A-4 | Docket No. AD07-13-017

Good morning Chairman Phillips and Commissioners.

Today, the Office of Enforcement (OE) is releasing its seventeenth Annual Report on Enforcement.  As in previous years, OE staff prepared this report to provide information about OE’s activities over the last fiscal year.  The Report discusses the activities performed by OE’s Divisions of Investigations (DOI), Audits and Accounting (DAA), and Analytics and Surveillance (DAS).  I am joined by my colleagues Kurt Jacobs from DAA and David Mason from DAS.

As noted in the Report, OE’s enforcement priorities in FY2023 focused on five distinct areas: (1) fraud and market manipulation; (2) serious violations of the Reliability Standards; (3) anticompetitive conduct; (4) threats to the nation’s energy infrastructure and associated impacts on the environment and surrounding communities; and (5) conduct that threatens transparency in regulated markets. 

The Report summarizes audit findings and settlements, which were approved by the Commission and are publicly available on e-Library.  In addition, the Report discusses public litigation filings, both before federal courts and Commission ALJs.  OE’s Report also includes a discussion of non-public activities, including summaries of investigations, self-reports, and surveillance inquiries that were closed without further action by DOI and DAS.  The Report additionally includes illustrative examples of the market monitor referrals received by OE that staff reviewed and closed without opening an investigation.  These summaries can be helpful to companies seeking to comply with the Commission’s regulations and orders.  To maintain confidentiality, the companies and individuals whose conduct was under review in these matters are not identified in these summaries. 

The Report also provides a summary of Enforcement staff’s work on the joint reliability inquiry concerning the December 2022 cold weather event.  After presenting its key findings and recommendations on September 21, 2023, the inquiry team issued its final report on November 7, 2023. 

The Report includes illustrative compliance alerts issued by DAA that cover over a dozen distinct areas where there have been consistent concerns or noncompliance of significant impact.  The Report also describes the audits completed in FY2023, summarizing staff’s findings of noncompliance and providing context for audits that resulted in refunds and recoveries.  Additionally, the Report summarizes the 380 proceedings in which DAA decided certain accounting matters under delegated authority or advised the Commission, and describes DAA’s administration of the Commission’s financial reporting filing requirements and programs, including Electric Quarterly Reports (EQRs) and various other forms.

The Report provides a comprehensive review of DAS’s surveillance program and describes how that division analyzed transactional and market data in FY2023 to detect potential manipulation, anticompetitive behavior, and other irregular activities in the energy markets.

In FY2023, the Commission approved twelve settlement agreements resolving investigations and litigated matters.  Nine of the settled investigations involved claims of market manipulation, tariff violations, and misrepresentations prohibited by the Commission’s Duty of Candor rule.  These settlements totaled approximately $33.39 million, which included approximately $11.72 million in civil penalties and disgorgement of approximately $21.67 million.  The additional  settlements resolved one district court litigation matter for $4 million in disgorgement, one order to show cause proceeding for a $4.4 million civil penalty, and one United States court of appeals matter on remand to the Commission for a $10.75 million civil penalty.

In FY2023, DOI opened 19 new investigations and brought nine pending investigations to closure with no action.  The investigations that staff closed with no action included matters in which staff found that there was no violation, that there was insufficient evidence to conclude that a violation had occurred, or that a violation should not be subject to sanctions.  DOI also closed 172 self-reports without further action, closed three market monitor referrals without opening full investigations, and resolved 241 calls made to the Commission’s Enforcement Hotline.  In addition, in FY2023, DOI continued to litigate three cases on the Commission’s behalf in federal district court, one of which was fully settled in this fiscal year.

In FY2023, DAA completed 9 audits of public utility, natural gas, and oil companies covering a wide array of topics.  The audits resulted in 68 findings of noncompliance and 332 recommendations for corrective action and directed $33 million in refunds and other recoveries.  Additionally, DAA acted through the Chief Accountant’s delegated authority or advised on 380 proceedings.  DAA also assessed EQR submittals received from over 3,000 entities each quarter as to timeliness and, through automated validations, accuracy of data.  Furthermore, DAA administered and oversaw compliance with the requirements of FERC’s financial reporting forms, which in FY2023 involved assessing the Commission’s receipt of approximately 2,600 financial reporting form submittals.

In FY2023, DAS continued monitoring for potential market manipulation and other irregular activities in the markets.  Natural gas surveillance screens produced approximately 24,000 screen trips for review by DAS, which resulted in 27 natural gas surveillance inquiries, and three referrals to DOI for investigation.  On the electric side, each month during FY2023, DAS ran and reviewed 107 electric surveillance screens, as well as monthly, hourly, and intra-hour sub-screens, and reports for over 41,000 hub and pricing nodes within the six ISOs/RTOs.  The electric surveillance screens produced approximately 567,000 screen trips, which resulted in 43 electric surveillance inquiries and six referrals to DOI for investigation. 

In FY2023, DAS also engaged in “enhanced surveillance” involving coordinated efforts by both the natural gas and electric surveillance teams, into disruptive market events related to Winter Storm Elliot and to a period of high energy prices in the west during the winter of 2022-2023.  This enhanced surveillance into both market events is ongoing in FY2024.

During FY2023, DAS also worked with DOI on approximately 60 investigations involving allegations of manipulation in the Commission-jurisdictional natural gas and electricity markets, or violations of tariff provisions.  In these efforts, DAS: (1) provided analytical and data-based assessments of market activity related to ongoing investigations; (2) supported DOI in its fact-finding; and (3) calculated the unjust profits and market harm resulting from alleged violations to assist with determining a civil penalty recommendation under the Commission’s Penalty Guidelines. 

Lastly, DAS conducts analytical reviews of wholesale electric market-based rate transactions to detect the potential exercise of market power.  During FY2023, DAS staff reviewed over 2.6 million market-based rate transactions filed through the Commission’s EQRs by all market-based rate holders selling wholesale energy in the bilateral markets.

Copies of OE’s Annual Report are now available on the Commission’s website.  This concludes the presentation.  My colleagues and I will be happy to take any questions you may have.  Thank you.

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This page was last updated on November 16, 2023