The US Federal Energy Regulatory Commission (FERC or Commission) has released its annual report on enforcement for fiscal year 2023. As in fiscal year 2022, FERC’s Office of Enforcement (OE) focused on matters involving fraud and market manipulation, serious violations of the Reliability Standards, anticompetitive conduct, threats to the nation’s energy infrastructure and associated impacts on the environment and surrounding communities, and conduct that threatens the transparency of regulated markets.
Power & Pipes
FERC, CFTC, and State Energy Law Developments
The Commodity Futures Trading Commission (CFTC or Commission) released its enforcement results for fiscal year 2023 on November 7, 2023. The CFTC’s Division of Enforcement filed 96 enforcement actions in 2023 charging a range of violations in a variety of markets that resulted in more than $4.3 billion in civil monetary penalties, restitution, and disgorgement. Both metrics show an increase from last year, when the Commission initiated 82 enforcement actions and imposed more than $2.5 billion in restitution, disgorgement, and penalties. The uptick in cases stemmed largely from a near doubling of fraud-related cases.
The Commodity Futures Trading Commission (CFTC or the Commission) released its enforcement results for fiscal year 2022 on October 20, 2022. The enforcement results detail the 82 enforcement actions the CFTC filed in 2022 and show that orders secured by the Commission imposed more than $2.5 billion in restitution, disgorgement, and civil monetary penalties, either through settlement or litigation.
US Senators Maria Cantwell (D-WA) and Catherine Cortez Masto (D-NV) introduced legislation on July 28, 2022, to provide FERC with the authority to temporarily or permanently ban any person from trading or transacting in certain energy markets if that person is found to have manipulated the natural gas or electricity market or willfully or knowingly provided false information regarding those markets. Known as the Energy Consumer Protection Act of 2022, the legislation will be introduced in the House of Representatives by Representative Jan Schakowsky (D-IL).
A recent district court order highlights the importance of maintaining a strong compliance program with effective compliance controls and practices, while highlighting the risk of employee misconduct for the enterprise itself. Specifically, on December 20, a California district court denied a motion to dismiss a FERC complaint that seeks to enforce a penalty against a company and one of its traders. In addition to finding that FERC’s claims were not time barred, the court also found that the employer can be held liable for the trader’s actions even though the trader withheld information from the company regarding the trading activity at issue. However, in a win for the company, the court limited the civil penalties that may be sought in a complaint to the proposed penalty set forth in FERC’s order to show cause. This limits FERC’s ability to penalize a defendant for choosing to contest a proposed sanction in district court.
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.
The Commodity Futures Trading Commission (CFTC) announced last week that it has obtained another admission from a trader of violations of the Commodity Exchange Act and CFTC regulations, demonstrating its continued aggressive enforcement of its market anti-manipulation provisions.
The Federal Energy Regulatory Commission (FERC) announced on February 22 that its Office of Enforcement would examine wholesale natural gas and electricity market activity during last week’s extreme cold weather “to determine if any market participants engaged in market manipulation or other violations.” FERC’s brief press release explained that its examination is part of its existing surveillance program for market participant behaviors in the wholesale natural gas and electric markets.
A natural gas trader pleaded guilty in federal district court last week to conspiring to commit commodities fraud and wire fraud in an insider trading scheme over natural gas futures. His co-conspirator had pleaded guilty last July to conspiracy to commit wire fraud and to violate various provisions of the Commodity Exchange Act and the Commodity Futures Trading Commission’s (CFTC) anti-manipulation rule.
The Commodity Futures Trading Commission (CFTC or the Commission) Division of Enforcement filed the most enforcement actions in the Commission’s history in fiscal year 2020 (FY 2020).