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In May, two “loophole” penalty orders were issued regarding recent fraud and manipulation investigations conducted by the Federal Energy Regulatory Commission’s (FERC) Office of Enforcement (OE), which are discussed below. What will June bring? To start, on June 3, the House of Representatives Energy and Commerce Subcommittee on Energy and Power heard testimony, including from new OE Director Larry R. Parkinson, reviewing draft legislation designed to revamp FERC’s enforcement program to ensure that FERC’s actions are fair and transparent. Parkinson said that FERC’s investigative process is “one of the most transparent, if not the most transparent, in the federal government.” At the same time, as requested by several senators last year, the U.S. Department of Energy’s Inspector General is investigating the fairness of recent FERC enforcement efforts.

FERC Issues Order Assessing Civil Penalties to Powhatan, et al.

On May 29, 2015, FERC issued an Order Assessing Civil Penalties against Powhatan Energy Fund, LLC and its affiliates as well as against Dr. Houlian Chen, Powhatan’s chief trader, for violating FERC’s anti-manipulation rule. Specifically, FERC found Powhatan violated section 222 of the Federal Power Act (FPA) and section 1c.2 of the Commission’s regulations by designing and implementing a scheme to engage in fraudulent up-to congestion (UTC) transactions in PJM Interconnection LLC’s (PJM) energy markets to garner excessive amounts of certain credit payments to transmission customers, known as marginal loss surplus allocation (MLSA). FERC found that from June 1 to August 3, 2010, Powhatan implemented its fraudulent trading scheme by intentionally placing a high volume of “round-trip” UTC trades that canceled each other out by placing the first leg of the trade from locations A to B, and simultaneously placing a second leg of equal volume from locations B to A. This OE investigation was initiated after PJM referred a market participant’s complaint to OE regarding the unusually high volumes of transmission reservations on PJM’s OASIS. PJM’s independent market monitor submitted a similar referral to OE.

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Photo of Francesca Ciliberti-Ayres‡ Francesca Ciliberti-Ayres‡

Francesca focuses her practice on energy regulatory and litigation matters before the Federal Energy Regulatory Commission (FERC), state public utility commissions, and the Court of Appeals. Her experience includes representing parties in major interstate natural gas and petroleum pipeline hearings involving complex multiparty…

Francesca focuses her practice on energy regulatory and litigation matters before the Federal Energy Regulatory Commission (FERC), state public utility commissions, and the Court of Appeals. Her experience includes representing parties in major interstate natural gas and petroleum pipeline hearings involving complex multiparty major rate cases, in certificate proceedings and confidential investigations before FERC involving natural gas, oil, and environmental matters, LNG licensing, tariff, and fuel proceedings. She also advises clients on ensuring compliance with regulatory requirements and environmental regulations.

Photo of Gregory K. Lawrence Gregory K. Lawrence

Gregory K. Lawrence focuses his practice on the electricity and natural gas industries. He is experienced appearing before the Federal Energy Regulatory Commission (FERC) and multiple state utility commissions regarding regulatory proceedings, compliance and enforcement, capacity and energy market structure, transactions and negotiations,

Gregory K. Lawrence focuses his practice on the electricity and natural gas industries. He is experienced appearing before the Federal Energy Regulatory Commission (FERC) and multiple state utility commissions regarding regulatory proceedings, compliance and enforcement, capacity and energy market structure, transactions and negotiations, asset transfers, and governmental affairs. Greg’s clients include funds and financial institutions, marketers, traders, renewable and other project developers, energy storage and demand response assets, municipal and investor-owned utilities, and large energy consumers.

Recognized as a leading energy and electricity lawyer by Chambers USA, Greg is a frequent speaker at energy industry conferences and a contributor to a wide range of publications, including The Electricity Journal, Electric Light & Power, Energy Risk, Bloomberg Law Reports, Project Finance International, Corporate Counsel, Windpower Engineering, and EnergyLaw 360. He also authored a quarterly column in Electric Energy T&D Magazine and “Rationalizing Supply with Demand: Electricity Demand Response in U.S. Wholesale Electricity Markets,” a book chapter in U.S. Law and Taxation.