This week’s enforcement update covers:
- BP files motion seeking dismissal of FERC case based on statute of limitations;
- Eversource sends cease & desist letter regarding alleged gas pipeline capacity withholding report;
- Secretary Perry grants extension for FERC action on DOE grid resiliency proposal;
- Kevin McIntyre sworn in as Chairman and Richard Glick sworn in as Commissioner at FERC;
- House Energy and Commerce Subcommittee holds hearing on financial trading in electricity markets; and
- CFTC releases annual enforcement results for Fiscal Year 2017.
BP files motion seeking dismissal of FERC case based on statute of limitations. On December 11, BP filed a motion to lodge and to dismiss, or in the alternative, for reconsideration of FERC’s order affirming the initial decision assessing a civil penalty and disgorgement against BP in FERC Docket No. IN13-15. BP lodges the district court’s decision in FERC v. Barclays and the Supreme Court’s decision in Kokesh v. SEC regarding the five-year statute of limitations in 28 U.S.C. § 2462. BP argues that under Barclays and Kokesh, the imposition of civil penalties and disgorgement are time-barred and the case should be dismissed. According to BP, the statute of limitations began to run at the very latest on November 25, 2008, when FERC Enforcement’s investigative period ended. Accordingly, Section 2462 required the commencement of a “proceeding” no later than November 25, 2013. Although the Order to Show Cause was issued within that time period (August 5, 2013), based upon Barclays, this was not a “proceeding” within the statute of limitations. The Order Setting the Matter for Hearing was not issued until May 15, 2014—outside the five-year period provided in Section 2462.
On December 14, in response to an unopposed motion by FERC Enforcement Staff, FERC extended the time for FERC Enforcement Staff to file an answer until January 25, 2018.
Eversource sends cease and desist letter regarding alleged gas pipeline capacity withholding report. On December 11, Eversource sent a cease and desist letter to the Environmental Defense Fund (EDF) regarding an EDF report alleging that Eversource has intentionally withheld gas pipeline capacity from the wholesale power market in order to profit from higher electricity prices. Calling the allegations “patently false” and “unsupported by fact,” Eversource demanded that the EDF cease and desist from further statements and requested that EDF remove the report from the internet. As we previously reported, on October 17, U.S. Senator Richard Blumenthal (D-Conn.) sent a letter to FERC calling for an investigation into allegations that Eversource and Avangrid may have withheld and underutilized gas pipeline capacity, costing New England consumers $3.6 billion in higher electricity prices.
Secretary Perry grants extension for FERC action on DOE grid resiliency proposal. On December 8, DOE Secretary Rick Perry granted FERC another 30 days to consider the DOE’s grid resiliency proposal in FERC Docket No. RM18-1. In a letter filed with FERC, Perry granted FERC Chairman McIntyre’s request for an extension for FERC to take final action on the grid resiliency proposal until January 10, 2018. In granting the extension, Secretary Perry stressed the urgency of the matter, stating: “The better course would be for the Commission to adopt the Proposal within this reasonable deadline. If the Commission fails to adopt the Proposal within the original deadline for the reasons stated in the Extension Request, the security of our nation’s electric grid will continue to be at risk.”
House Energy and Commerce Subcommittee holds hearing on financial trading in electricity markets. On November 29, the U.S. House of Representatives Committee on Energy and Commerce, Subcommittee on Energy held a hearing titled “Powering America: Examining the Role of Financial Trading in the Electricity Markets.” The hearing examined the role and effects of financial trading in the nation’s wholesale electricity markets, as well as whether market design changes are necessary to ensure the efficiency of financial transactions and to protect against improper trading activity. Among other things, the witnesses discussed whether efforts by FERC and the RTOs/ISOs to enforce market rules and prosecute improper trading conduct are sufficient to maintain confidence in market outcomes. According to the hearing’s Background Memo, “[T]he highly technical nature of these financial transactions and the use of complicated trading strategies have allowed certain traders with ill-intent to engage in manipulation schemes that are often difficult to detect. . . . As such, vigilant oversight and continued prosecution of those seeking to manipulate the market remains necessary.”
Kevin McIntyre sworn in as Chairman and Richard Glick sworn in as Commissioner at FERC. On December 7, Kevin McIntyre was sworn in as Chairman at FERC. In addition, Rich Glick was sworn in as a FERC Commissioner on November 29. FERC now has its full complement of five Commissioners (three Republicans and two Democrats).
CFTC releases annual enforcement results for Fiscal Year 2017. On November 22, the CFTC released its enforcement results for fiscal year 2017. In the fiscal year that ended September 30, 2017, the CFTC brought 49 enforcement-related actions, which included significant actions to root out manipulation and spoofing and to protect retail investors from fraud. The CFTC also pursued significant litigation, including cases charging manipulation, spoofing, and unlawful use of customer funds. Overall, the CFTC obtained orders totaling $412,726,307 in restitution, disgorgement and penalties. In particular, the CFTC obtained $333,830,145 in civil monetary penalties and $78,896,162 million in restitution and disgorgement orders.
According to the CFTC’s release, the CFTC continued its benchmark rate anti-manipulation enforcement, brought significant actions to combat disruptive trading practices (including spoofing), and prosecuted retail fraud (including fraud involving virtual currency markets) during fiscal year 2017. In addition, the CFTC implemented enhancements to increase the effectiveness and strength of its enforcement program. The CFTC put in place new rules and procedures to better protect whistleblowers and to further incentivize whistleblowers to come forward. Moreover, the CFTC realigned the market surveillance unit under the Division of Enforcement, under which the market surveillance unit conducts market analysis to confirm market integrity and identifies areas that may warrant enforcement inquiry. The Division of Enforcement also issued new cooperation advisories, bringing its cooperation program in line with other law enforcement agencies.