Background - Practices (Details)

Energy Compliance


With the threat of civil penalties of up to $1 million a day per violation, companies subject to FERC regulation must not only thoroughly understand applicable regulatory requirements, they also must have controls in place to minimize the risk of violations, and, should a violation nevertheless occur, be in a position to minimize penalties. A strong compliance program is a mitigating factor in reducing any penalties for violations should they occur. Our attorneys are experienced in conducting independent assessments of clients' existing compliance programs, designing and documenting revitalized compliance programs, and assisting in the formulation of trading and plant operations policies and price reporting procedures.

In advising on compliance matters, the firm's Energy attorneys and advisors are thoroughly familiar with RTO- and ISO-specific market rules and market designs for each organized market in the U.S. today, including CAISO, MISO, NYISO, PJM, SPP, ISO-NE, and ERCOT. Such an understanding is essential because variations in these rules and designs determine what practices are permitted or prohibited in each of those markets and how internal control procedures must be tailored to each market.

Moreover, energy trading, in particular, can involve complex portfolio management of electricity and gas positions. The firm's energy trading attorneys and advisors have considerable experience with complex trading transactions and with assessing voluminous trading data, which enables the firm to assist clients in handling the increasingly complex and visible compliance requirements presented by participation in today's energy markets.

Given this wealth of experience, if a potential violation or problematic behavior is identified, we work with our clients to design and conduct internal investigations. We have conducted internal investigations in connection with energy trading practices, bidding and scheduling, plant operations, the natural gas "buy-sell" arrangements, "shipper must have title" and "anti-flipping" rules, price reporting practices, and the myriad obligations imposed on competitive market participants in tariffs, market rules, and FERC regulations and orders. In conducting these sensitive internal investigations, the firm assists clients in fully understanding the pertinent facts, interpreting applicable laws and rules, and making considered decisions whether and how to self-report potential violations to FERC, market monitors, and other applicable authorities. Our substantial experience in enforcement proceedings and regulatory investigations can be found here. In addition, the firm regularly advises clients on NERC compliance and enforcement matters.

Representative Engagements: Energy Compliance

  • Internal Audits and Gap Analyses. Conducted and documented audits and gap analyses of clients’ compliance programs, including effectiveness of training programs, monitoring, telephone taping and electronic records preservation, and internal communications and compliance decision-making processes, which resulted in recommendations for enhancement of compliance functions and institutionalizing compliance responsibilities.
  • Compliance Program Design and Implementation. Designed and implemented compliance programs that conform to best industry practices and that include the elements that FERC requires in a robust compliance program.
  • Compliance Program Documentation. Documented compliance program materials, including plain-English energy trading compliance manuals explaining compliance requirements and company procedures for trading desk personnel and supervisors, to ensure effective day-to-day resolution of energy trading compliance issues and on-going monitoring of trading practices; and compliance policies and procedures related to FPA, PUHCA, and NERC compliance for formal adoption by a company’s senior management and board of directors.
  • Training. Conducted conduct company-wide and specialized compliance training programs, including presentation of seminars, preparation of written hand-out materials, discussion of real-world scenarios, covering FERC's anti-manipulation regulations, policy statements on enforcement, RTO market rules, electricity trading and operations practices, Standards of Conduct, index price reporting procedures, Federal Power Act regulatory and filing requirements for public utilities, and NERC reliability standards and compliance.
  • Code of Conduct. Represented Electric Power Supply Association (EPSA) in its development and adoption in 2003 of a Code of Conduct prescribing sound trading and price reporting practices.