News + Events
Washington Energy Report - (1) Commissioner Kelly Renominated for Third Term (2) Entergy Moves Closer to Joining SPP (3) FERC Decision to Deny Intervention of License Amendment Upheld by 9th Circuit (4) FERC Staff, Amaranth Agree to New Settlement in Enforcement Case
Washington Energy Report
July 31, 2009
Commissioner Kelly Renominated for Third Term
On Tuesday, President Barack Obama renominated Commissioner Suedeen Kelly to serve for a third term on the Federal Energy Regulatory Commission (“FERC” or the “Commission”). The term would expire June 30, 2014.
Kelly joined the Commission in November 2003, and in December 2004, was confirmed to a second term, which expired at the end of last month. She has continued to serve under a grace period that runs through the end of the current congressional session. The United States Senate Committee on Energy and Natural Resources must approve the nomination.
Kelly has been actively involved in smart grid issues, and on July 23, 2009, she testified before the House Energy and Environment Subcommittee, stating that new legislation is needed to make smart grid standards mandatory. Under the Energy Independence and Security Act of 2007, the standards will be developed by the National Institute for Standards and Technology, and then approved by FERC. Kelly said that under current law, those standards will not be mandatory and that FERC’s enforcement authority will be limited. She said that Congress needs to act to ensure that all relevant entities comply with smart grid standards.
Entergy Moves Closer to Joining SPP
On July 20, 2009, Entergy Services, Inc. (“Entergy”) submitted comments indicating that it will consider becoming a member of the Southwest Power Pool (“SPP”). Entergy’s filing addressed issues raised during the Joint FERC and State Regulator Conference held on June 24, 2009, in Charleston, South Carolina.
In April 2006, FERC approved SPP as the Independent Coordinator of Transmission (“ICT”) for Entergy. The ICT arrangement was a culmination of various proposals by Entergy to address concerns about access to Entergy’s transmission system. The ICT’s role is to administer Entergy’s open access transmission tariff, respond to transmission service requests, analyze Entergy’s investment plans, and oversee a weekly procurement process. The ICT arrangement is set to expire in November of 2010. In a recent order addressing Entergy’s weekly procurement process, FERC required Entergy to file by November 2009 its plans following expiration of the ICT arrangement.
At the technical conference, Entergy noted that it has agreed to conduct a cost/benefit analysis of joining the SPP by the end of this year. In the July 20 filing, Entergy stated that as part of a comprehensive review, it will explore alternatives to the ICT arrangement, including possibly joining SPP. Entergy indicated it will also consider whether modifying the current ICT structure and giving the ICT the authority to require Entergy to construct facilities identified in SPP’s planning process is more appropriate.
Entergy also addressed specific concerns raised in the technical conference that it is not investing enough to upgrade its transmission system. The company noted that it has spent more than $1.25 billion between 2004 and 2008 on its system. Entergy also stated that its current planning practices comply with all existing laws and regulations, including FERC’s transmission planning rules. However, Entergy did recognize the need for its transmission plans to be more aligned with SPP’s, and promised to work with stakeholders to improve that process.
FERC Decision to Deny Intervention of License Amendment Upheld by 9th Circuit
On July 20, 2009, a split panel from the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”) voted 2-1 to uphold the Commission’s decision to deny two environmental groups’ untimely attempt to intervene in proceedings to amend the flow requirements at Pyramid Dam in Los Angeles County. The Ninth Circuit concluded that the Commission reasonably determined that California Trout and Friends of the River (collectively, the “petitioners”) lacked good cause in their untimely attempt to intervene.
On March 17, 2005, Pyramid Dam’s operator, the California Department of Water Resources, originally filed an amendment at the Commission to eliminate all minimum flow requirements. The proposed amendment allowed for the release of water from the Pyramid Dam in order to achieve the natural flow pattern at the Middle Piru Creek and help endangered species. While the Commission set July 8, 2005 as the final date for making motions or comments, the petitioners only filed comments and not a motion to intervene. It was not until a couple of months after the Commission issued its Environmental Assessment (“EA”) on March 1, 2007, that the petitioners filed such motions to intervene. The Commission rejected the petitioners’ motions, as well as their petitions for rehearing. Petitioners then filed an appeal with the Ninth Circuit.
The Court provided two main reasons why the Commission’s decision should be upheld. First, the Ninth Circuit concluded that the mere issuance of an EA does not demonstrate good cause for an untimely intervention. If it did, the Commission would have issued a rule stating so, just as it has done for the issuance of an Environmental Impact Statement. Furthermore, new information released on Middle Piru Creek and its endangered species did not create a new issue for the proposed license amendment. Second, the Court disagreed with the petitioners’ claim of arbitrary and capricious decision making when the Commission ruled that petitioners’ late interventions would be prejudicial. Instead, the Ninth Circuit concluded that the Commission clearly found that petitioners lacked good cause, and thus, did not need to consider any prejudicial factors that would result from an untimely motion to intervene.
Circuit Judge Ronald Gould dissented from the majority, stating that he would have allowed the petitioners’ late motions to intervene. Judge Gould claimed that the Commission’s own precedent has shown that the Commission grants untimely motions to intervene when there is no risk of prejudice. Judge Gould concluded that the Commission has gone against its own precedent and raised the bar to show good cause for late intervention to an unreasonably high bar. As such, he said, the Commission’s decision should be reversed.
The Ninth Circuit’s decision can be found under Case No. 07-73664 at the Ninth Circuit’s website at http://www.ca9.uscourts.gov/.
FERC Staff, Amaranth Agree to New Settlement in Enforcement Case
On July 23, 2009, the Commission’s Enforcement Litigation Staff (“Staff”), Amaranth Advisors LLC (“Amaranth”), and one of Amaranth’s two former gas traders filed a new settlement in its high-profile enforcement case. The Commission previously rejected a settlement submitted by the parties earlier this year (See February 20, 2009 edition of the WER).
The settlement filing last week also showed that one of Amaranth’s former gas traders accused of manipulating gas markets is not a party to the new settlement. As such, the trader has been severed from the settlement proceedings and will have to continue to represent himself on his own according to the proceeding schedule already set by the Commission.
In July 2007, the Commission issued a Show Cause Order against Amaranth for certain trading practices that took place over the course of three days in early 2006. During that time period, Amaranth was alleged to have made as much as $168 million in profits by engaging in massive selling in short intervals in ways that benefited Amaranth’s gas derivatives positions. The Show Cause Order directed Amaranth to explain why it should not be fined $291 million.
After the parties came to the Commission with a proposed settlement in November of 2008, the Commission found that the settlement was not in the public interest because the proposed fines were insufficient. The Commission went on to state that it estimated Amaranth’s profits from its market manipulation actions were far in excess of the proposed settlement. Amaranth meanwhile has consistently claimed its innocence and stated that its traders conducted valid speculative trades.
The newest settlement is not public and has been completely redacted. However, the settlement will be fully released if and when it is approved by the Commission. While such a settlement would normally go to an Administrative Law Judge for approval first, the Commission has granted a request to have the settlement go directly to the Commissioners.
FTC to Delay Enforcement of Red Flags Rule until November 1, 2009
Just announced, the Federal Trade Commission (“FTC”) has suspended enforcement of the Red Flags Rule for a third time, resulting in a new compliance date of November 1, 2009, which is an additional three month delay from the most recent compliance date of August 1, 2009 (see May 1, 2009 edition of the WER). According to the FTC, this suspension will provide creditors, particularly small businesses and entities with a low risk of identity theft, with more time to understand their obligations under the Red Flags Rule and to develop and implement identity theft prevention programs. During this additional three month delay, the FTC has stated that it will redouble its efforts to educate small businesses regarding compliance with the Red Flags Rule and provide additional resources and guidance to clarify which businesses are covered by the Rule and what they must do to comply. The FTC intends to make available additional compliance guidance, including the creation of a special link for small and low-risk entities on the FTC Red Flags Rule web site, www.ftc.gov/redflagsrule, with compliance materials and further direction regarding the Rule. The FTC recently posted FAQs that address how the FTC intends to enforce the Rule.
The FTC will forebear from bringing any enforcement action for violation of the Rule during this additional three-month extension period. The FTC’s announcement, however, makes clear that the extension applies only to entities subject to the FTC’s jurisdiction and does not affect the other agencies charged with overseeing enforcement of this Rule: the Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and the National Credit Union Administration.
The Red Flags Rule resulted from the Fair and Accurate Credit Transactions Act of 2003, which amended the Fair Credit Reporting Act, and requires covered entities to develop and implement a written Identity Theft Prevention Program designed to detect, prevent, and mitigate identity theft. The FTC explained that many entities subject to the Rule were uncertain about their coverage under the Red Flags Rule. During the previous two extension periods, the FTC conducted outreach efforts and developed and published materials on its Red Flags Rule web site to assist companies in complying with the Rule.
This is one in a series of advisories regarding “Red Flags Rules”. If you have questions or would like copies of previous advisories related to this topic, please contact David Anthony. Troutman Sanders LLP offers a full array of services to help bring companies into compliance with the Red Flags Rule.
The next edition of the Washington Energy Report will be published on September 4, 2009. Have a nice August.