FERC’s modified civil penalty guidelines

Photo by Thomas Roche. Some rights reserved

Almost two weeks ago, FERC issued modified penalty guidelines for enforcement cases. These guidelines, which set forth procedures for determining civil penalties, have had a somewhat turbulent recent history.

The Energy Policy Act of 2005 originally expanded FERC’s civil penalty authority under the Federal Power Act (FPA), and provided civil penalty authority to cover violations of the Natural Gas Act (NGA). On March 18th, 2010, after nearly four years of experience with their new authority, FERC first issued a policy statement on the penalty guidelines that, according to the FERC press release, would “add fairness, consistency and transparency to all FERC civil penalty determinations.” The policy statement guidelines were modeled after portions of the US Sentencing Guidelines.

However, less than one month after the issuance of the guidelines, FERC issued an order mysteriously suspending the new policy and requesting public comments on it. According to the order, FERC had “determined that the public interest would be served by affording interested entities a broader opportunity to comment on the Penalty Guidelines before issuing a final order and putting them into effect.”

Three conferences and numerous written comments later, FERC announced that the penalty guidelines had been revised in response to industry feedback, and that these guidelines, like their March 2010 predecessors, would “ensure fairness, consistency and transparency in all FERC civil penalty decisions.” Law firm Van Ness Feldman identifies the following as key changes to the penalty guidelines:

  • Applicability of the Penalty Guidelines to Violations of the Reliability Standards
  • Base Violation Level for Violations of Reliability Standards
  • Load Loss
  • Partial Compliance Credit
  • Senior-Level Involvement
  • Mitigation Credits
  • Misrepresentations and False Statements

You can read the specifics of the changes in this VNF Alert.

According to FERC, “the modified Penalty Guidelines will apply to all future violations and any pending investigation where FERC’s Enforcement staff has not entered into settlement negotiations.” Within a year, FERC intends to hold a technical conference to receive more input on the guidelines and how they are being implemented.


Further analysis of the implications of the guidelines and their recent amendments is still trickling in from law firms. You can read more on the KM law firm memo search page by entering FERC and penalty guidelines into the text search box.

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