On February 11, 2014, the staff of the Office of Enforcement (OE) of the Federal Energy Regulatory Commission (FERC) issued a Staff Notice of Alleged Violations (Notice) stating that it has preliminarily determined that four operating company subsidiaries of ITC Holdings Corp. (ITC) violated Section 203 of the Federal Power Act (FPA) and FERC’s regulations by failing to obtain FERC authorization prior to consummating certain transmission asset transactions and/or Section 205 of the FPA and FERC’s regulations by failing to timely file with FERC certain FERC-jurisdictional agreements.
The Notice alleges that International Transmission Company, d/b/a ITCTransmission, Michigan Electric Transmission Company, LLC (METC), ITC Midwest, LLC (ITC Midwest), and ITC Great Plains, LLC violated Section 203(a)(1)(B) of the FPA and/or Part 33 of FERC’s regulations by acquiring jurisdictional transmission facilities in twenty transactions between 2005 and 2011 without obtaining prior FERC authorization. The Notice also alleges that ITCTransmission, METC, and ITC Midwest violated Section 205 of the FPA and Part 35 of FERC’s regulations by failing to timely file with FERC nearly 175 jurisdictional agreements the companies inherited or executed between 2003 and 2011.
The Notice is among the first, if not the first, notice of alleged violations of Section 203, or of such extensive alleged violations of Section 205, since FERC began issuing notices of alleged violations arising from non-public investigations in 2011. It is unclear from the Notice whether the alleged violations harmed third parties. How FERC approaches the alleged violations under these unique circumstances, including in applying its Penalty Guidelines and exercising its civil penalty authority, which is capped at $1 million per day per violation, will be of interest to FERC-jurisdictional entities subject to Sections 203 and 205. In addition, while several other recent FERC enforcement actions highlight FERC’s focus on market manipulation and reliability matters—as we reported here, here, and here—this Notice serves as a reminder of FERC’s commitment to compliance with statutes and regulations governing matters across its jurisdiction.