FERC Releases Modified Penalty Guidelines
At FERC’s September 16, 2010 monthly meeting, the agency unanimously approved an order clarifying its penalty guidelines for use in enforcement cases under the Federal Power Act ("Revised Penalty Guidelines").
FERC released an initial set of penalty guidelines on March 18, 2010. On April 15, 2010, the Commission suspended the use of the initially-drafted guidelines, and requested comments from interested parties on how the guidelines
could be improved. Overall, the Commission accepted a number of regulated entities' comments regarding how enforcement program penalties could be improved.
The Revised Penalty Guidelines include the following significant changes:
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FERC reduced the base violation level for electric reliability violations with the goal of making penalty amounts more commensurate with violations.
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For losses of load due to a reliability violation, FERC will now base penalty amounts on the MWh of lost load -- not the monetary value of such load lost. FERC noted that the latter calculation is difficult to make.
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The Commission will now give partial compliance credit for entities that have less-than-perfect compliance programs in place;
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FERC reduced penalty amounts in cases where violations are based on the actions of rogue employees;
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FERC clarified the mitigation credits that will be given to violators for self-reports, cooperation, avoidance of trial-type hearings, and acceptance of responsibility.
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Finally, the Revised Penalty Guidelines now contain a "scienter requirement" for violations associated with misrepresentations and false statements.
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In sum, FERC stated that its goal was to promote objectivity, consistency, and transparency in its enforcement program. The modified guidelines are still based on the United States Sentencing Guidelines that apply to organizations
in federal enforcement cases. FERC also emphasized, however, that the new guidelines will not impact Enforcement Staff's discretion to close investigations or self-reports. FERC also stated that the modified guidelines
will only apply to Commission Part 1b investigation and enforcement actions, and will not apply to FERC’s review of any NERC Notice of Penalty under the reliability rules. The new guidelines will apply to all future
and pending violations where settlement negotiations have not been initiated, and one year from now, the Enforcement Staff will conduct a technical conference to evaluate the use of the new guidelines.
At the September 16 meeting, Chairman Wellinghoff praised Enforcement Staff for their efforts, and emphasized that FERC will not be using strict liability concepts to penalize operators for shedding load. Also, Wellinghoff
stated the goal of the guidelines is not penalize grid operators for shedding load to comply with a reliability standard. In such instances, FERC will assess the impact of the load lost and will not assess a per se penalty.
The other commissioners also expressed their support for the penalty guidelines at today’s meeting. Commissioner Spitzer attempted to allay concerns that there is a criminal analogy in place by using sentencing guidelines
as a model. Spitzer said FERC’s mission is one of compliance and reliability, and the sentencing guidelines increase transparency and predictability for industry compliance.