Energy Alert: FERC Hits Entergy Hard For Violations Of NERC Reliability Standards: Orders $975,000 Penalty

On March 28, 2013, the Federal Energy Regulatory Commission issued an Order Approving Stipulation and Consent Agreement between FERC's Office of Enforcement and Entergy Services, Inc. The Agreement settles an investigation initiated under Part 1b of FERC's regulations, wherein Enforcement alleged that Entergy violated 27 requirements of 15 NERC Reliability Standards.

Enforcement's action was independent of the NERC compliance and enforcement program; there was no NERC audit, and apparently neither NERC nor any of the three regional entities in which Entergy operates were involved in the investigation.

Pursuant to the Agreement, Entergy has agreed to pay a civil penalty of $975,000 and complete rigorous mitigation and compliance measures necessary to mitigate the violations over a two-year period. One of the more substantial mitigation commitments is for Entergy to complete a comprehensive analysis of its nearly 14,000 miles of transmission facilities using airborne Light Detection and Radar (LiDAR) technology. The cost of that work alone will substantially exceed the civil penalty in this case.

FERC noted that the civil penalty was set based on certain aggravating and mitigating factors. Credit was given for the level of mitigation committed to by Entergy, the company's cooperation in the process and avoiding protracted litigation of the matter. Conversely, the Commission noted the severity and quantity of the various Reliability Standard violations as well as the fact that Entergy had a prior compliance violation record.

This is a rare settlement resulting from a FERC Enforcement audit and investigation into violations of NERC Reliability Standards. There have only been five approved FERC settlements based on violations of Reliability Standards since 2007: the California ISO for $200,000; PacifiCorp for $3.9 million; Grand River Dam Authority for $350,000; Western Electricity Coordinating Council for $350,000; and Florida Power and Light for $25 million.

It should also be noted that FERC settlements based on violations of Reliability Standards have been significantly higher than NERC settlements filed with and approved by FERC. The largest approved NERC settlement to date has been $950,000, with only a handful exceeding $400,000.

FERC Office of Enforcement's investigations cover Reliability Standards in some cases, as well as anti-manipulation, standards of conduct and regulation and tariff enforcement. Since 2007, FERC has approved nearly $319 million in civil penalties and $161 million in unjust profit disgorgements.

Go here to read the Order Approving Stipulation and Consent Agreement.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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