FERC, CFTC, and State Energy Law Developments

Ten years ago, “transparency” within the natural gas markets was largely an ignored concept. The general public gave little thought to whether natural gas markets were transparent and federal regulators assumed that there was no issue to address.

In the wake of Enron’s demise, however, questions surrounding the transparency of natural gas markets were thrust into the headlines of major media outlets and to the forefront of the Federal Energy Regulatory Commission’s attention.

Consequently, since the turn of the century, a paradigm shift has evolved as FERC has undertaken a conscious effort to mandate additional transparency in the natural gas markets.
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On January 22, the Federal Energy Regulatory Commission (FERC) issued an Initial Decision determining that a former hedge fund trader violated FERC’s Anti-Manipulation Rule. The decision, issued By Administrative Law Judge (ALJ) Carmen A. Cintron, is a major step in concluding a lengthy, ongoing investigation initiated By FERC in July 2007. Read more…

On August 6, the Federal Trade Commission (FTC) issued a Final Rule prohibiting market manipulation in the petroleum industry. Under the terms of the Final Rule, persons that engage in fraud or deceit in wholesale petroleum markets or omit material information that is likely to distort petroleum markets are subject to significant civil penalties. In issuing the Final Rule, the FTC joins the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission in regulating market manipulation in the energy industry.

The issuance of the Final Rule concludes a two-year process that was authorized By Title VIII of the Energy Independence and Security Act (EISA) of 2007. Under EISA, the FTC is authorized to issue any rule or regulation that prohibits any person from engaging in manipulative or deceptive behavior in connection with the purchase or sale of crude oil, gasoline, or petroleum distillates at wholesale. Accordingly, the FTC’s Final Order prohibits any person from (a) knowingly engaging in any act that operates as a fraud or deceit upon any person; and (b) intentionally failing to state a material fact that renders a statement made By that person misleading if the omission distorts or is likely to distort market conditions. In practice, paragraph (i) of the Final Rule prohibits fraudulent or deceptive overt conduct while paragraph (ii) of the Final Rule prohibits material omissions that are likely to distort market conditions.  Read more…

On July 16, the Federal Energy Regulatory Commission (FERC) issued an order directing market operators in New York and neighboring regions to submit a long-term solution to loop flow issues. In the order, FERC also adopted the findings of an investigation By its enforcement staff into allegations that loop flow issues between the New York Independent System Operator (NYISO) and neighboring markets were a result of market manipulation.

The FERC investigation grew out of a referral By the NYISO’s internal market monitor, who alleged that market participants had submitted circuitous transmission schedules that traversed the systems of multiple Regional Transmission Organizations (RTOs) when more direct routes were available. The internal market monitor claimed that the circuitous scheduling, which utilized paths in the Lake Erie region, increased loop flows and associated uplift costs borne By customers, and violated the rule against market manipulation.  Read more…