Seven Compliance Items Every Electric Utility Should Consider In 2017

The Federal Energy Regulatory Commission (FERC) staff marked the Energy Policy Act’s (EPAct’s) first ten years with two whitepapers: a retrospective on a decade of anti-manipulation enforcement and an overview of expected compliance practices.  At the same time, FERC staff issued its annual enforcement report.  While there is no one-size-fits-all approach to compliance, read together, these three documents offer valuable insights into the compliance efforts FERC staff seeks from electric utilities. 

FERC’s papers suggest that electric utilities should:

1. Rely on compliance personnel who (a) have a variety of professional and educational experience, including legal, operations, and risk management; (b) are integrated into the organization’s business units; and (c) have the authority and resources necessary to succeed.
2. Establish appropriate and clear rules and restrictions for employees to reduce the risk of misconduct and enforce these rules to ensure employees take compliance seriously, including by following up on alerts, documenting resolution, establishing disciplinary actions, and disciplining personnel for noncompliance when appropriate, and in a consistent manner.
3. Monitor employees’ activities for potential misconduct.  For example, FERC stated that the purpose of conduct is a critical factor in determining fraudulent behavior and suggested utilities should require employees to articulate and document the purpose behind any conduct that might raise red flags so that compliance departments can properly vet the conduct.
4. Assess the effectiveness of their compliance program regularly to ensure that the program continues to be effective and to identify any necessary updates.
5. Conduct regular training on issues tailored to employees’ work assignments, using a variety of training methods.
6. Encourage effective coordination between different departments.  Staff specifically recommends that utilities ensure coordination between accounting and rate staff to prevent the recovery of costs that should be excluded from the formula rate.
7. Ensure compliance with not only FERC’s rules and regulations, but also an electric utility’s Open Access Transmission Tariff (OATT).  In most recent audits, Staff has identified a number of recurring issues to avoid, including: improper use of network transmission services, improper sales from designated network resources, transmission capacity not released in accordance with Commission-approved tariffs, inaccurate available transmission capacity data posted on the Open Access Same-Time Information System, and transmissions service provided to customers under expired transmissions service agreements.

FERC suggests that effective compliance programs go beyond the written documents and states that utilities look both for indicators that compliance programs are supported and followed and for red flags of potential noncompliance at all levels of the organization in order to detect, prevent, and respond to violations quickly and effectively.  Steptoe’s electric utility practice brings decades of experience both inside and outside government to bear in counseling clients in matters of compliance and FERC enforcement.  For more information, please contact your regular Steptoe lawyer or members of our enforcement team Daniel A. Mullen at 202.429.8004 or daniel.mullen@steptoe.com or Charles R. Mills at 202.429.6472 or cmills@steptoe.com.