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FERC Modifies its Process for Resolving Enforcement Investigations by Settlement, Giving Enforcement Staff More Authority and Discretion

Client Updates

FERC’s Policy

On Thursday, February 15, 2024, the Federal Energy Regulatory Commission (“FERC”) adopted a policy statement in Docket No. PL24-2-000 modernizing and streamlining its process for resolving enforcement investigations by settlement. Under the new policy, FERC’s Office of Enforcement no longer needs to seek settlement authority from the Commission prior to engaging in settlement negotiations. Rather, the Director of Enforcement will have the discretion to authorize staff to begin such negotiations.

FERC’s Rationale

Commissioner Clements explained during the Open Meeting, “In applying its discretion, the Office of Enforcement will draw on the wealth of experience gained over the last fifteen years under the Commission’s existing policies.” The Commission will still determine whether any proposed settlement is in the public interest, but, according to the policy statement, eliminating the step of seeking commission approval to hold settlement discussions will improve efficiency and eliminate unnecessary delays in resolving enforcement matters.

Practical Implications

These revisions to FERC’s Settlement Policy may benefit Investigative Subjects by expediting settlement in cases that are more straightforward – where Staff and the Subjects already agree on the core settlement parameters.  But in harder cases, where the parties are not in alignment, this Policy may not be as welcome, as it gives Enforcement Staff more authority and discretion to control the settlement process before the Commission and Senior Staff outside of the Office of Enforcement (e.g., the Office of General Counsel and Office of Energy Market Regulation) have had the opportunity to assess the merits of Enforcement’s Staff’s case and, accordingly, how the case should best be resolved in the public interest.

The Policy also creates some uncertainty in the enforcement process where the parties are unable to settle.  In the past, Commissioners and Senior Staff would receive detailed briefing materials from Staff and the Investigative Subject (specifically, the Subject’s response to Staff’s Preliminary Findings) before authorizing settlement negotiations. This is typically how Commissioners and Senior Staff would first learn about the investigation in detail. Now, it is not clear exactly when Commissioners and Senior Staff will receive those briefing materials. If they receive them only at the time when the Office of Enforcement has already decided to recommend an enforcement action (because settlement negotiations have failed), that is not necessarily a welcome development for Investigative Subjects, who would prefer that the Commissioners and Senior Staff assess the merits of the case at an earlier stage. It may take some time for this process uncertainty – again, for the harder cases, where Staff and Subjects don’t agree on resolution – to become clear.

Baker Botts L.L.P. has experienced lawyers who are ready to assist you with all stages of a FERC investigation or settlement negotiation. Please reach out to the lawyers below if you have any questions about how FERC’s Revised Policy Statement on Settlements may affect your current regulatory and commercial needs.

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