Senate Panel Holds Confirmation Hearing on FERC Nominees
Yesterday, the Senate Committee on Energy and Natural Resources held a hearing to consider the nominations of Cheryl LaFleur and Norman Bay to serve as Commissioners of the Federal Energy Regulatory Commission (FERC). Bay, currently the director of FERC’s Office of Enforcement, has been nominated by the President to serve the remainder of former Chairman Jon Wellinghoff’s term, which ends in 2018, and would be designated Chairman upon confirmation. LaFleur, currently serving as Acting Chairman, has been re-nominated for a term ending in 2019. Both nominations require Senate confirmation.
At the hearing, the majority of the questions from the committee focused on Bay’s regulatory experience, whether he will recuse himself from acting on pending enforcement cases if he is confirmed, and recent criticism that the Office of Enforcement does not allow for due process or sharing of exculpatory evidence when conducting investigations. Other topics explored by the committee included how to modernize the grid, ensuring ratepayers are not harmed by natural gas exports, and how to reconcile Environmental Protection Agency (EPA) power plant regulations with FERC’s mission of maintaining reliability and ensuring just and reasonable rates.
Several senators brought up the recent Energy Law Journal article and Wall Street Journal op-ed that criticized the Office of Enforcement for failing to provide sufficient substantive and procedural due process during investigations. Specifically, senators questioned Bay on claims that his office does not share transcripts of depositions with the deposed party, does not disclose exculpatory evidence to the investigated party, and does not provide a legal or factual response to arguments raised. Bay denied these claims, noting that depositions are eventually shared with the deposed party, but that access to them can be temporarily denied if the release would affect the integrity of the investigation. With regard to disclosing exculpatory evidence, Bay noted that he pushed for FERC to adopt the Brady Policy Statement (see Policy Statement on Disclosure of Exculpatory Materials,129 FERC ¶ 61,248 (2009)), which ensures that Office of Enforcement staff allows subjects access to exculpatory or potentially exculpatory evidence that is “material to guilt or punishment” in Section 1b investigations and administrative enforcement actions. He also noted that Enforcement shares information with an investigated party through a Preliminary Findings Letter, and that parties are allowed to respond to the allegations. Bay also noted that the Commission approves settlements that have been negotiated by the Office of Enforcement staff, and there has been bipartisan support by the Commission in approving such settlements.
Other senators voiced support for the Commission taking forceful enforcement actions, recalling the Enron abuses in western power markets. While both Acting Chairman LaFleur and Bay noted they were open to suggestions to improve the process, one senator noted that any changes in the FERC enforcement program were decisions for the Commission to make, not decisions for an office director.
Several senators also expressed concern regarding Bay’s lack of regulatory and policy experience, how he would handle his recusal in a number of matters, and his qualifications to serve as FERC Chairman. They noted that Bay had not served as a regulator or worked in the energy sector prior to 2009. Bay defended his qualifications and highlighted his prior experience in the industry. Several senators defended Bay’s qualifications.
In addition, senators suggested there are 43 pending matters from which Bay might have to recuse himself if confirmed. Bay responded that he would only be required to recuse himself from those matters if the most sweeping criteria were used, and that he would work with FERC’s Designated Ethics Officer to determine which matters would require recusal.
Senators also questioned what actions FERC would take with regard to pending EPA regulations. Specifically, they asked what steps FERC would take if EPA’s regulations affected the reliability of the grid, and whether modeling the cumulative effects of EPA regulations was possible. Both Acting Chairman LaFleur and Bay noted that they do not control EPA rules, but that they provide technical assistance to EPA, comment on proposed rules, and discuss any regulations that might affect reliability with EPA.
Several senators stated that they would submit additional written questions to the nominees for inclusion into the record.
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