Senators Question Bay, LaFleur on FERC Nominations

by Akin Gump Strauss Hauer & Feld LLP

The Senate Energy and Natural Resources Committee held a hearing on Tuesday on the nominations of Norman Bay and Cheryl LaFleur to the Federal Energy Regulatory Commission (the “Commission” or “FERC”).  Mr. Bay, who currently serves as the Director of the Commission’s Office of Enforcement, has been selected by the President to serve as the next Chairman.  Ms. LaFleur, who has served as acting Chair since the departure of former Chairman Jon Wellinghoff, and who served prior to that as a Commissioner, has been nominated to serve another term as Commissioner.   

Given Mr. Bay’s background as the head of FERC’s Enforcement operation, much of the hearing’s questioning involved what critics view as that office’s controversial investigatory practices.  Since receiving enhanced civil penalty authority in the Energy Policy Act of 2005, the Office of Enforcement, under Mr. Bay’s leadership, has ramped up its prosecution of alleged manipulation of the energy and natural gas markets and other violations of Commission rules and tariffs.  FERC has ordered payment of over $1 billion in civil penalties and disgorged profits under Mr. Bay, putting the previously little known independent agency in the unfamiliar position of grabbing national headlines and sparking public debate.  Critics have argued that FERC has failed to clearly draw the line between acceptable market behavior and actions that cross into manipulation or fraud.  Some critics also allege that FERC has failed to provide adequate due process during its investigations.

Much of this recent criticism found its way into the confirmation hearing on Tuesday.  Members of the Committee characterized Mr. Bay’s Enforcement division as out of control and spoke of the “widespread view” that FERC has become “lopsided and unfair.”  Senators Lee (R-Utah), Barrasso (R-Wyoming), and others, questioned the due process of FERC investigations, repeating allegations from a recent Wall Street Journal op-ed and an Energy Law Journal article that the Office of Enforcement sometimes fails to release deposition transcripts and exculpatory evidence.  Mr. Bay denied these claims.  Senator and Committee Chair Mary Landrieu (D-Louisiana) noted that nearly all Enforcement settlements have been approved unanimously by the Commission, which contains both Democratic and Republican Commissioners.

Senator and Ranking Committee Member Lisa Murkowski (R-Alaska) expressed concern over Mr. Bay’s lack of broader policy knowledge outside of the enforcement realm.  The Senator expressed discomfort with Mr. Bay’s lack of experience with what she called the Commission’s “foundational mission” to ensure reliable operation of the nation’s grid at just and reasonable rates.  The Ranking Member also noted the likelihood that Mr. Bay, if confirmed, would have to recuse himself from several important pending matters due to his current or past involvement as head of Enforcement. 

Skeptical questioning for Mr. Bay’s nomination continued from Senators Alexander (R-Tennessee) and Barrasso.  Gender politics did not escape the hearing either, as several Senators noted the optics of effectively demoting the only current female Commissioner at FERC and replacing her with a less experienced man.  The questioning was not entirely along partisan lines, however, as former Senator and Ranking Member Pete Domenici (R-New Mexico) gave his unequivocal support for his fellow New Mexican, whom he characterized as “bipartisan,” highly qualified, and the embodiment of the American Dream. 

Democrats appeared largely supportive of Mr. Bay and Ms. LaFleur.  Ms. LaFleur received notably less adversarial questioning and is expected to easily sail through the nomination process.


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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