31 January 2016

Energy Enforcement Update

Recent developments:

  • TOTAL files lawsuit in Texas district court over FERC enforcement action.
  • FERC files opposition to Barclays motion for a stay in district court.
  • At the January 25-26, 2016 Buying and Selling Electric Power in the West Conference, David Applebaum, Director of FERC’s Division of Investigations patched in Tuesday by video due to cancelled flights.

TOTAL files lawsuit in Texas district court over FERC enforcement action.  On January 27, TOTAL Gas & Power North America, Inc. (“TGPNA”) and two individual traders filed a complaint for declaratory relief with a U.S. district court in Texas.  TGPNA asks the court to issue a declaratory judgment to prevent FERC from pursuing its enforcement action against TGPNA in a hearing before an administrative law judge at FERC.  TGPNA seeks instead to have the case adjudicated by a federal district court in the first instance, in a proceeding overseen by a judge appointed under Article III.  According to the complaint, “FERC’s in-house adjudication process flips the burden of proof, denies litigants basic procedural rights, and assigns the adjudication of law and facts to ALJs who are themselves FERC officers, whose appointments violate the Constitution, and who work in offices located just a few feet away from those of the Commissioners. This entire process is conducted without a jury, at a ‘hearing’ where rank hearsay is routinely admitted for the truth of the matter asserted, and those accused of violations are often deprived of the right to confront the ‘testifying’ witness.”

FERC issued a Notice of Alleged Violations on September 21 naming TGPNA and two traders.  Staff alleges that TGPNA’s scheme involved making largely uneconomic trades for physical natural gas during bid week designed to move indexed market prices in a way that benefited the company’s related positions.  FERC alleges that this scheme was implemented on at least 38 occasions during June 2009 through June 2012.  FERC has not yet issued an order to show cause against TGPNA.  Unlike proceedings under the FPA, enforcement cases under the NGA do not provide respondents the opportunity to elect de novo review in federal court, which is why TGPNA filed this complaint for declaratory relief.

Judge orders supplemental briefing in demand response enforcement cases in district court.  On January 25, the Supreme Court issued its decision in FERC v. EPSA, which affirmed FERC’s authority over demand response programs.  This decision impacts FERC’s ongoing enforcement action against Lincoln Paper and Richard Silkman in the District of Massachusetts involving the ISO-NE demand response program.  FERC alleges that the respondents engaged in an intentional fraudulent scheme to artificially inflate Lincoln Paper’s customer baseline to enable it to receive compensation for demand response without intending to provide the service or actually having to reduce load.  In light of the Supreme Court’s decision, Judge Woodlock invited the parties to submit supplemental memoranda by February 10 regarding the implications of that case on the pending dispositive orders.  A hearing will be held on February 24.

FERC files opposition to Barclays motion for a stay in district court.  On January 28, FERC filed its opposition to Barclays’ motion asking the U.S. district court in California to stay the proceedings.  As we previously reported, Barclays filed a motion asking the district court to stay the proceedings pending resolution of its appeal to the Ninth Circuit.  In its opposition, FERC argues that Barclays cannot demonstrate “a strong likelihood of success on the merits of their pending appeal,” as required to justify a stay.  In addition, FERC asserts that Barclays cannot show that it will suffer a probable risk of irreparable injury absent a stay of the district court proceedings.  Accordingly, FERC requests that the court deny the motion for a stay of the proceedings.

At the January 25-26, 2016 Buying and Selling Electric Power in the West Conference, David Applebaum, Director of FERC’s Division of Investigations patched in Tuesday by video due to cancelled flights.  David spoke to the role of FERC Enforcement, how many of their cases get started by referrals from organized markets and IMMs, and their view of de novo review.   He noted that Staff acknowledges the district courts have discretion to set FERC enforcement matters for trial, but he focused on the statute’s use of ‘review’ in conferring the courts with jurisdiction.  To us, we heard this as recognition that respondents will need process and discovery in the trial courts.  While a good deal of the record Enforcement amasses comes from the respondent, it’s not a full and complete record as de novo review would mean for the average first year law student.

SHARE
EmailShare

Leave a Reply