals on how to find documents and regulations using the Commission’s eLibrary 

system and Title 18 of the Code of Federal Regulations available electronically. Such informal 

accounting and financial reporting guidance is not binding on the Commission, and does not grant 

waiver of a Commission regulation or order. 
2019 Staff Report on Enforcement 

70 

Accounting for the Tax Cuts and Jobs Act of 2017 (TCJA) 

On November 15, 2018, the Commission issued a policy statement in Docket No. PL19-2-000 

to discuss certain rate and accounting implications resulting from the TCJA.55 Specifically, the 

Commission required that public utilities and natural gas pipelines record excess and deficient 

Accumulated Deferred Income Taxes (ADIT) in Account 254, Other Regulatory Liabilities, and 

Account 182.3, Other Regulatory Assets, respectively. The excess and deficient ADIT should then 

be amortized consistent with the manner in which such amounts are reflected in rates using 

Account 410.1, Provision for Deferred Income Taxes, Utility Operating Income, and Account 

411.1, Provision for Deferred Income Taxes – Credit, Utility Operating Income. The policy 

statement also clarified that for public utilities and natural gas pipelines, the balances of excess 

and deficient ADIT should continue to be recognized as regulatory liabilities and assets after an 

asset sale, in cases where the excess and deficient ADIT do not transfer to the purchaser of the 

asset. Similarly, public utilities and natural gas companies should continue to account for excess 

and deficient ADIT related to retirements as regulatory liabilities and assets. 

Separately, the Chief Accountant issued numerous letters of approval during FY2019 for 

requests to reclassify the deferred tax effects stranded in Accumulated Other Comprehensive 

Income (AOCI) as a result of the TCJA’s impact on retained earnings. This reclassification was 

necessary because other comprehensive income is accounted for net of tax, including any deferred 

tax effects. When items are realized and transferred from AOCI to income, the income tax effects 

are recognized at current tax rates. The TCJA created a discord between those items already 

recognized net of tax in AOCI using the previous tax rates and the eventual tax recognition in 

income using the new tax rates. This difference is considered stranded in AOCI. In order to 

remove these stranded amounts from AOCI, regulated entities have requested approval to move 

these amounts directly into retained earnings. This treatment is consistent with the allowed 

accounting treatment by the FASB under ASU 2018-02. 

 

Accounting for Leases 

On December 27, 2018, the Chief Accountant issued accounting guidance in Docket No. AI19-

1-000 relating to the accounting for leases. The accounting guidance was issued in response to 

multiple inquiries from jurisdictional entities and other regulatory bodies regarding whether and 

how the Commission would implement ASC 842 issued by FASB. Prior to ASC 842, under 

generally accepted accounting principles, leases were classified either as operating leases, which 

did not recognize any assets or liabilities on the balance sheet, or capital leases, which recognized 

leased assets and lease obligations on the balance sheet. The criteria for classifying a lease as a 

capital lease depended on whether at least one of four criteria were met. If any one of those criteria 

were met, the lease was considered a capital lease. ASC 842 changed the nomenclature of the two 

classes of leases to operating leases and finance leases. While the requirement to meet at least one 

of four criteria to classify a lease as a finance lease is similar to that previously used for capital 

leases (i.e., the distinction between an operating lease and a capital lease is similar to the distinction 

between an operating lease and a finance lease), there was a significant change to accounting for 

 

55 Accounting and Ratemaking Treatment of Accumulated Deferred Income Taxes and Treatment 

Following the Sale or Retirement of an Asset, Docket No. PL19-2-000 (Nov. 15, 2018). 
2019 Staff Report on Enforcement 

71 

operating leases. Under ASC 842, all leases, including operating leases, require recognition of 

assets and liabilities on the balance sheet if the lease term is over 12 months. With this change, 

most companies will now reflect much larger balance sheets than those prior to ASC 842. 

The Chief Accountant guidance letter clarified that under the Commission’s accounting 

requirements, jurisdictional entities may also recognize assets and liabilities on the balance sheet 

for operating leases consistent with ASC 842. However, while ASC 842 requires the presentation 

of operating leases and finance leases separately on the balance sheet, the Chief Accountant 

explained that the Uniform System of Accounts only provides one account for leased assets 

(Account 101.1, Property under Capital Leases). Similarly, the Uniform System of Accounts only 

provides one account for the current portion of lease liabilities (Account 243, Obligations under 

Capital Leases–Current) and one account for the long-term portion of lease liabilities (Account 

227, Obligations under Capital Leases–Noncurrent). Accordingly, both operating leases and 

finance leases on the balance sheet must be accounted for under the same lease asset and lease 

liability accounts. Another difference between lease accounting under ASC 842 and lease 

accounting under the Commission’s accounting requirements is whether to recognize land rights 

as a lease. Under ASC 842, certain easements are considered leases, while the Uniform System 

of Accounts requires all land rights to be recognized as part of utility plant in service. 

Staff notes that changes in accounting by the FASB, such as ASC 842, are not to be construed 

as a change to, or a waiver of, the Commission’s accounting requirements. When necessary, the 

Chief Accountant or the Commission will issue guidance on the implementation of changes in 

accounting standards issued by the FASB. 

 International Financial Reporting Standards 

DAA continued its participation with the International Financial Reporting Standards (IFRS) 

Foundation, the International Accounting Standards Board (IASB), and their project on RateRegulated Activities (RRA), which remains of special interest to the Commission and its regulated 

entities. In FY2019, the Chief Accountant, as a Consultative Group member for the RRA Project, 

participated in informal and formal meetings with U.S. regulated entities, state commissions, and 

international regulators to inform the development of an IFRS accounting standard that provides 

for regulatory assets and liabilities in IFRS financial statements. During this period, the IASB has 

begun to develop an accounting model for recognizing regulatory assets and liabilities on IFRS 

financial statements, and is expected to issue an exposure draft for comments during the first half 

of calendar year 2020. In FY2020, the Chief Accountant stands ready to continue providing expert 

advice to IASB staff regarding the development of permanent standards on rate-regulated 

activities.
2019 Staff Report on Enforcement 

72 

DIVISION OF ANALYTICS AND SURVEILLANCE 

Overview 

The Division of Analytics and Surveillance (DAS) develops surveillance tools, conducts 

surveillance, and analyzes transactional and market data to detect potential manipulation, 

anticompetitive behavior, and other anomalous activities in the energy markets. DAS focuses on: 

(1) natural gas surveillance; (2) electric surveillance; and (3) analytics for reviewing market 

participant behavior. The analysts and economists in DAS identify market participants whose 

conduct potentially calls for investigation. They do this not only by conducting surveillance and 

inquiries of the natural gas and electric markets, but also by reviewing market monitor referrals56

and Hotline complaints against the non-public data available to the Commission. This internal 

review process reduces burden on the industry, by resolving some matters without the need for 

investigation. When an investigation is opened, DAS staff participates in investigations with 

attorneys from DOI, providing detailed transactional analysis, market event analysis, and subject 

matter expertise. 

To perform these functions, access to high quality, relevant, and timely data is essential. Since 

the creation of DAS in 2012, the Commission has been enhancing its data collection through 

orders, agreements, and subscription services in a manner designed to minimize burden on market 

participants. In Order No. 760, the Commission directed the ISOs/RTOs to provide, on an ongoing 

basis and in a format consistent with how the data is collected in each market, critical information 

on market bids, offers, and market outcomes.57 On average, the Commission receives, on a nonpublic basis, approximately seven gigabytes of data in more than 1,350 tables each day from the 

six organized markets combined. Each ISO/RTO database is different, and DAS is responsible for 

understanding the particular nuances of each database and preparing them for use in surveillance 

screens and analyses. 

Similarly, pursuant to Order No. 771,58 the Commission gained access to the electronic tags 

(eTags) used to schedule the transmission of electric power interchange transactions in 

jurisdictional wholesale markets by requiring that each covered eTag identify the Commission as 

a party authorized to review its contents. The Commission has access to approximately 7.6 million 

eTags and gains access to approximately 5,000 new eTags each day. The Commission also 

routinely receives non-public physical electric and natural gas market data from the 

Intercontinental Exchange (ICE) and a subset of the Large Trader Report from the Commodity 

Futures Trading Commission (CFTC) through a Memorandum of Understanding. DAS staff 

 

56 Specific examples of this review of market monitor referrals are included in DOI Section F.2. 

of this report under “Illustrative MMU Referrals Closed with No Action.” 

57 Enhancement of Electricity Market Surveillance and Analysis through Ongoing Electronic 

Delivery of Data from Regional Transmission Organizations and Independent System Operators, 

Order No. 760, 139 FERC ¶ 61,053 (2012). 

58 Availability of E-Tag Information to Commission Staff, Order No. 771, 141 FERC ¶ 61,235 

(2012). 
2019 Staff Report on Enforcement 

73 

continue to use these data sources, EQR data, and data from a variety of subscription-based 

services, extensively. 

 Surveillance 

As part of its surveillance function, DAS develops, refines, and implements surveillance tools 

and algorithmic screens to perform continuous surveillance and analysis of market participant 

behavior, economic incentives, operations, and price formation, both in the natural gas and 

electricity markets. In the context of surveillance, DAS seeks to: (1) detect anomalous activities 

in the markets; and (2) identify potential investigative subjects. When a surveillance screen trips, 

staff conducts a series of analyses to gain information about the activity that caused it. First, staff 

evaluates the activity using available market data and information to determine whether there is a 

fundamentals-based explanation for the activity. Most often, staff finds such an explanation. 

However, when the follow-up analyses fail to explain the screen trip or surveillance alert, staff 

performs a more in-depth review of the conduct, which may involve contacting the market 

participant to request additional information and explanations for the conduct. Staff classifies this 

enhanced review as the opening of a surveillance inquiry. If, after conducting an inquiry, staff is 

still concerned that there is a potential violation, it will recommend that DOI open an investigation 

into the matter. 

1. Natural Gas 

DAS conducts surveillance and analysis of the physical natural gas markets to detect potential 

manipulation and anti-competitive behavior. Automated natural gas screens cover the majority of 

physical and financial trading hubs in the United States, monitoring daily and monthly markets. 

These screens and data feeds alert staff to anomalous market conditions and market participant 

actions based on a review of supply, demand, pipeline utilization, operational notices, and physical 

and financial trading. Asset-based screens evaluate natural gas trading around infrastructure, 

including natural gas storage, pipeline capacity, and electric generation. In addition, DAS uses 

Large Trader Report data from the CFTC to weigh potential financial incentives that might 

encourage a market participant to engage in a manipulative scheme. 

In FY2019, natural gas surveillance screens produced approximately 7,629 screen trips. Staff 

reviewed these automated screen trips, compared the conduct that triggered the screen trips to 

conduct at other hubs, and evaluated whether a fundamentals or physical asset-based explanation 

existed for the activity. DAS also reviewed other observed anomalous market outcomes for 

potential concern. In FY2019, staff reviewed and dismissed most of the screen trips as consistent 

with concurrent conditions. Where concerns remained, staff classified specific screen trips and 

market activity as “surveillance alerts.” Staff documented 1,286 surveillance alerts that ranged in 

severity from low to high concern. When concerns persisted through more thorough review, DAS 

opened a surveillance inquiry, which is a more in-depth staff review of the specific trading 

behavior, which in some cases involves contacting market participants for additional information 

or to discuss the conduct at issue. In FY2019, DAS conducted 20 such natural gas surveillance 

inquiries. Of these inquires, DAS referred one to DOI for investigation. 
2019 Staff Report on Enforcement 

74 

2. Electricity

DAS accesses data from a variety of sources to screen for anomalies and potentially 

manipulative behavior in the ISOs/RTOs and bilateral wholesale electricity markets. During 

FY2019, staff ran monthly and weekly screens to identify patterns by monitoring the interactions 

between bids and cleared physical and financially-settled electricity products. In particular, these 

screens identify financial transmission rights and swap-futures that settle against nodes that are 

affected by transmission constraints where market participants also trade virtuals, generate 

electricity, purchase electricity, or move power between Balancing Authorities. 

During the fiscal year, staff continued to refine its processes for screening to detect: (1) 

uneconomic virtual transactions by node, zone, and constraint; (2) day-ahead and real-time market 

congestion manipulation that would benefit financial transmission rights (FTRs), synthetic realtime FTRs, swap-futures positions for physical load and generation portfolios; (3) anomalies in 

physical offer patterns, particularly in non-price based parameters; (4) abnormal out-of-market 

payments; (5) irregularities in capacity market sell offers; and (6) loss making physical fixed-price 

offer strategies in bilateral electricity markets. DAS also continued to bolster its tools to view 

patterns of behavior on a portfolio basis, across Balancing Authority borders and jurisdictional 

commodities. 
2019 Staff Report on Enforcement 

75 

Each month during FY2019, DAS ran and reviewed 83 electric surveillance screens; monthly, 

hourly and intra-hour sub-screens; and reports for over 37,000 hub and pricing nodes within the 

six ISOs/RTOs. Additionally, DAS screened non-RTO markets and cross-RTO portfolio trades 

for potential manipulation. In reviewing screen trips and, in some cases, after communicating with 

the ISO/RTO Market Monitoring Units, DAS identified 23 instances of market behavior that 

required further analysis through a surveillance inquiry. Of the 23 electric surveillance inquiries, 

five were referred to DOI for investigation, twelve were closed with no referral, and six remain 

open with staff continuing its analytic work. 

3. Illustrative DAS Surveillance Inquiries Closed With No Referral 

Market Manipulation (Gas). DAS natural gas surveillance screens identified a market 

participant selling at low prices and with high market concentration in bidweek trading at a hub in 

the West, while holding large short financial basis positions. This created short exposure to nextmonth bidweek indices like Platts Inside FERC Gas Market Report (IFERC). Staff contacted the 

market participant, who explained that: (1) the participant needed to sell gas acquired under a 

long-term contract; (2) limited information concerning current events in the market affected supply 

and exacerbated the price collapse; and (3) the market experienced low liquidity during the trading 

period. After staff reviewed additional information provided by the market participant and verified 

market conditions, DAS closed the surveillance inquiry with no referral to DOI. 

Market Manipulation (Gas). DAS identified a market participant selling at consecutively lower 

prices into short financial positions at a western hub during bidweek. At the same time, staff 

observed that published indices and trade prices diverged. Staff collected index and transaction 

data to develop a clear picture of the trades’ effect on the index price. Staff held a conference call 

with the market participant, specifically the gas trader, the gas-trading manager, the company’s 
2019 Staff Report on Enforcement 

76 

compliance officer, and outside counsel to discuss the low priced trades. On the call, the company 

explained its motivation, trading strategy, and build-up of financial positions, as well as the market 

conditions. In addition, the company sent DAS additional data on pipeline capacity, daily 

exposure, and over-the-counter (OTC) sales. The company also outlined its internal compliance 

review process. After staff verified additional information provided by the market participant, 

DAS closed the matter with no referral to DOI. 

Market Manipulation (Gas/Electric). DAS evaluated a tip from a Hotline caller that alleged that 

a market participant imported gas uneconomically and depressed index prices for multiple months 

to benefit short financial positions. DAS observed that the accused market participant had minimal 

physical trading activity in the relevant hub, but that it had short financial gas and power positions 

that stood to benefit from market movements. Upon review, DAS determined that the company's 

financial gas and power sales could have been a reasonable mechanism to secure fuel for affiliated 

power generation. DAS closed the inquiry without referral to DOI. 

Market Manipulation (Gas). DAS reviewed the natural gas trading activities of electric 

generators that triggered certain key screen trips during specific market events. Staff examined 

whether this activity might be responsible for some of the high natural gas and related power 

prices. Staff requested next-day and same-day bids and offers from ICE. The data did not show 

anomalous order activity, and, therefore, DAS did not refer this matter to DOI. 

Market Manipulation (Gas). DAS natural gas surveillance screens identified a company that 

sold gas with high market share, losses, and a large short financial basis position during a bidweek 

at a northeastern hub. Staff was concerned that the company was depressing prices at this hub in 

both bidweek and next day markets to benefit its financial short position and to create lower prices 

for its purchase needs at other hubs in the region. Staff held a conference call with the company 

and received additional information on the company’s interrelated pipeline capacity, risk 

exposures, and physical transactions. Staff determined that the company had engaged in 

transportation capacity transactions that had firm deliverability to the hub, and basis spreads along 

the transport path to an upstream hub justified the pricing of its sales at the hub in question. DAS 

closed the surveillance inquiry with no referral to DOI. 

Market Manipulation (Electric). DAS staff routinely reviews cross-market transactions that 

result in an uneconomic flow of power across ISO/RTO boundaries, because they have the 

potential to impact prices in a neighboring ISO/RTO. In FY2019, DAS electric surveillance 

screens flagged more than one market participant exporting power in quantities that were large 

relative to the interface limit. In these cases, staff ran additional analyses on the market 

participants’ portfolios in both the exporting and importing markets. Staff reviewed potentially 

benefiting positions such as generation, swaps, and swap futures. DAS closed these inquiries 

without a referral to DOI, because it did not find a nexus between the loss-making interchange 

trades and profitable trades elsewhere in the market participants’ portfolios. 

Market Manipulation (Electric). DAS identified a power plant that received large uplift 

payments during a shoulder month period. One of the plant’s units was on outage, and the other 

units were needed for reliability. In addition, the start-up costs submitted for the plant during 

this shoulder month period were higher than normal. Further research revealed that the plant had 

a temporary adder in place. The market participant provided information on the additional costs 
2019 Staff Report on Enforcement 

77 

that demonstrated that they related to the ongoing operation of the remaining units. DAS closed 

this inquiry with no referral to DOI. 

Market Manipulation (Electric). DAS electric surveillance screens identified a market 

participant that repeatedly sold physical power at a Western bilateral trading hub, while appearing 

to hold a corresponding leveraged short financial position at the same hub that would benefit from 

a lower index. The market participant had high concentration levels and often transacted at the 

beginning of trade sessions when the bid-ask spread was the highest. Staff conducted an inquiry 

into the market participant’s portfolio and determined that the market participant was using hub 

transactions to market output from a plant it owned to the broader region, and that the physical 

power sales were economic. Staff further determined that, after accounting for all the market 

participant’s physical and financial exposure to the hub, the financial position was not leveraged. 

As a result, the inquiry was closed without a referral to DOI. 

Market Manipulation (Electric). DAS routinely focuses on virtual trading. Several 

surveillance screens identify virtual bidding behavior that appears uneconomic or otherwise 

anomalous. In the past year, several market participants were flagged for further analysis. In 

one such case, a market participant consistently traded Decrement Bids (DECs) into a large, 

leveraged long swap-futures position. Deeper analysis revealed that the trader had an over-thecounter short position that was being hedged with the swap-futures. As a result, the inquiry was 

closed with no referral to DOI. 

Market Manipulation (Electric). DAS electric surveillance screens identified a market 

participant whose virtual positions appeared to be creating or aggravating a binding constraint in 

the day-ahead market. Staff analyzed the trader’s effective positions potentially affecting the 

constraint, and its effective downstream positions that could benefit. Staff concluded that the 

virtual positions were too small and inconsistent throughout the month to cause the constraint to 

bind. As a result, the inquiry was closed with no referral to DOI. 

Analytics 

During FY2019, DAS worked on approximately 45 investigations, some of which are 

discussed above in the DOI section. Many of these investigations involve allegations of 

manipulation in the Commission-jurisdictional natural gas and electricity markets, or violations of 

tariff provisions that are intended to foster open, competitive markets. DAS’ investigative 

activities generally include: (1) assessing market conditions during periods of suspected 

manipulation; (2) identifying patterns of market activity that could indicate market manipulation; 

(3) identifying time periods in which potentially manipulative activities occurred; (4) fully 

reconstructing and analyzing companies’ trading portfolios; (5) supporting DOI in taking 

investigative testimony; and (6) calculating the amount of unjust profits and market harm resulting 

from violations to assist with determining a civil penalty recommendation under the Commission’s 

penalty guidelines. Upon completion of the analytical process, staff develops data-based 

explanations to inform the structure and substance of further investigation, settlement discussions, 

and Commission actions. Staff also coordinates internally to refine and develop new screens to 

detect improper behavior discovered in prior investigations. 
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Data Management 

During FY2019, DAS staff worked to streamline its Order No. 760 data collection efforts and 

to improve data usability within DAS and throughout the Commission. On streamlining its Order 

No. 760 collection, DAS’ efforts included: (1) deploying a centralized platform with each 

ISO/RTO to track their system changes and to track issues; and (2) working with FERC’s Office 

of the Chief Information Officer to more quickly deploy ISO/RTO data model changes into 

FERC’s Order No. 760 databases. 

On the data usability front, DAS’ efforts in FY2019 included: (1) researching best-in-class 

data management organizational structures in government; (2) designing, building, and 

maintaining managed data pipelines; and (3) collaborating across offices to improve master data 

management. In addition, DAS, in collaboration with FERC IT, deployed the first cloud 

environment with secure production data at the Commission. Using this environment, the team 

delivered five proof-of-concepts, including new data visualization interfaces for important electric 

market data. Finally, the team designed, recommended, and supported the creation of the new 

Data Governance Division in the Office of the Executive Director. This Division, led by the 

Commission’s first Chief Data Officer, will pursue best-in-class data strategy, management, and 

analytics. These data management efforts are consistent with Objective 3.1 of the Commission’s 

FY2018-2022 Strategic Plan.59 

 

59 See Strategic Plan, supra note 4, at 21-25 (Objective 3.1).
2019 Staff Report on Enforcement 

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DIVISION OF ENERGY MARKET OVERSIGHT 

Overview 

In support of the Commission’s responsibility to ensure just and reasonable rates, terms, and 

conditions for consumers, the Division of Energy Market Oversight (DEMO) was responsible for 

monitoring and analyzing the nation’s wholesale natural gas and electric power markets. DEMO 

performed this monitoring and analysis by: (1) examining and analyzing the structure and 

operation of the markets to identify significant market events and trends, inefficient market rules, 

tariff and rule violations, and other unusual market behavior; (2) analyzing market-based rate 

transactions to determine whether entities are exercising market power, and reporting its various 

analyses and observations to the Commission; (3) collaborating with other Commission offices to 

develop regulatory strategies, focusing on the competitiveness, fairness, and efficiency of 

wholesale energy markets; (4) administering, analyzing, and ensuring compliance with the filing 

requirements of Electric Quarterly Reports (EQRs) and various Commission forms; and (5) 

conducting outreach to and communication with the public. As described above, pursuant to a 

September 2019 realignment, DEMO’s functions were realigned to better reflect the key functions 

and mission statements of Commission offices. The functions described in this section continue 

to be carried out by staff in OEPI, DAA, and DAS. 

Market Monitoring 

DEMO staff examined data from a variety of sources to review market fundamentals and 

emerging trends, and to examine the structure, operation, and interaction of natural gas and electric 

markets. As developments warranted, DEMO staff initiated projects designed to evaluate market 

trends and assess participant behavior. Staff also presented analyses at Commission meetings and 

made analyses available to the public on the Commission website. During FY2019, such reports 

and presentations included the following: 

2018 State of the Markets Report 

DEMO presented to the Commission, and made public, its State of the Markets report, which 

assessed the significant events in the energy markets during the prior year.60 Posted on April 18, 

2019, the report for 2018 reviewed trends and events in natural gas and power markets, including 

trends in prices, supply, and demand. The report also reviewed the development of US pipeline 

infrastructure and the rapid increase in the LNG export industry. 

 

60 See State of the Markets Report 2018, available at http://www.ferc.gov/marketassessments/reports-analyses/st-mkt-ovr/2018-A-3-report.pdf. 
2019 Staff Report on Enforcement 

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Seasonal Market Assessments 

DEMO prepared seasonal assessments that it presented at Commission meetings and made 

available to the public on the Commission website. In FY2019, DEMO’s seasonal assessments 

included the following: 

Winter 2018-2019 Energy Market Assessment, October 18, 2018. DEMO staff presented its 

assessment of fuel and electricity market preparedness for the 2018-19 winter season. For fuels 

markets, the assessment covered natural gas storage volumes, regional natural gas price outlooks, 

and pipeline capacity expansion. For electricity markets, the assessment examined gas-oil 

switching in the Eastern U.S., including the use of dual-fuel generators to hedge fuel price 

volatility, as well as the adequacy of regional electric power supplies and trends in capacity 

additions and retirements. The assessment also discussed gas pipeline restrictions in Southern 

California and ISO New England’s Pay-for-Performance capacity construct.61

Summer 2019 Energy Market and Reliability Assessment, May 16, 2019. This assessment 

reviewed the outlook for the electricity and fuels markets for summer 2019. For electricity 

markets, the assessment discussed the adequacy and diversity of regional electric power supplies, 

CAISO’s hydroelectric generation outlook, and trends in renewable generation and battery storage. 

For fuels markets, the assessment presented an analysis of regional natural gas futures prices, as 

well as the growth in LNG exports. The presentation also discussed expectations for natural gas 

storage volumes.62

As of the September 2019 realignment, these reports will continue to be drafted and presented 

by staff now assigned to OEPI.

Market-Based Rate Ex Post Analysis 

DEMO developed, refined, and implemented tools and algorithmic indicators to conduct 

ongoing analysis of transactional and other market data to detect the presence of market power, 

and to ensure that jurisdictional rates remain just and reasonable and not unduly discriminatory or 

preferential. This ex post analysis evaluated transactions against market fundamentals at the time 

of execution, with the primary goal of identifying outcomes that may be inconsistent with 

expectations of a competitive market, and thus an indication of an exercise of market power. Once 

such outcomes were identified, DEMO coordinated with other Commission program offices to 

determine whether to recommend the Commission take action to remedy market power concerns. 

DEMO also used these tools to assist in analyzing applications and filings for market-based rates, 

public utility mergers, and other docketed proceedings. Since the September 2019 realignment, 

this function has been and will continue to be performed by staff now assigned to DAS. 

 

61 See Winter 2018-2019 Energy Market Assessment, available at http://www.ferc.gov/marketassessments/reports-analyses/mkt-views/2018/10-18-18-A-3.pdf. 

62 See Summer 2019 Reliability and Energy Market Assessment, available at

http://www.ferc.gov/market-assessments/reports-analyses/mkt-views/2019/05-16-19.pdf. 
2019 Staff Report on Enforcement 

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Commission Orders and Rulemakings

DEMO assisted the Commission in evaluating the efficacy of certain regulatory policies in 

light of evolving energy markets and ensured that the Commission has the information needed to 

administer and monitor the markets effectively. In FY2019, DEMO assisted with over 40 docketed 

Commission proceedings. Through its work on these matters, DEMO sought to enhance market 

transparency and efficiency while balancing the regulatory burden on market participants. Since 

the September 2019 realignment, this function has been and will continue to be performed by staff 

now assigned to DAS and OEPI. 

Forms Administration and Compliance 

DEMO staff administered and ensured compliance with certain Commission filing 

requirements. The Commission requires companies subject to its jurisdiction to submit financial 

statements, operational data, and annual and quarterly reports regarding jurisdictional sales. It 

uses these reports for various analyses, such as evaluations of whether existing rates continue to 

be just and reasonable. Other government agencies and industry participants also use them for a 

variety of business purposes. 

Electric Quarterly Reports 

Section 205 of the FPA, 16 U.S.C. § 824d (2012), and Part 35 of the Commission’s regulations, 

18 C.F.R. Part 35 (2019), require, among other things, that all rates, terms, and conditions of 

jurisdictional service be filed with the Commission. In Order No. 2001, the Commission revised 

its public utility filing requirements to require public utilities, including power marketers, to file 

EQRs summarizing the contractual terms and conditions in their agreements for all jurisdictional 

services (including market-based power sales, cost-based power sales, and transmission service) 

and providing transaction information (including rates) for short-term and long-term power sales 

during the most recent calendar quarter.63 

In FY2019, the Commission received EQR submittals from nearly 2,600 entities each quarter. 

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

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

and reliable. It also coordinated with DAA on EQR issues that arose during audits and submitted 

candidate entities that did not timely file their EQRs to OEMR for possible revocation of MarketBased Rate authority. DEMO held one EQR user group meeting in FY2019 to conduct outreach 

 

63 Revised Public Utility Filing Requirements, Order No. 2001, FERC Stats. & Regs. ¶ 31,127 

(2002), reh’g denied, Order No. 2001-A, 100 FERC ¶ 61,074 (2002), reh’g denied, Order No. 

2001-B, 100 FERC ¶ 61,342 (2002), order directing filing, Order No. 2001-C, 101 FERC ¶ 61,314 

(2002), order directing filing, Order No. 2001-D, 102 FERC ¶ 61,334 (2003), order refining filing 

requirements, Order No. 2001-E, 105 FERC ¶ 61,352 (2003), order on clarification, Order No. 

2001-F, 106 FERC ¶ 61,060 (2004), order revising filing requirements, Order No. 2001-G, 120 

FERC ¶ 61,270 (2007), order on reh’g and clarification, Order No. 2001-H, 121 FERC ¶ 61,289 

(2007), order revising filing requirements, Order No. 2001-I, FERC Stats. & Regs. ¶ 31,282 

(2008). 
2019 Staff Report on Enforcement 

82 

with the filing community and to discuss potential system improvements and enhancements. More 

than 370 participants attended this meeting either in person or via webcast/phone. Staff also 

updated the EQR Frequently Asked Questions (FAQs)64 and the provided additional assistance to 

filers. 

Since the September 2019 realignment, this function has been and will continue to be 

performed by staff now assigned to DAA.

eForms Refresh Project 

On April 16, 2015, the Commission directed Commission staff to begin the process of 

replacing its electronic filing format for many of the forms submitted by the industry, as the current 

filing software is no longer supported.65 On June 20, 2019, the Commission issued a final rule 

adopting eXtensible Business Reporting Language (XBRL) as the standard for filing these forms.66 

Throughout FY2019, DEMO staff, with the assistance of subject matter and technical experts from 

other Commission program offices, worked on the process for selecting a contractor to develop 

the XBRL standard and on resolving issues associated with transitioning from the current filing 

software to the XBRL standard. 

Since the September 2019 realignment, this function has been and will continue to be 

performed by staff now assigned to DAA.

Outreach and Communication 

DEMO made some of its analyses available to the public by posting reports on its website and 

hosting periodic snapshot presentations. Staff also briefed visiting industry participants, state and 

federal officials, and foreign delegations. 

Website 

DEMO published data and analyses on the FERC website, which was organized into pages for: 

(1) national overviews of natural gas and electricity markets; and (2) ten regional electricity and 

five regional natural gas markets.67 The regional market pages provided charts, tables, and maps 

displaying market characteristics and outcomes. 

 

64 See EQR Frequently Asked Questions, available at http://www.ferc.gov/resources/faqs/eqr2013.asp. 

65 Order Instituting Proceeding to Develop Electronic Filing Protocols for Commission Forms, 

151 FERC ¶ 61,025 (2015). 

66 Revisions to the Filing Process for Commission Forms, Order No. 859, 167 FERC ¶ 61,241 

(2019). 

67 This information is available at https://www.ferc.gov/market-assessments/marketassessments.asp. 
2019 Staff Report on Enforcement 

83 

Snapshot Calls 

DEMO held semi-annual conference calls with representatives of public utility commissions 

and state agencies in the eastern, central, and western states. These calls provided a current 

“snapshot” of energy markets. Regional Snapshot Reports, which included data and information 

on natural gas, electricity, LNG, weather, infrastructure development, and other market 

developments, served as the basis for discussion on the calls. DEMO’s Snapshot Reports are 

available on the FERC website and are archived back to 2007.68

Domestic and Foreign Delegation Briefings 

DEMO periodically hosted visitors, including domestic and foreign delegations of regulators 

and industry participants, who were interested in energy markets and in the Commission’s market 

monitoring activities. In FY2019, DEMO conducted 12 briefings for various domestic and foreign 

delegations in the Market Monitoring Center. 

Since the September 2019 realignment, these outreach functions have been and will continue 

to be performed by staff now assigned to DAS and OEPI.

 

68 DEMO’s Snapshot Reports are available at https://www.ferc.gov/market-assessments/mkt-snpsht/mkt-snp-sht.asp. 
2019 Staff Report on Enforcement 

84 

Audits Branch 1 

Nicholas Coughlin, Chief

Quality Assurance 

Sylvia Anderson, Chief

Division of Audits and Accounting

Steven Hunt, Director & Chief Acct 

Kristen Fleet, Deputy Director 

Timothy Smith, Director, Audits & Acctg Ops 

Laura Vallance, Legal Counsel 

Kurt Jacobs, Legal Counsel

A

Audits Branch 2 

Christopher Handy, Chief 

Audits Branch 3 

Nkosi Brooks, Chief

Audits Branch 4 

Brian Harrington, Chief

Regulatory Accounting Branch 

Jim Yu, Chief

EQR Administration Branch 

Jeffrey Sanders, Chief

APPENDIX A1: OFFICE OF ENFORCEMENT ORGANIZATION CHART 

Regulatory Accounting Branch 

Office of the Director

Larry Parkinson, Director 

Janel Burdick, Deputy Director 

Demetra Anas, Senior Legal Advisor 

Gerald Thomas, IT Advisor 

Mark Weber, Senior Market & Risk Advisor 

Investigations Branch 1

Lisa Owings, Chief

Investigations Branch 2

Jay Matson, Chief

Investigations Branch 3

Jeremy Medovoy, Chief

Investigations Branch 4

Gabriel Sterling, Chief

Analyti

Nan

Analyti

M

Analyti

B

Analyti

N

Analyti

J

Analyti

Analyti

Division 

Jam

Steven 

Dav

Division of Investigations

Geof Hobday, Director

Courtney Spivey Urschel, Deputy Director
2019 Staff Report on Enforcement 

85 

APPENDIX A2: OFFICE OF ENFORCEMENT ORGANIZATION CHART 

Division of Audits and Accounting

Steven Hunt, Director & Chief Acct 

Kristen Fleet, Dep Dir

Timothy Smith, Dir, Audits & Acctg Ops 

Kurt Jacobs, Legal Counsel

Office of the Director

Larry Parkinson, Director 

Janel Burdick, Deputy Director 

Demetra Anas, Senior Legal Advisor 

Gerald Thomas, IT Advisor 

Mark Weber, Senior Market & Risk Advisor 

Admin

Deni

Market Oversight Branch 1

Jeffrey Sanders, Chief

Investigations Branch 1

Lisa Owings, Chief

Audits Branch 1

Nicholas Coughlin, Chief

Investigations Branch 2

Jay Matson, Chief

Investigations Branch 3

Jeremy Medovoy, Chief

Quality Assurance

Sylvia Anderson, Chief

Audits Branch 2

Christopher Handy, Chief 

Division of Investigations

Geof Hobday, Director

Courtney Spivey Urschel, Dep Dir

Audits Branch 3

Nkosi Brooks, Chief

Investigations Branch 4

Gabriel Sterling, Chief

Audits Branch 4

Brian Harrington, Chief

Market Oversight Branch 4 

Adam Bednarczyk, Chief

Market Oversight Branch 2 

Erin Miller, Chief

Market Oversight Branch 3

David Mason, Chief

Analyt

Nan

Analyt

Ja

Analyt

AnalytAnalytAnalyt

Analyt

Sp

Division of Energy Market Oversight

Janel Burdick, Acting Director

Melissa Lozano, Dep Dir 

Laura Vallance, Legal Counsel 

Division 

Steve

Da

Regulatory Accounting Branch 

Jim Yu, Chief
2019 Staff Report on Enforcement 

86 

APPENDIX B: FY2019 CIVIL PENALTY ENFORCEMENT ACTION

 

Subject of Investigation and Order 

Date Total Payment Explanation of Violatio

Algonquin Gas Transmission, LLC, Docket No. IN19-2-000, Order Approving Stipulation and Consent Agreement, 166 FERC ¶ 61,012. 

$400,000 civil penalty. The Commission approved a Stipulation and C

between Enforcement and Algonquin Gas Tran(Algonquin), resolving Enforcement’s investigAlgonquin violated the express terms of the CoAlgonquin Incremental Market (AIM) Project under section 7(c) of the NGA, when it entered the AIM Project’s right of way with constructiattempt to retrieve a broken drill stem without 

from the Commission as required. 

Virginia Electric & Power Company, d/b/a Dominion Energy Virginia, Docket No. IN19-3-000, Order Approving Stipulation and Consent Agreement, 167 FERC ¶ 61,103. 

$7 million civil penalty; $7 million disgorgement. 

The Commission approved a Stipulation and Cbetween Enforcement and Virginia Electric & Dominion Energy Virginia (DEV), resolving Einvestigation into whether DEV violated Commincluding the Anti-Manipulation Rule, 18 C.F.improperly targeting and increasing its receipt credits (LOCs) in the PJM Interconnection, L.L

 

69 A list of all post-EPAct 2005 civil penalty orders is available at http://www.ferc.gov/enforcement/civil-penalties/