Energy Enforcement Update
Recent developments:
- Coaltrain and individuals file motions to dismiss FERC’s complaint.
- CFTC orders Angus to pay civil penalty for acting as an unregistered Commodity Trading Advisor and disclosure violations.
- CFTC orders Barclays to pay $500,000 for EFRP recordkeeping violations.
- Maxim Power settles market manipulation case with FERC.
- TOTAL files appeal to Fifth Circuit in declaratory judgment proceeding.
- FERC Enforcement files reply to TOTAL in show cause proceeding.
- TOTAL files motion to dismiss amended class action complaint.
- FERC files motion for summary judgment against City Power.
Energy Enforcement Update
Recent developments:
- CFTC Chairman Massad plans to recommend that the CFTC abandon its proposal to allow private rights of action in RTO/ISO markets.
- FERC and City Power file joint status report in district court proceeding.
- District court judge denies TOTAL’s request for reconsideration.
- BP files petition for review with Fifth Circuit, and FERC grants BP’s motion for modification of payment directive at FERC.
FERC files response regarding supplemental authorities in Silkman case
On August 29, FERC filed a response to Silkman’s filing of supplemental authorities (the recent decisions in the Maxim Power and City Power cases on de novo review) before the U.S. district court in Maine. FERC’s response repeats many of the arguments it made in opposing Silkman’s request for discovery. According to FERC, Judge Woodlock has already decided the threshold issue that was before the Maxim Power and City Power courts: whether FERC conducted an adjudication subject to judicial review or whether a plenary trial is required. Based on Judge Woodlock’s decision denying the motion to dismiss and transferring the case to Maine, FERC argues that it is the law of this case that FERC conducted an adjudication subject to judicial review. According to FERC, “The Court should focus instead on the question left open by Judge Woodlock’s ruling: how the Court will perform its review; that is, whether the Court will rule immediately after its review of the administrative record or whether its review requires supplementation of the administrative record through discovery, a hearing, or both.” Arguing that Judge Woodlock’s prior decision is not “clearly erroneous,” FERC asserts that the decision by the Maxim Power and City Power courts to proceed in a different manner should not affect how this case proceeds.
Maxim Power files answer to FERC complaint
On September 2, Maxim Power filed its answer to FERC’s complaint in the U.S. District Court for the District of Massachusetts. As we previously reported, Judge Mastroianni issued an order denying Maxim Power’s motion to dismiss FERC’s case on July 21. Maxim Power’s answer denies many of the allegations in FERC’s complaint. Maxim Power also asserts a number of defenses, including that FERC’s complaint fails to state a claim for which relief can be granted, Maxim Power made no false statements or material omissions, the alleged misstatements are non-actionable statements containing expressions of opinion, and lack of fair notice.
BP files motion for modification of payment directive at FERC
On September 8, BP filed a motion for modification of the payment directive in FERC’s natural gas market manipulation proceeding against BP. As you may recall, FERC ordered BP to disgorge its unjust profits in the amount of $207,169 to the Low Income Home Energy Assistance Program (LIHEAP) of the state of Texas for the benefit of its energy consumers. In its request for rehearing, BP sought clarification of the disgorgement, requesting that it be permitted to post a bond (under protest) during the pendency of the review proceedings. FERC has not yet acted on the clarification, and the payment of the disgorgement is due by September 9. Thus, BP contacted the Texas Department of Housing, the state agency that administers the LIHEAP program for Texas. BP was informed that the Texas Department of Housing is only permitted to disburse amounts approved by the Texas legislature and is not set up to receive amounts directed by FERC. BP has been provided with a list of charities that reportedly administer LIHEAP in Texas. BP’s motion requests that FERC modify the payment directive to specify the charities to which BP should pay the disgorgement amount, and grant such other relief as may be warranted.
FERC settles with National Energy and David Silva
On September 1, FERC issued orders approving separate settlements with National Energy and its former employee David Silva. The settlements involve allegations that National Energy and Silva manipulated natural gas prices at several trading hubs. National Energy agreed to pay a civil penalty of $1.15 million and disgorgement of $305,780. Silva agreed to pay a civil penalty of $40,000 and a one-year ban from trading in FERC-jurisdictional natural gas markets. Considering the fact that National Energy is no longer a going concern, Enforcement recommended a downward departure from its Penalty Guidelines for the penalty against National Energy. National Energy and Silva neither admitted nor denied the allegations.
TOTAL requests revised judgment and files amended complaint in district court
On August 12, TOTAL filed a motion to alter judgment and motion to file a second amended complaint in federal district court. This case involves TOTAL’s declaratory judgment action in federal court in Texas claiming FERC lacked jurisdiction to adjudicate the manipulation claims against TOTAL. As we previously reported, U.S. District Judge Nancy F. Atlas issued an order on July 15 dismissing TOTAL’s declaratory judgment action against FERC. TOTAL argues that it is entitled to a declaratory judgment stating that FERC must litigate alleged market manipulation violations in federal district court because such a process is mandated by Section 24 of the Natural Gas Act, as well as the Constitution and the Administrative Procedure Act. FERC’s response to TOTAL’s motion is due by August 29.
City Power files answer to FERC complaint
On August 24, City Power filed its answer to FERC’s complaint in the U.S. District Court for the District of Columbia. As we previously reported, Judge Bates issued an order denying City Power’s motion to dismiss in FERC’s case on August 10. City Power’s answer denies many of the allegations in FERC’s complaint. City Power also asserts a number of defenses, including that FERC’s complaint fails to state a claim for which relief can be granted, due process violations, FERC’s lack of jurisdiction over the UTC trades at issue, and lack of fair notice.
FERC files response on regarding supplemental authorities in the Barclays case
On August 16, FERC filed a response to the Barclays filing of supplemental authorities (the recent decisions in the Maxim Power and City Power cases on de novo review). FERC states that it “respectfully disagrees” with those courts’ holdings that Section 31(d)(3) of the Federal Power Act requires application of the Federal Rules of Civil Procedure and a regular civil trial. In addition, FERC points to some of the language from the City Power decision supporting its position on liability, including that: (a) FERC is not required to show harm; (b) traders are presumed to be trading based on their best estimates of the security’s economic value, and trading for other purposes can be deceptive; and (c) de novo review does not eliminate Chevron deference.
FERC files complaint against ETRACOM in federal district court
On August 17, FERC filed its complaint against ETRACOM and Michael Rosenberg in the U.S. District Court for the Eastern District of California. As we previously reported in June, FERC issued an Order Assessing Civil Penalties finding that ETRACOM and Rosenberg violated FERC’s anti-manipulation rule through a scheme to submit virtual supply transactions at the New Melones intertie at the CAISO border in order to affect power prices and economically benefit ETRACOM’s Congestion Revenue Rights sourced at that location. FERC assessed $2,400,000 against ETRACOM and $100,000 against Rosenberg in civil penalties, plus $315,072 in disgorgement. Since ETRACOM elected the de novo review procedures under Section 31(d)(3) of the Federal Power Act and then did not pay the penalty within 60 days, FERC instituted the instant proceeding in district court seeking an order affirming the assessment of a civil penalty. The case has been assigned to Judge Troy L. Nunley, the same judge presiding over the Barclays case.