ETRACOM’s fight for de novo review; CFTC revisits 2013 orders on RTOs and ISOs; Total and FERC fight over court action

This week’s enforcement update reports on the CFTC’s proposed amendment to the RTO/ISO exemption order to permit private rights of action, as well as developments in the TOTAL complaint case in district court and the ETRACOM case at FERC.

ETRACOM files letter to FERC regarding de novo review election. On May 13, ETRACOM filed a letter regarding its de novo review election, in light of FERC’s May 6 order denying ETRACOM’s motion for disclosure of information. ETRACOM declined to revoke its election of de novo review at this time. Instead, ETRACOM requested the opportunity to petition FERC for revocation of its de novo review election after the federal courts have determined the scope and nature of de novo review. ETRACOM intends to seek rehearing of FERC’s May 6 order.

CFTC issues proposed amendment to the 2013 RTO/ISO Final Order that would permit private rights of action. On May 10, the CFTC issued a proposed amendment to the 2013 RTO/ISO Final Order that exempted specified RTO/ISO transactions from certain provisions of the Commodity Exchange Act (CEA) and CFTC regulations. The CFTC’s proposed amendment seeks to change that 2013 order by explicitly stating that the exemption does not apply to actions pursuant to CEA Section 22, which allows for a private right of action. If adopted, the amendment would permit private parties to bring claims under the CEA for fraud and manipulation involving financial energy products traded in the organized wholesale power markets, which is not permitted under the Federal Power Act.

Commenting on the proposed amendment, colleague Michael Sackheim said: “As witnessed by Commissioner Giancarlo’s dissent and the comments of the RTO Council, the CFTC’s proposal will likely increase costs to consumers and decrease efficiency as RTO/ISO market participants have to spend resources on lawyers instead of on the creation of new jobs.”

For more information on the CFTC’s proposed amendment, please see our Energy Update: CFTC Proposes Major Changes Affecting RTO/ISO Markets.

TOTAL files motion for summary judgment and opposition to FERC Enforcement’s motion to dismiss. On May 6, TOTAL Gas & Power North America, Inc. (TGPNA) filed a motion for summary judgment and opposition to FERC Enforcement’s motion to dismiss the case, which was transferred from the Western District of Texas to the Southern District of Texas last week. In the motion for summary judgment, TGPNA argues that FERC seeks to act as investigator, prosecutor, judge, and jury to impose more than $200 million in fines, but Section 24 of the Natural Gas Act (NGA) gives federal district courts “exclusive jurisdiction of violations” of the statute and of “all suits . . . and actions” to “enforce any liability or duty created by” the statute.

TGPNA argues that FERC seeks to usurp the power of Article III courts to adjudicate fraud claims and determine whether to impose FERC’s proposed civil penalties, in violation of the Appointments Clause, the Seventh Amendment right to a jury trial, the Fifth Amendment’s Due Process Clause, and the Administrative Procedure Act. TGPNA seeks a declaratory judgment that FERC’s practices are unlawful and that violations of the NGA and the determination of civil penalties fall within the “exclusive jurisdiction” of federal district courts.

In response to FERC Enforcement’s motion to dismiss, TGPNA argues that the court has subject matter jurisdiction. According to TGPNA, jurisdiction and the merits are indistinguishable in this case because the merits relief sought by TGPNA includes a declaration that Congress vested in federal district courts exclusive jurisdiction over violations of the NGA.

In the FERC show cause proceeding against TGPNA, FERC has extended the deadline for TGPNA’s answer to the Order to Show Cause until July 12, and granted Enforcement Staff an additional 45 day extension to file a reply. TGPNA had requested that FERC extend the time to answer the Order to Show Cause to the later of: (1) 45 days after the district court issues an order ruling on the threshold jurisdictional issues raised in TGPNA’s amended complaint, or (2) 90 days after the issuance of the Order to Show Cause (i.e., July 27).