Shots Across The Bow: How FERC’s Recent Actions Demonstrate A Change In Emphasis And Focus For FERC Enforcement

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The Federal Energy Regulatory Commission (“FERC”) recently sent several strong signals that it intends to ramp up anti-manipulation enforcement efforts in the energy trading markets, including potentially taking aim at trading practices that many in the energy industry may view as legitimate portfolio management strategy. As part of these increased enforcement efforts, Chairman Wellinghoff announced a reorganization of FERC’s Office of Enforcement aimed at the monitoring, detection, prevention, and prosecution of manipulation within the energy markets. FERC also issued a final rule on April 19, 2012, Order No. 760, requiring each regional transmission organization (“RTO”) and independent system operator (“ISO”) to deliver data related to the markets it administers electronically to the FERC on an ongoing basis. Several recent high profile enforcement actions and Chairman statements have showcased FERC’s increased emphasis on anti-manipulation in organized energy markets. These developments in the enforcement sphere should alert energy sector entities that FERC is placing an increased emphasis on energy trading in organized markets and that actions taken in the course of historically acceptable trading activities may now be viewed in a different light. Market participants will need to educate their traders and compliance offices accordingly.

FERC Enhances Market Surveillance And Enforcement Capabilities

Chairman Wellinghoff in February announced a reorganization of the Office of Enforcement. A new Division of Analytics and Surveillance will focus on developing surveillance tools and performing analysis to detect manipulation and anticompetitive behavior in the energy markets. The staff of approximately 35 is tasked with taking a detailed look at the operation of the markets and “looking for things in data that may indicate that there are people out there that are trying to utilize market processes and procedures in ways that are improper and in violation of statutory provisions.”

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