FERC Filings
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION_
Key Elements Of EPSA’s Competitive Market Enforcement Proposal
Objective: The objective of this enforcement proposal is to develop rules and procedures to allow the Commission to respond in a timely manner to disputes and/or complaints regarding jurisdictional services, including commercial practices affecting both power sale and transmission transactions, and to identify and closely monitor certain "problem" utilities in order to discourage any reoccurrence of unreasonable commercial practices or violations of policy. The Commission’s current practice of responding to complaints filed pursuant to Section 206 of the Federal Power Act ("FPA"), or applications filed pursuant to Section 211 of the FPA, is inadequate for resolving many commercial practice issues, as well as certain other alleged violations of tariffs or FERC policy. Preparing complaints and applications is time consuming and costly, and, typically, does not elicit any Commission action for several months or years after a filing. Moreover, since Section 206 does not provide for retroactive refunds, many complaints simply are not filed. All too often, transactions are lost because of a party’s unreasonable commercial practice (e.g., erroneous ATC determinations, incomplete OASIS postings, code of conduct violations, etc.), or as a result of delayed rulings as to a party’s failure to comply with FERC policy in implementing its tariff.
Expedited Complaint Procedures: In order to streamline the complaint process, the Commission should establish a category of complaints called "Commercial Practice Complaints," which would be handled, at the outset, separately from other complaints filed pursuant to Section 206 of the FPA. Commercial Practice Complaints would address issues for which an immediate resolution is required in order for the complainant to consummate or implement a transaction.3 Complainants would be required to make a preliminary showing that expedited treatment is necessary to resolve the complaint in order to avoid significant harm to the complainant.4 To facilitate the Commission’s processing of Commercial Practice Complaints more swiftly, the Commission could develop a pro forma "Standardized Complaint Form" which would be filed in lieu of a traditional Section 206 complaint pleading.5 A complaint designated as a "Commercial Practice Complaint" would be treated differently than other Section 206 complaints regarding the rates, terms and conditions of service under filed rate schedules.6 In particular, Commercial Practice Complaints would be handled on an expedited basis pursuant to a two track process:
Track 1 ("Advisory Fast Track"): Upon receiving a Standardized Complaint Form, the Commission (or an "Enforcement Commissioner/Officer," as discussed below) would render, as expeditiously as possible, an informal advisory opinion and recommendation.7 If the advisory opinion is adhered to by the parties, that would conclude the proceeding.8 If one or both of the parties elect not to follow the advisory opinion, then the matter would proceed to Track 2. Alternatively, procedures could be established that would allow the parties the option of temporarily adhering to the advisory opinion (and, hence, modify the commercial practice to conform to the requirements of the advisory opinion) while continuing to appeal the ruling to the full Commission, subject to refund, if applicable. This would allow the transaction to go forward, but still provide the respondent to the complaint additional time to persuade the full Commission of the reasonableness of its desired commercial practice.9
Track 2 ("Opinion Fast Track"): Under Track 2, the Commission formally would adjudicate the dispute on an expedited basis.10 In this case, however, the loser would be required to pay the winner’s costs, as well as an appropriate penalty in the event a ruling in favor of the complainant could not be issued in time to permit its proposed transaction to go forward.11 The Commission also could adopt a series of escalating penalties that would serve to discourage inappropriate commercial conduct while adequately compensating aggrieved parties.12 In addition, if the loser is the respondent to the Commercial Practice Complaint (e.g., a transmission provider), then it could be placed on a "Utility Watch List," described below. In order to assure an objective review and an unbiased ruling in any Track 2 proceeding, any Commissioner or Commission staff directly involved in rendering an advisory opinion under Track 1 should not be involved in Track 2 proceedings.
Strengthen the Enforcement Hotline: In order to mitigate the need for entities to file Commercial Practice Complaints, the Commission should devote greater resources to its existing enforcement hotline. The Commission should also codify certain general procedures governing the use of the enforcement hotline. The enforcement hotline, if properly staffed, could be an effective means of informally resolving issues in their infancy. In addition, the Commission undoubtedly would become aware of utilities against which repeated informal complaints have been made through the enforcement hotline. The Commission could consider additional consequences for repeat offenders, such as a Utility Watch List (discussed below). Such a List could serve as an early warning signal to utilities and possibly avoid the reoccurrence of incidents potentially giving rise to formal complaints.
Enforcement Commissioner/Officer: In order to facilitate the timely resolution of Commercial Practice Complaints under Track 1, above, the Commission should consider appointment of an "Enforcement Commissioner" (or an "Enforcement Officer"), akin to an acting "Motion’s Commissioner" established to handle interlocutory appeals to the Commission from decisions of presiding administrative law judges.13 The Enforcement Commissioner/Officer would be empowered to perform whatever fact-finding is necessary to render an advisory opinion under Track 1.14
In order to be effective, the Commission must make this a priority function of the Commission. The enforcement duties of any Commissioner should be no less important than any other of the Commissioner’s duties. For this reason, it might be necessary for the Commission to delegate this function to an appropriate FERC office (e.g., OEPR or OGC) when demand is heavy for Track 1 advisory opinions, so that the Commissioners can devote sufficient attention to other ongoing matters.
Remedies: It is important that any enforcement proposal include appropriate measures to encourage compliance both with the Commission’s rules and with the complaint procedure itself. There are a host of creative alternatives the Commission might consider, including:
Restitution: The Commission has the inherent ability to remedy violations of its rules. This may take many different forms, including monetary damages, refunds, capacity or priority awards, limitations on affiliate transactions or the use of market-based rates, or other mechanisms to make parties whole. Restitution is likely to be extremely fact specific in each individual case.
Alternative Dispute Resolution: When appropriate, the Commission should encourage parties to use alternate means of dispute resolution to resolve all or part of matters in dispute.
Utility Watch List: The Commission could develop a Utility Watch List in order to more efficiently monitor market-based transactions and transmission arrangements involving utilities against whom the Commission previously has issued rulings in enforcement or other proceedings. This list would include utilities which the Commission has found to have violated FERC policy or otherwise engaged in discriminatory conduct.15
Utilities placed on the Utility Watch List would be subjected to heightened scrutiny and enhanced reporting requirements during a defined probation period.
Repeat offenders also could be assigned a "case manager," which could be a member of the FERC Staff assigned to review the utility’s commercial practices and other transactions for consistency with Commission policy. In situations involving intentional or egregious violations of FERC policy deemed to have adversely affected competition, depending upon the particular circumstances, the Commission could suspend a utility’s authority to transact at market-based rates, or, at a minimum, require advance approval of all power sale transactions (as opposed to requiring only quarterly transaction reports). For egregious (or repeated) transmission-related offenses, the Commission could require the establishment of an independent system operator or, if necessary, divestiture of facilities. It is anticipated that few, if any, utilities would be placed on a Utility Watch List because the threat of inclusion should be sufficient to discourage unreasonable, or at least egregious, conduct. 16