Federal watchdog to probe agency’s enforcement program
DOE Inspector General Gregory Friedman told Republican Sen. John Barrasso of Wyoming last month that, after weighing the senator’s concerns outlined in a Sept. 12 letter, he had decided to pursue the matter.
“After reviewing this situation, we have determined that we will be undertaking a review of aspects of FERC’s enforcement program,” Friedman wrote in a letter to Barrasso.
Friedman said Sens. Susan Collins (R-Maine) and Bob Casey (D-Pa.) had also requested that the IG review the matter.
Casey asked Friedman to investigate the agency this summer, specifically whether FERC had violated its requirements for confidentiality of nonpublic investigations, and whether the agency was properly allocating its limited resources to investigations of cases that create the most havoc in the energy markets.
Casey also asked whether FERC had the appropriate authority to investigate instances of alleged market manipulation that aren’t outright prohibited when they occurred, and whether any of the agency’s investigations were misplaced.
“I appreciate that FERC investigates matters that may bring instability or fraud to the energy marketplace,” Casey wrote. “However, to do this fairly and effectively, it is important that FERC’s policies on investigations and enforcement actions be transparent.”
Debates over FERC’s handling of manipulation cases spiked in the run-up to the May confirmation hearing for Norman Bay, whom the Senate has since confirmed to take the agency’s helm as chairman.
At the heart of the scuffle was a hedge fund, Powhatan Energy Fund LLC, that publicly fumed over FERC’s investigation of it over accusations that it gamed the energy markets. Kevin and Rich Gates, identical twins who manage the fund in Pennsylvania, warned that FERC’s foray into investigations under the direction of Bay — best known as the director of FERC’s Office of Enforcement since 2009 — was too ambitious and misplaced at times.
Separately, William Scherman, FERC’s former general counsel and a partner with Gibson, Dunn & Crutcher LLP, penned an op-ed in The Wall Street Journal saying the Gateses’ experience with FERC was just the “tip of the iceberg.” Scherman, notably, has been critical of FERC for not clarifying what constitutes market manipulation (E&E Daily, May 20).
Scherman said FERC, unlike other agencies, doesn’t share information it collected with individuals under investigation, nor does the commission allow individuals to go out and collect their own information.
Barrasso and Collins followed up in a Sept. 12 letter to Friedman, asking him to investigate such accusations that FERC’s enforcement was unfair, and whether FERC was treating all parties to the same standards with regard to manipulation investigations.
The senators also asked Friedman to review Bay’s work in March 2012, when he signed a consent agreement with a subsidiary of Constellation Energy Group — an entity that was also participating in merger proceedings before FERC at the time. Republicans have asked Bay about the settlement agreement he signed March 8 and its relation to the merger, which was approved the next day.
Republicans asked Bay during his confirmation whether the settlement and merger approval were linked. Bay told the Senate Energy and Natural Resources Committee earlier this year that he would be concerned about the appearance of a “quid pro quo” connection.
“I would be concerned about the appearance of a quid pro quo in a connection between merger reviews and enforcement,” Bay told the Senate panel, but then went on to explain that the merger review and investigation into Constellation’s trading activities were conducted by staff members in separate parts of FERC and that he had not encouraged the company to settle to advance the merger (E&E Daily, June 6).
Mary O’Driscoll, a spokeswoman for FERC, said the agency is cooperating with the review.