02/15/2009

Outlook for Increased Regulatory Scrutiny Shows Importance of Compliance Programs

By: David D'Alessandro, Kelly A. Daly and Harvey L. Reiter

The California energy crisis at the turn of this century and the large-scale electrical blackouts in the eastern United States a few years later shook the public’s confidence in the electric energy industry. These events are also largely why the Energy Policy Act of 2005 (EPAct 2005) included provisions giving the Federal Energy Regulatory Commission (FERC or Commission) substantially increased enforcement powers to regulate the natural gas pipeline and electric utility industries. FERC has embraced those new powers enthusiastically.

FERC’s focus on enforcement is understandable. The complexities of organized electric power and gas trading markets are open invitations to those who might scheme to manipulate prices. And the economic consequences of large-scale power blackouts are no less troublesome. “Not on my watch” encapsulates FERC’s attitude: if aggressive enforcement can minimize the chances of future market meltdowns or catastrophic power system failures, that is the course to take.

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David D'Alessandro, Kelly Daly and Harvey Reiter are partners with Stinson Morrison Hecker LLP. They can be reached in the Washington, D.C., office at 202.785.9100.