Staff Presentation: November 19, 2020
Docket No. AD07-13-014
Item No. A-3: Staff Presentation | Report
Good morning Chairman Danly and Commissioners.
Today, the Office of Enforcement (OE) is releasing its fourteenth 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) during the last fiscal year.
The Report summarizes audits, litigation filings, and settlements which were approved by the Commission. These resources are also publicly available on e-Library. OE’s Report also includes discussion of non-public activities, including summaries of investigations and self-reports that were closed without further action by DOI. The Report also 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 Division of Audits and Accounting has included illustrative compliance alerts that cover nearly a dozen distinct areas where there have been consistent concerns or noncompliance of significant impact. To assist jurisdictional entities in gaining a better understanding of a particular topic, examples of docket number(s) of one or more recent audit reports or Commission orders dealing with the various topics are provided in the Report so that jurisdictional entities may review the more recent findings by DAA in audit reports or by the Commission in orders related to a particular topic area. The Report also gives a description of the audits completed in FY2020, which summarizes staff’s findings of noncompliance and provides context for audits that resulted in refunds and recoveries. Additionally, the Report summarizes DAA’s role in deciding, or advising, on Commission proceedings and accounting matters and in the administration of certain Commission form filing requirements and programs.
The Division of Analytics and Surveillance provides a comprehensive review of its surveillance program and describes how it analyzed transactional and market data in FY2020 to detect potential manipulation, anticompetitive behavior, and other anomalous activities in the energy markets. Additionally, this section of the Report includes details about DAS’s processes and practices related to reviewing market monitor referrals and data management.
OE’s enforcement priorities in FY2020 have remained the same, as we continue to focus on four distinct areas: (1) fraud and market manipulation; (2) serious violations of the Reliability Standards; (3) anticompetitive conduct; and (4) conduct that threatens transparency in regulated markets.
In FY2020, the Commission approved three settlement agreements between Enforcement and subjects to resolve pending investigative matters. The settlements totaled more than $550,000, which included $437,500 in civil penalties and disgorgement of approximately $115,000. In FY2020, DOI staff opened six new investigations and brought eight pending investigations to closure with no action. The investigations that staff closed with no action included matters in which staff found no violation, or staff found that there was not enough evidence to conclude that a violation had occurred. In several other matters, DOI found a violation but exercised its discretion to not pursue a sanction and closed the investigation. DOI also closed 105 self-reports without further action, closed six MMU referrals without opening full investigations, and resolved 146 calls made to the Commission’s Enforcement Hotline. In addition, DOI filed one new case in federal district court, and continued to litigate three other cases on the Commission’s behalf.
In FY2020, the Division of Audits and Accounting completed ten audits of public utility, natural gas, oil, and Regional Transmission Organization companies covering a wide array of topics. The audits resulted in 51 findings of noncompliance and 199 recommendations for corrective action, and directed $98.4 million in refunds and other recoveries. Additionally, DAA acted through the Chief Accountant’s delegated authority or advised on 441 proceedings, including acting on 104 accounting filings requesting approval of a proposed accounting treatment or financial reporting matter, and assisting with 337 rate, pipeline certificate, merger and acquisition, and debt and security issuance proceedings before the Commission. These proceedings included requests for declaratory orders, natural gas certificate applications, merger and acquisition applications, electric and natural gas rate filings, applications for issuance of securities, and requests for accounting approval. In many of these cases, DAA served in an advisory role, identifying and analyzing the accounting implications of those requests. DAA also assessed Electric Quarterly Report (EQR) submittals received from nearly 2,800 entities each quarter as to timeliness and, through automated validations, accuracy and reliability of data. DAA held two EQR user group meetings to conduct outreach with the filing community and discuss potential system improvements and enhancements. Additionally, in March 2020, DAA held a staff-led virtual technical conference on use of XBRL for filing Commission forms, and in FY2020 the Commission established an XBRL implementation schedule. DAA also administered and oversaw compliance with the requirements of FERC Form Nos. 1, 1-F, 2, 2-A, 3-Q (gas and electric), 6, 6-Q, 60, and FERC-61.
Finally, in FY2020, the Division of Analytics and Surveillance continued monitoring for potential market manipulation and other anomalous activities in the markets. Natural gas surveillance screens produced approximately 10,594 screen trips which were reviewed by DAS staff, resulting in 26 additional in-depth inquiries into specific trading behavior. On the electric side, each month during FY2020, DAS ran and reviewed 84 electric surveillance screens, as well as monthly, hourly and intra-hour sub-screens, and reports for over 38,000 hub and pricing nodes within the six ISO/RTOs. This surveillance activity identified 39 instances of market behavior that required further analysis. DAS staff made a total of five surveillance-related referrals to DOI during the fiscal year. During FY2020, DAS also worked with DOI on approximately 50 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 amount of unjust profits and market harm resulting from alleged violations to assist with determining a civil penalty recommendation under the Commission’s Penalty Guidelines. DAS’s work in these areas informs the structure and substance of investigative fact-finding, settlement discussions, and Commission actions.
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.