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Power & Pipes

FERC, CFTC, and State Energy Law Developments

Since January, FERC-regulated market participants and practitioners alike have anticipated how FERC may approach its enforcement mission under the stewardship of Chairman Richard Glick following his appointment as chair by President Biden. Although most market participants and practitioners have expected FERC to take an aggressive approach in investigating and penalizing instances of misconduct, FERC confirmed those expectations in its May 20 open meeting.

During the open meeting, Chairman Glick reaffirmed his focus on enforcement efforts and, in turn, the agency’s commitment to aggressively investigating allegations of misconduct. In a press release issued contemporaneously with the meeting, Chairman Glick stated, “This Commission takes very seriously our responsibility to ensure that FERC jurisdictional markets operate competitively and free from fraudulent schemes that harm other market participants and impose excessive, unjust costs on consumers.” Chairman Glick’s comments reflect his response to his previously stated concern about the agency’s commitment to enforcement—questioning at FERC’s November 2020 open meeting whether the Commission had “gone AWOL at this point.” Chairman Glick’s affirmation is significant because it reflects the direction the energy industry can expect from FERC and its Office of Enforcement under the Biden-Harris administration.

FERC demonstrated its commitment to investigating and penalizing fraud and manipulation by issuing a show cause order that directs GreenHat Energy LLC and its owners to explain why they should not pay a total of $229 million in civil penalties and disgorge nearly $13.1 million in unjust projects for alleged electric market manipulation. FERC’s Office of Enforcement alleges that the GreenHat parties violated the Federal Power Act and PJM Interconnection LLC’s tariff and operating agreement by engaging in a manipulative scheme in the financial transmission rights (FTR) market.

Over the course of three years, GreenHat acquired the largest FTR portfolio in PJM and subsequently defaulted on the portfolio. GreenHat’s scheme generated $179 million in losses, which were borne by all other PJM members. FERC’s Office of Enforcement alleges that GreenHat’s scheme is a form of fraud where the actors acquire assets with no intent to pay for them and try to turn the assets into immediate cash for themselves.

Although FERC’s Office of Enforcement has focused on alleged manipulation of energy markets, it has also turned its attention to investigating energy infrastructure matters as of late. Recent settlements and show cause orders have signaled that the Commission will hold operators of energy infrastructure to their obligations—and to the commitments made and information provided during the course of securing the necessary certificates and authorizations to move forward with their projects. Chairman Glick noted in recent comments that revoking a company’s certificate is always an option.