Stephen J. Hug

On Thursday, March 21, 2019, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued two Notices of Inquiry (“NOIs”). One NOI focuses on FERC’s approach to determining the Return on Equity (“ROE”) for FERC jurisdictional electric transmission and cost-based wholesale power rates (“ROE Inquiry”)...

On April 10, 2018, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) approved a stipulation and consent agreement (the “Settlement Agreement”) between FERC’s Office of Enforcement (“Enforcement”) and ETRACOM LLC and Michael...

On March 30, 2018, the U.S. District Court for the Southern District of Ohio issued an opinion granting in part and denying in part motions to dismiss the Federal Energy Regulatory Commission’s (“FERC”) action seeking to enforce its assessment of civil penalties against Coaltrain...

Historically, Sections 205 [1] and 206 [2] of the Federal Power Act (“FPA”) have been viewed as authorizing the Federal Energy Regulatory Commission (“FERC” or the “Commission”) to order refunds when a rate has been suspended and placed in effect subject to refund pursuant to Section 205 or a refund effective date...

On November 22, 2017, the Commodity Futures Trading Commission (“CFTC”) released its annual enforcement report for fiscal year 2017. As in previous years, this year’s report highlights the agency’s continued commitment to enforcement and aggressive pursuit of those viewed as engaging in conduct that undermines the integrity of...

FERC Annual Enforcement Update On November 16, 2017, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) released the Office of Enforcement’s (“OE”) annual report on enforcement activities (“ Annual Report ”) for fiscal year...

After more than four years of litigation in federal district court, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) yesterday issued an order approving a $105 million settlement...

On Friday, the U.S. District Court for the Eastern District of California handed the Federal Energy Regulatory Commission (“FERC” or “Commission”) a significant defeat by concluding that FERC’s...

Pursuant to its authority under Section 403 of the Department of Energy Organization Act, on September 29, 2017, the Department of Energy (“DOE”) issued a Notice of Proposed Rulemaking (“NOPR”)...

Yesterday, the Federal Energy Regulatory Commission (FERC) issued an order approving a settlement agreement between FERC’s Office of Enforcement and City Power Marketing, LLC, and its owner, K. Stephen Tsingas (together, City Power). The order resolves...

On July 26, 2017, the U.S. Commodity Futures Trading Commission (“CFTC”) issued an order approving a settlement resolving allegations that Simon Posen of New York violated the CFTC’s prohibition on spoofing by entering bids or offers with “the intent to cancel the bid or offer before execution.” [1] Posen’s transactions occurred in gold, silver, and copper futures contracts (on the Commodity Exchange, Inc.) and crude oil futures contracts (on the New York Mercantile Exchange). Mr. Posen was not, at the time, employed by any corporate entity. According to the order, Mr. Posen engaged in...

A Path Begins to Emerge: Industry Responses to FERC Proposals Respecting State Policies and Eastern Wholesale Markets On May 1-2, 2017, the Federal Energy Regulatory Commission (“FERC”) held a two day conference focused on the interplay between state policy goals and the organized markets for energy and capacity operated by Regional Transmission Organizations (“RTO”) and Independent System Operators (“ISO”) in the East. The conference focused on what steps, if any, FERC should take to protect the integrity of wholesale markets given the recent proliferation of state policies intended to...

On March 30, 2017, the U.S. District Court for the Eastern District of California issued an order denying, without prejudice, the Federal Energy Regulatory Commission’s (“FERC” or the “Commission”) Motion to Affirm Civil Penalties against Barclays Bank PLC and four individuals (“Defendants”). [1] As an initial matter, the court agreed with every other federal court that has opined on the issue of whether defendants are entitled to conduct discovery under the Federal Rules of Civil Procedure. [2] Notably, though, the court went further than any other court in rejecting arguments raised by FERC...

On March 8, 2017, the U.S. District Court for the Eastern District of California issued an order affirming that ETRACOM LLC and its owner (the “Respondents”) are entitled to a full trial on the merits and discovery rights in an action brought by the Federal Energy Regulatory Commission (“FERC” or the “Commission”) seeking to enforce an order assessing civil penalties against the Respondents for alleged market manipulation in the California energy market. The primary issue at stake was the meaning of the Federal Power Act’s (“FPA”) reference to “ de novo review” in a civil action brought by...

In recent weeks, there has been much speculation over what actions the Federal Energy Regulatory Commission (“FERC” or the “Commission”) would take to ensure continuity of operations following the departure of Commissioner Norman Bay. Under the Department of Energy Organization Act, the Commission is required to have a quorum of three commissioners “for the transaction of business.” Because Commissioner Bay’s departure leaves only two FERC commissioners, many have questioned whether FERC would effectively cease to function until such time as the Trump administration is able to fill commission...

The Federal Energy Regulatory Commission (“FERC”) and the U.S. Commodity Futures Trading Commission (“CFTC”) recently released their annual reports on enforcement activities for fiscal year 2016 (October 2015 through September 2016). In addition, FERC enforcement staff released two white papers regarding the bounds of FERC’s prohibition on market manipulation and the features of an effective compliance program: (1) FERC Staff White Paper on Anti-Market Manipulation Enforcement Efforts Ten Years after EPAct 2005 (the “Anti-Manipulation White Paper”); and (2) FERC Staff White Paper on Effective...

On October 14, 2016, the Federal Energy Regulatory Commission (“FERC”) issued an order approving an audit report providing guidance regarding how to report certain types of transactions and payments received by those participating in the FERC-jurisdictional markets operated by Regional Transmission Organizations (“RTO”) and Independent System Operators (“ISO”) in a seller’s Electric Quarterly Reports (“EQR”). The audit report highlights pitfalls that market-based rate sellers should avoid when submitting EQRs and provides insight into areas of likely FERC scrutiny. In particular, FERC staff’s...

On September 30, 2016, the United States District Court for the Southern District of New York issued an order in CFTC vs Wilson, et. al , 13 Civ. 7884 (NYSD), denying motions for summary judgment in an action by the Commodity Futures Trading Commission (“CFTC”) concerning alleged violations of the prohibition on market manipulation contained in Sections 6(c) and 9(a)(2) of the Commodity Exchange Act (“CEA”). In its order, the Court clarified the burden of proof that the CFTC faces when making a price-based manipulation claim under these sections, including that acting with the intent to...

Executive Summary On September 22, 2016, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Inquiry (“NOI”) seeking comment on whether FERC should make changes to the manner in which it evaluates horizontal market power for purposes of evaluating transactions under Section 203 of the Federal Power Act (“FPA”) and its market-based rate program. Among other things, if FERC ultimately adopts this proposal, certain transactions that currently require no detailed market power analysis to be submitted in order to obtain approval would now be subject to more scrutiny. For instance...

In its September 22 Open Meeting, the Federal Energy Regulatory Commission (Commission) issued a Notice Seeking Comments on Proposed Revisions to Electric Quarterly Report Reporting Requirements (in Docket No. RM01-8-000, et al. ) as part of an ongoing effort to “provide for more accurate and consistent data in the EQR.” [1] Two proposed changes in the September 22 Notice are likely to be of significant interest: clarifications on reporting of booked out power and the increased ancillary services reporting obligations for transmission providers. The Notice also seeks comment on other proposed...

On July 21, 2016, the U.S. District Court for the District of Massachusetts issued an order finding that Maxim Power Corp. and several affiliates and an employee (collectively, the “Maxim Respondents”) were entitled to a full trial on the merits and discovery rights. The ruling came in an action by the Federal Energy Regulatory Commission (“FERC”) seeking an order affirming FERC’s assessment of significant civil penalties against Maxim for alleged violations of the Federal Power Act’s (“FPA”) prohibition on market manipulation and related FERC rules. The court’s order is significant both for...

At the Federal Energy Regulatory Commission’s (“FERC” or “Commission”) July 21, 2016 meeting, FERC issued a Notice of Proposed Rulemaking (“NOPR”) proposing to establish a new reporting regime that would require market-based rate (“MBR”) sellers and entities only trading virtual products and financial transmission rights in markets operated by Regional Transmission Organizations (“RTO”) and Independent System Operators (“ISO”) (“Virtual/FTR Participants”) to submit detailed ownership, employee, and contractual information to a database maintained by FERC. FERC proposes that its staff would...

On May 6, 2016, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued an order denying ETRACOM LLC (“ETRACOM”) and Michael Rosenberg’s Motion to Require Disclosure of Certain Materials and Information or, in the Alternative, for Issuance of Subpoena. The motion sought certain data from the California Independent System Operator Corp. (“CAISO”) to support ETRACOM’s defense that CAISO “market flaws” are at the bottom of the matter, not market manipulation as alleged by FERC staff. The Commission denied the motion on three grounds: (1) the data is unnecessary; (2) the...

On May 6, 2016, the Office of Enforcement of the Federal Energy Regulatory Commission (“FERC”) issued a Staff Notice of Alleged Violations (“NAV”), disclosing a nonpublic investigation in which FERC staff has preliminarily determined that Saracen Energy Midwest, LP (“Saracen”) violated Southwest Power Pool, Inc.’s (“SPP”) Open Access Transmission Tariff (“Tariff”), Attachment AE, § 7.4.1(4) between August 2014 and March 2015. According to FERC staff, Saracen submitted bids for transmission congestion rights (“TCRs”) at electronically equivalent settlement points, which is prohibited by § 7.4...

On April 28, 2016, the Federal Energy Regulatory Commission (“FERC”) issued an order [1] directing Total Gas & Power North America, Inc. (“TGPNA”) and two natural gas traders (together the “Respondents”) to show cause why they should not be found to have violated the Natural Gas Act’s (“NGA”) prohibition on market manipulation by engaging in a scheme to manipulate natural gas prices in the southwest United States to benefit related financial positions between June 2009 and June 2012. FERC is proposing civil penalties of $213.6 million against TGPNA and $1 million and $2 million against...

On April 11, 2016, the United States District Court for the District of Massachusetts issued a procedural order denying motions to dismiss actions initiated by the Federal Energy Regulatory Commission (“FERC”) seeking affirmance of two orders assessing civil penalties against Lincoln Paper and Tissue, LLC, Richard Silkman (“Silkman”), and Competitive Energy Services (“CES”) (collectively, the “Respondents”) for violating Section 222 of the Federal Power Act (“FPA”) and FERC’s Anti-Manipulation Rule. In the underlying orders, FERC found that the Respondents had engaged in market manipulation...

On January 27, 2016, TOTAL Gas & Power North America, Inc. ("TGPNA") and two natural gas traders filed a complaint for declaratory relief in the U.S. District Court for the Western District of Texas against the Federal Energy Regulatory Commission ("FERC") claiming that FERC intends to violate TGPNA's statutory and constitutional rights by proceeding with an administrative enforcement action against the company for alleged violations of the Natural Gas Act's ("NGA") prohibition on market manipulation. [1] TGPNA's complaint represents a direct attack on the legality of FERC's existing...

On December 8, 2015, the Federal Energy Regulatory Commission ("FERC") Office of Enforcement held a technical conference respecting FERC's recent Notice of Proposed Rulemaking ("NOPR") on Connected Entity Data. As discussed in an earlier post , if adopted, the NOPR would dramatically increase the amount of information that entities participating in Regional Transmission Organization ("RTO") and Independent System Operator ("ISO") markets would be required to disclose regarding their affiliates, contractual arrangements, and employees. In particular, the NOPR would require each market...

On November 19, 2015, the Federal Energy Regulatory Commission ("FERC") released its annual report on enforcement activities for fiscal year 2015. The report highlights FERC's continued focus on incidents involving fraud, market manipulation, and other anticompetitive conduct in the markets subject to its jurisdiction. It also highlights the types of activities and conduct that have been subject to FERC scrutiny over the past year and provides informal guidance that jurisdictional entities should consider when evaluating their own conduct and compliance programs. The most notable trend...

On September 17, 2015, the Federal Energy Regulatory Commission ("FERC") issued a notice of proposed rulemaking ("NOPR") proposing to significantly expand the information that entities would be required to disclose in order to participate in the wholesale markets administered by Regional Transmission Organizations ("RTO") and Independent System Operators ("ISO"). Notably, while market participants already are required to disclose certain affiliate relationships to the RTOs and ISOs in which they participate, FERC's proposal would require market participants to provide additional...

On June 9, 2015, FERC issued an order accepting PJM's proposal to modify its forward capacity market, the Reliability Pricing Model ("RPM"), to establish a new capacity product, the Capacity Performance Resource. PJM's proposal is designed to tighten the performance standards applicable to resources that receive a capacity obligation through the RPM and is intended to address poor resource performance that has been experienced since implementation of the RPM, especially during the 2014 polar vortex. Once implemented, PJM's proposal will impose more stringent performance standards on...

On October 7, 2014, PJM Interconnection, L.L.C. ("PJM") filed with the Federal Energy Regulatory Commission ("FERC") a blueprint for the continued participation of demand response resources in its markets in the wake of the United States Court of Appeals for the D.C. Circuit's decision in Electric Power Supply Ass'n v. Fed. Energy Reg. Comm'n , 753 F.3d 216 (D.C. Cir. 2014) (" EPSA "). In that case, the D.C. Circuit vacated Order No. 745, FERC's rule governing the compensation of demand response resources in wholesale energy markets on the basis that the rule encroached upon state...

On June 19, 2014, the Federal Energy Regulatory Commission ("FERC" or "Commission") issued a Notice of Proposed Rulemaking ("NOPR") proposing to revise its standards for evaluating applications to sell energy, capacity, and ancillary services at market-based rates, as set forth in Order No. 697 and subsequent orders. FERC's revisions have two primary goals: (1) to streamline the horizontal and vertical market power analyses that public utilities are required to submit when filing an application for market-based rate authority or a triennial market power update; and (2) increase the...

On November 13, 2013, the Federal Energy Regulatory Commission ("FERC") issued an order instituting a proceeding pursuant to Section 206 of the Federal Power Act to determine whether Idaho Power Company's ("Idaho Power") market-based rate authority in its home balancing authority area remains just and reasonable. The order responded to Idaho Power's June 28, 2013 triennial market power analysis for the Northwest region. That submittal indicated that Idaho Power failed FERC's market share indicative screen when the additional 300 MW of capacity associated with Idaho Power's recently...

On October 17, 2013, the Federal Energy Regulatory Commission ("Commission") issued an order finding that all generators providing Reactive Supply and Voltage Control Service ("reactive power") must have a rate schedule on file with the Commission governing that service, even when the generator does not receive compensation for the service. Traditionally, the Commission only has required generators to file a rate schedule addressing its provision of reactive power if it received compensation for providing the service. Going forward, however, all generators providing reactive power will be...

On July 18, 2013, the Federal Energy Regulatory Commission ("Commission") issued a Notice of Proposed Rulemaking ("NOPR") proposing to revise its regulations to permit expressly interstate natural gas pipelines and public utilities that own, operate, or control transmission facilities (i.e., transmission operators) to share non-public, operational information for the purpose of promoting reliable service or operational planning. The Commission issued the NOPR in response to statements by natural gas pipelines and transmission operators at recent conferences concerning electric-gas...

On June 4, 2013, the Federal Energy Regulatory Commission ("FERC") posed data requests to each of the country's Independent System Operators and Regional Transmission Organizations as part of its efforts to explore improvements to the coordination of the natural gas and electric markets. As natural gas has become the fuel of choice for more and more electric generating facilities, concerns have arisen regarding the reliability impacts of insufficient infrastructure to deliver needed gas supplies and other impediments to the seamless coordination of these markets. Over the past year, FERC...

On March 7, 2013, the Federal Energy Regulatory Commission ("FERC") issued an order denying a request for authorization pursuant to Section 203 of the Federal Power Act for Wayzata Investment Partners, LLC ("Wayzata") to acquire an indirect interest in New Harquahala Generating Company, LLC ("New Harquahala"), which owns a 1,054 megawatt ("MW") gas-fired, combined-cycle facility located in the Arizona Public Service Company ("APS") balancing authority area. FERC's order is significant because it represents one of the few instances where FERC has denied Section 203 authorization. New...

On February 1, 2013, the Department of Justice (DOJ) filed comments in response to the Federal Energy Regulatory Commission's (FERC) Notice of Inquiry in which FERC is considering amending its regulations to require jurisdictional sellers of natural gas to report on a quarterly basis detailed, transaction-specific information regarding every sale of natural gas that entails physical delivery the next day or the next month. FERC already requires sellers of electricity and transmission service to file such information on a quarterly basis. FERC has taken the position that existing natural gas...

On September, 20, 2012, the United States Court of Appeals for the Second Circuit affirmed a lower court decision dismissing an incipient class action against KeySpan Corporation and Morgan Stanley Capital Group, Inc. The court's decision was the most recent development in the ongoing saga surrounding KeySpan and Morgan Stanley's manipulation of capacity auction for the New York City market. Simon v. KeySpan Corp. , Docket No. 11-2265-cv (2d Cir. 2012). As detailed in prior blog posts in February 2010 , February 2011 , and August 2012 , KeySpan acquired a financial interest in its largest...