FERC issued an order on May 16 rescinding its 2009 policy[1] of issuing Notices of Alleged Violations (NAVs) after the subject of an investigation is given an opportunity to respond to FERC Enforcement Staff’s preliminary findings (the NAV Policy).[2] NAVs typically identify FERC’s targets (by name), and set forth abbreviated information concerning the subject matter of FERC’s enforcement attention, the time frame, and the particular statutes relevant to the alleged violations. Since FERC began implementing the NAV Policy in 2011, it has been monitoring its implementation and has now determined that the potential adverse consequences that NAVs pose for the subjects of FERC investigations are no longer justified in light of the limited transparency that NAVs provide.
A few years after FERC received enhanced enforcement authority in 2005, it instituted the NAV Policy to increase the transparency of the nonpublic investigations that its Staff conducts under Part 1b of FERC’s regulations. When it issued the NAV Order, FERC explained that issuing the NAVs after the preliminary findings stage balances “the need to protect the subject’s confidentiality in the early stages of an investigation with the public interest of promoting additional transparency during investigations.”[3] FERC has since determined that NAVs provide only limited guidance and information to market participants and that the various orders on enforcement matters and the reports and white papers its Staff issues are more informative and provide more transparency.
In the NAV Order, FERC explained that the potential risk of reputational harm and negative impact on the subjects of FERC investigations are no longer warranted in light of the limited transparency that NAVs have generated and in light of the alternative methods through which FERC can, and has been, providing information to the public about its enforcement activities. FERC noted one instance in which a NAV identified a company and individual subjects of an investigation but in which Enforcement Staff ultimately did not enter into a negotiated settlement with the individual subjects. But for the NAV, one individual subject would not have been publicly identified as being the subject of a FERC investigation.
Market participants should continue to monitor and review FERC issuances to stay up-to-date on FERC enforcement activities, hot topics, and trends. These issuances include orders approving settlement agreements, orders to show cause, orders assessing civil penalties, FERC Staff’s Annual Reports on Enforcement, policy statements, and FERC Staff’s white papers.