Overview
As we reported on February 18, 2021, and updated the next day in our client alert on the inquiries into the recent cold weather event, last week's freeze has led to the initiation of, or calls for, joint inquiry by the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC); US Senate and House investigations; investigation by the Texas Attorney General; and Commodity Futures Trading Commission (CFTC) investigations, to name a few. The wholesale and retail price spikes are getting a lot of attention, including in Tweets by Senator Cruz.
Yesterday, FERC upped the stakes, announcing that in addition to its joint inquiry with NERC, its Office of Enforcement will examine wholesale natural gas and electricity market activity during the cold weather event "to determine if any market participants engaged in market manipulation or other violations." FERC's statement said that "any potential wrongdoing" will be pursued as non-public investigations.
Simultaneously, FERC emphasized its commitment to doing "everything we can within our statutory authority to ensure that the electric grid is capable of keeping the lights on in the face of extreme weather." Thus, FERC announced that it is opening a new proceeding to "examine the threat that climate change and extreme weather events pose to electric reliability. The proceeding will examine how grid operators prepare for and respond to extreme weather events, including, but not limited to droughts, extreme cold, wildfires, hurricanes, and prolonged heat waves." Together, these announcements underscore the attention that this cold weather event will get from both the enforcement and policy components of FERC.
In addition, consistent with the recent report of the CFTC's Climate-Related Market Risk Subcommittee on Managing Climate Risk in the US Financial System and the agenda for the February 23 meeting of the CFTC's Market Risk Advisory Committee, the CFTC today discussed this weather event, grid failure, and volatile power pricing. Acting Chairman Benham noted at the outset of the meeting that "We are monitoring irregularities in the Texas energy markets following last week's freeze, specifically where there is a federal nexus with CFTC regulated markets and listed products. We remain prepared to do whatever is necessary to protect the integrity of our markets." It is common for the CFTC to investigate volatile commodity price movements, as it did with respect to those of the NYMEX WTI Crude Oil Futures Contract on April 20, 2020 or silver markets as recently as February 1, 2021.
Steptoe's team offers great breadth and depth to assist clients in all of these investigations.
