Energy Enforcement Update

This week’s enforcement update covers the following:

  • FERC Staff issues notice of alleged violations against GDF SUEZ;
  • FERC files motion to affirm civil penalties against ETRACOM; and
  • FERC files brief in TOTAL appeal proceeding in Fifth Circuit.

FERC Staff issues notice of alleged violations against GDF SUEZ.  On December 2, FERC Enforcement Staff issued a notice of alleged violations stating that Staff has preliminarily determined that GDF SUEZ Energy Marketing NA, Inc. (GSEMNA) violated FERC’s anti-manipulation rule by engaging in a strategy to target and inflate its receipt of lost opportunity cost credits (LOCs) in the PJM market from May 2011 to September 2013.  Staff alleges that GSEMNA carried out its strategy by offering combustion turbine units in the day-ahead market with below-cost offers when it anticipated that the units would not be dispatched in the real-time market and at times when the discounted units were expected otherwise to be out of the money and likely would run at a loss if dispatched.  According to Staff, this strategy was undertaken in order to target the receipt of LOCs paid to combustion turbine units that clear the day-ahead market and are not dispatched in the real-time market.

FERC files motion to affirm civil penalties against ETRACOM.  On December 1, FERC filed a motion to affirm its civil penalties against ETRACOM and Michael Rosenberg in the U.S. District Court for the Eastern District of California.  FERC requests that the district court affirm in their entirety the penalties and disgorgement assessed against the respondents.  According to FERC, the respondents engaged in a fraudulent scheme that violated FERC’s anti-manipulation rule, as detailed in FERC’s order assessing civil penalties.  FERC asserts that the record underlying the FERC’s penalty assessment order provides the court with all of the facts and legal arguments needed to conduct its de novo review and affirm FERC’s assessed remedies in full.  FERC also rejects the respondents’ requests for discovery, arguing that the court need not indulge respondents’ “wild goose chase” for discovery because the additional evidence could not provide a defense.

FERC files reply brief regarding TOTAL appeal in Fifth Circuit. On November 28, FERC filed its reply brief in the Fifth Circuit in TOTAL’s declaratory judgment action against FERC.   According to FERC, TOTAL’s principal argument on appeal—that Section 24 of the Natural Gas Act (NGA) deprives FERC of authority to find violations of the NGA—is both unripe and incorrect.  FERC asserts that if it ever issues an order aggrieving TOTAL, then a court of appeals can address TOTAL’s argument on direct review of that order.  Moreover, as the district court recognized, Fifth Circuit precedent, longstanding FERC practice, and the plain text of the NGA all demonstrate that FERC has authority to adjudicate violations and impose remedies, with review of FERC’s ultimate decision vested exclusively in the courts of appeals.

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