Federal Energy Regulatory Commission Chairman Neil Chatterjee on April 2, 2020, announced the commission’s plan to assist regulated entities in managing enforcement- and compliance- related burdens during the ongoing coronavirus (COVID-19) pandemic. His announcement is intended to balance the need for regulatory flexibility with the commission’s ongoing obligation to protect the integrity of the physical energy markets in both the electric power and natural gas sectors.
The Federal Energy Regulatory Commission (FERC) recognizes that the steps taken to ease certain regulatory obligations and exercise limited discretion in its prosecutorial functions is necessary to enable the utilities and natural gas market participants it oversees to focus on critical front-line efforts to keep electricity on and gas flowing.
Chairman Chatterjee has indicated that FERC will exercise prosecutorial discretion when addressing events arising during the emergency period, promising that FERC “will not second-guess the good faith actions that regulated entities take in the face of this emergency.”
Enforcement staff will consider the ongoing pandemic when evaluating compliance programs as part of its Penalty Guidelines analyses or during an audit of operations occurring during the emergency. Enforcement staff also will consider the pandemic’s impact when assessing the timeliness of self-reports, including for the self-report credit under the Penalty Guidelines.
Chairman Chatterjee also encouraged regulated entities to use “lines of informal communication with Enforcement staff” and, for more formal guidance, to seek standards of conduct waivers and no-action letters. A no-action letter allows entities to request written, but non-binding, advice as to whether staff would recommend enforcement action with respect to specific proposed transactions, practices, or situations.
A standard of conduct waiver would allow transmission providers to waive rules that isolate employees involved in transmission functions from those involved in marketing functions or that require informational postings to help detect any instances of undue preference due to the improper disclosure of non-public transmission information.
To facilitate standards of conduct waivers and no-action letters, FERC has created a task force for each to expedite requests related to the current emergency. Further, because the pandemic qualifies as an emergency, certain standards of conduct posting requirements have been suspended. An entity that cannot resume standards of conduct posting obligations as a result of the pandemic should seek a waiver.
In connection with Chairman Chatterjee’s announcement, FERC issued several orders that are intended to facilitate these goals. Those are:
With respect to enforcement-related matters, Chairman Chatterjee advised that entities may also delay for 60 days the submission of self-reports that involve inadvertent errors that do not result in significant harm to the markets, ratepayers, or other market participants. In addition, entities or individuals currently involved in non-public enforcement inquiries or investigations should remain in contact with Enforcement staff. FERC intends to provide subjects of ongoing non-public investigations and audits and entities with continuing compliance obligations related to completed enforcement cases with flexibility in meeting deadlines through July 31, 2020. FERC staff will also not commence any new audits until at least July 31, 2020.
But despite the easing of some compliance guidelines and a flexible approach to existing investigations and audit, Chairman Chatterjee affirmed that FERC’s market surveillance will continue. Though Enforcement staff will postpone surveillance inquiries not requiring immediate attention, it will continue to make surveillance inquiries based on market behavior that could result in significant risk of harm to the market and thus require immediate attention.
Enforcement staff will also continue to monitor its surveillance data feeds and screening processes while operating in a remote status. And, once the emergency ends, FERC will likely view intentional misconduct during this period or attempts to take advantage of its regulatory flexibility especially harshly.
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If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Kirstin E. Gibbs
J. Daniel Skees
Stephen M. Spina
Patrick R. Pennella
 See Business Continuity of Energy Infrastructure, 171 FERC ¶ 61,007 (2020).
 See Temporary Action to Facilitate Social Distancing, 171 FERC ¶ 61,004 (2020).
 See Uplift Cost Allocation and Transparency in Markets Operated by Regional Transmission Organizations and Independent System Operators, 171 FERC ¶ 61,005 (2020).
 See Order Temporarily Delegating Further Authority, 171 FERC ¶ 61,006 (2020).
 See Delegation of Authority, Order No. 870, 171 FERC ¶ 61,008 (2020).
 Extension of Non-Statutory Deadlines, Notice Granting Extension of Time, Docket Nos. AD20-11-000 et al (April 2, 2020).