Energy Enforcement + Compliance

Morrison & Foerster has a leading practice in the area of FERC and CFTC enforcement and compliance and FERC Enforcement audits, representing a broad range of participants in the electricity, natural gas and other commodity markets.

The risks of non-compliance for energy companies and individuals increased substantially under the Energy Policy Act of 2005 which explicitly prohibits the manipulation of energy markets, provides for civil penalties up to $1 million per day per violation under the Federal Power Act and the Natural Gas Act, and increases the level of possible criminal penalties. As a result, FERC has significantly increased its enforcement activities against market participants, including financial firms, electricity and natural gas traders, utilities, independent power producers, virtual traders, natural gas companies, pipeline shippers, and demand response providers. FERC has approved enforcement settlements totaling hundreds of millions of dollars and has numerous ongoing investigations, audits, and enforcement actions.

Under Dodd-Frank and the Commodity Exchange Act, the CFTC has enhanced authority to prohibit the manipulation of commodity markets, including energy, and can impose substantial civil penalties (including up to $1 million per violation). Congress also granted the CFTC new authority to prohibit disruptive trading practices such as banging the close and spoofing. The CFTC has actively policed energy markets for over a decade, which remains an enforcement focus post Dodd-Frank.

Morrison & Foerster lawyers regularly represent a wide range of electricity and natural gas market participants and individuals in FERC and CFTC enforcement proceedings and FERC audits, many of which remain non-public and confidential. In addition, we provide FERC and CFTC compliance advice and training to a wide range of market participants. Our resources include lawyers with significant agency enforcement and audit experience, including a former senior CFTC enforcement official, a former FERC Enforcement attorney who also served as chairman of the Energy Bar Association’s Enforcement & Compliance Committee, and a former assistant general counsel at the CFTC, as well as former prosecutors.

Representative Experience

• JP Morgan in a FERC Enforcement investigation of alleged electricity market manipulation in CAISO and MISO and the related $410 million settlement, the largest enforcement settlement in FERC history.
• Energy Transfer Partners and Oasis Pipeline in investigations by FERC and CFTC regarding alleged market manipulation and undue discrimination, and in resulting litigation and settlements at FERC.
• Electricity traders in connection with FERC Enforcement’s investigation and related action in federal district court regarding alleged manipulation by Barclays and four of its traders.
• Texas Energy Future Holdings in an audit by FERC Enforcement's Audit Division regarding compliance with the terms of the agency’s order approving the nation's largest leveraged buy-out, the acquisition of Texas Utilities Corp.
• Major energy trade association with respect to advice on the CFTC's proposed rule on market manipulation and the CFTC's advanced notice of proposed rulemaking on disruptive trade practices.
• Demand response provider in a non-public FERC investigation and settlement alleging manipulation in connection with demand response services in PJM.
• AES Southland and affiliates in several investigations of its participation in the organized California markets.
• Oil and gas producer in a FERC enforcement investigation and settlement regarding the Cheyenne Plains Open Season for pipeline capacity.
• Independent power producer in a non-public FERC Enforcement investigation of alleged manipulation of electricity markets with respect to the bidding of electric generation into certain RTO markets; terminated with no further action.
• Virtual electricity trader in an ongoing non-public FERC investigation of fraud and manipulation with respect to trading virtual electricity products and congestion revenue rights in the California ISO markets. 
• Large natural gas marketer in connection with a CFTC Enforcement subpoena regarding certain natural gas transactions.
• Gas utility in non-public FERC investigation of alleged violation of pipeline capacity release and related rules; terminated with no further action.
• Large electric and natural gas utility in a FERC Enforcement audit, including compliance with market-based rate authority, electronic quarterly report requirements, and rules regarding uplift or make-whole payments. 
• Sovereign wealth fund in a FERC Enforcement audit reviewing compliance with a FERC order approving its acquisition of a controlling interest in a U.S. vertically integrated utility and examining its U.S. energy holdings.
• Natural gas trading and pipeline company and six of its executives and employees in an ongoing FERC Enforcement investigation of alleged manipulation of natural gas trading in Northeastern markets.
• Traders in electricity and gas markets in ongoing FERC Enforcement investigations alleging manipulation in trading at various hubs and in scheduling and offering electricity products in RTO markets.
• Seven major energy trade associations, including Edison Electric Institute, American Gas Association, Natural Gas Supply Association and Electric Power Supply Association in preparing a comprehensive White Paper evaluating FERC’s enforcement initiatives both substantively and procedurally, and paving the way for implementation of significant reforms to FERC’s enforcement program.