Enforcement of Statutes, Orders, Rules, and Regulations

<RULE> DEPARTMENT OF ENERGY <SUBAGY>Federal Energy Regulatory Commission</SUBAGY> <CFR>18 CFR Part 1b</CFR> <DEPDOC>[Docket No. PL24-2-000]</DEPDOC> <SUBJECT>Enforcement of Statutes, Orders, Rules, and Regulations</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Energy Regulatory Commission, DOE. <HD SOURCE="HED">ACTION:</HD> Policy statement. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Federal Energy Regulatory Commission revises its process for resolving by settlement investigations pursuant to the Commission's regulations. Pursuant to this policy statement, the Commission grants the Director of Enforcement the discretion to authorize Office of Enforcement staff to engage in settlement negotiations without first seeking settlement authority from the Commission. When Office of Enforcement staff receives a viable offer of settlement from the subject of an investigation, it will present that offer to the Commission for voting, as is the case now. While the new process grants Office of Enforcement staff new discretion to commence settlement negotiations, it does not change the fact that it is the Commission that ultimately determines whether any proposed settlement of an investigation is in the public interest. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This policy statement is effective February 26, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> <FP SOURCE="FP-1"> Jennifer Gordon, Office of Enforcement, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-5908, <E T="03">jennifer.gordon@ferc.gov</E> </FP> <FP SOURCE="FP-1"> John Hebden, Office of Enforcement, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8821, <E T="03">john.hebden@ferc.gov</E> </FP> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Policy Statement on Process for Resolving Investigations by Settlement</HD> <HD SOURCE="HD2">(Issued February 15, 2024)</HD> 1. The Commission issues this policy statement to provide updated guidance as to our enforcement process and policies concerning resolution by settlement of investigations that are initiated pursuant to part 1b of the Commission's regulations. <SU>1</SU> <FTREF/> Based on our experience over the past 15 years operating pursuant to our existing settlement process as originally adopted in 2008, <SU>2</SU> <FTREF/> consideration of other Federal enforcement program settlement processes, and related industry feedback, we have determined that the Commission's existing settlement process would benefit from certain enhancements. Specifically, and in recognition of the important role that settlements play in enforcement, the reforms discussed herein are designed to streamline the settlement process, to ensure that both the Commission and subjects of Commission investigations can resolve investigations efficiently. <FTNT> <SU>1</SU>  18 CFR pt. 1b (2023). </FTNT> <FTNT> <SU>2</SU>   <E T="03">See Enf't of Statutes, Reguls. and Ords.,</E> 123 FERC ¶ 61,156, at PP 33-34 (2008) (Revised Policy Statement on Enforcement). </FTNT> 2. As discussed in more detail below, pursuant to this Policy Statement, we replace the Commission's existing process whereby Office of Enforcement (Enforcement) staff must seek settlement authority from the Commission prior to engaging in settlement negotiations with the subject of an investigation, with a process where the Director of Enforcement has the discretion to authorize Enforcement staff to engage in such negotiations. Under this new process, formal settlement authority, with settlement terms pre-reviewed by the Commission, will not be a necessary precondition to the initiation of settlement negotiations. Instead, with the Director of Enforcement's authorization, Enforcement staff will engage in negotiations with the subject of an investigation and, if and when Enforcement staff receives a viable settlement offer from the subject, it will negotiate the applicable terms and thereafter present the written Offer of Settlement to the Commission for formal voting. Importantly, while the new process grants Enforcement staff new discretion to commence and engage in settlement negotiations, it does not change the fact that it is the Commission that ultimately determines whether a settlement of an investigation is in the public interest and should be approved. 3. Given the significant role settlements play in the Commission's enforcement program, it is important to ensure that the policies and practices governing the settlement process are efficient and effective. Ensuring that the Commission moves expeditiously benefits the subjects of Commission investigations who want to resolve investigations early, as well as any market participants, customers, and the public who may have been harmed by the alleged violations and to whom disgorgement and restitution may be directed once settlement is achieved. The reforms adopted herein to the Commission's settlement process enhance both Enforcement staff's and investigative subjects' ability to negotiate settlements and reduce the time it takes to reach resolution by settlement. As a result, the Commission's settlement practices will better align with those of similarly situated Federal agencies which do not require that Enforcement staff request settlement authority prior to engaging in settlement negotiations with subjects of investigations. <HD SOURCE="HD1">I. Introduction and Background</HD> <HD SOURCE="HD2">A. Role of Settlements in Part 1b Investigations</HD> 4. Settlement is the preferred means for the Commission to resolve investigations that would otherwise result in a recommendation of remedial action. <SU>3</SU> <FTREF/> Settlements allow the Commission to devote its limited resources to investigating other cases, rather than expending significant resources in protracted litigation, which supports our mission of ensuring the jurisdictional markets remain free from fraud, manipulation, and anti-competitive conduct. <SU>4</SU> <FTREF/> The Commission has explained that “the public interest is often better served through settlements because we are able to ensure that compliance problems are remedied faster and that disgorged profits may be returned to customers faster.”  <SU>5</SU> <FTREF/> In addition, while the Commission does not make findings as to whether a violation occurred in an order approving or rejecting a settlement offer, <SU>6</SU> <FTREF/> early and transparent publication of settlements permits the Commission to expeditiously alert other market participants to potential compliance pitfalls and helps avoid repetition of unlawful conduct. <FTNT> <SU>3</SU>   <E T="03">Id.</E> P 33. </FTNT> <FTNT> <SU>4</SU>   <E T="03">Id.</E> </FTNT> <FTNT> <SU>5</SU>   <E T="03">Id.</E> </FTNT> <FTNT> <SU>6</SU>  Rather, the Commission determines only whether the settlement is a fair and equitable resolution of the matters concerned and is in the public interest. <E T="03">See, e.g., Todd Meinershagen,</E> 181 FERC ¶ 61,251, at PP 14-20 (2022); <E T="03">ISO-New England, Inc.,</E> 180 FERC ¶ 61,223, at PP 88-95 (2022); <E T="03">Enerwise Glob. Tech., LLC d/b/a CPower,</E> 180 FERC ¶ 61,126, at PP 17-18 (2022). </FTNT> <HD SOURCE="HD2">B. Revised Policy Statement on Enforcement</HD> 5. In 2008, the Commission issued its Revised Policy Statement on Enforcement to “provide guidance to the regulated community as to [its] enforcement policies concerning our governing statutes, regulations, and orders.”  <SU>7</SU> <FTREF/> The Revised Policy Statement on Enforcement was designed to “give the industry a fuller picture of how our investigative process works, including the considerations Enforcement staff takes into account in determining whether to open an investigation and, once opened, whether to close it without further action or to recommend sanctions.”  <SU>8</SU> <FTREF/> Consistent with this purpose, the Revised Policy Statement on Enforcement detailed the procedures the Commission, and in particular Enforcement staff, follow when initiating, conducting, and resolving an investigation. <SU>9</SU> <FTREF/> <FTNT> <SU>7</SU>  Revised Policy Statement on Enforcement at P 1. The Revised Policy Statement on Enforcement followed an earlier policy statement on Enforcement issued in 2005, following enactment of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594 (2005) (EPAct 2005). <E T="03">See Enf't of Statutes, Ords., Rules, and Reguls,</E> 113 FERC ¶ 61,068 (2005) (Policy Statement on Enforcement). </FTNT> <FTNT> <SU>8</SU>  Revised Policy Statement on Enforcement at P 5. </FTNT> <FTNT> <SU>9</SU>   <E T="03">Id.</E> PP 20-71. </FTNT> 6. The Revised Policy Statement on Enforcement explained that, before recommending the Commission commence an enforcement proceeding, Enforcement staff will attempt to reach a settlement with the subject of an investigation. The Commission noted that this is valuable to the subjects of investigations, who benefit from potentially lower negotiated penalties  <SU>10</SU> <FTREF/> and avoiding the costs and risks of litigation. <SU>11</SU> <FTREF/> Further, the Commission explained that resolution of investigations by settlement benefits the public interest, by ensuring the quick remediation of compliance problems and return to customers of any ill-gotten gains. <SU>12</SU> <FTREF/> <FTNT> <SU>10</SU>  In adopting and subsequently revising its Penalty Guidelines, the Commission formalized this financial benefit for settling parties, by providing a specific and transparent credit to subjects in the penalty calculation for resolving a matter without the need for a trial-type hearing. The Commission also separately provides credit for co ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 34k characters. 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