DOE Inspector General Opens Investigation of FERC's Office of Enforcement

Well, here's a chance for our government to work for us!

It was reported on Monday that DOE's Inspector General will be "undertaking a review" of FERC's Office of Enforcement" at the urging of several U.S. Senators.

The lawmakers have urged the IG to look into the way FERC investigates market manipulation.  Earlier this year, a very public battle between FERC's OE and energy trading firm Powhatan Energy Fund LLC made headlines and haunted former Director of FERC's Office of Enforcement Norman Bay's nomination to the Commission.

Sen. Robert Casey, D-Pa., was the first to ask the inspector general to look at the way FERC has been investigating alleged energy market manipulation. Stressing the need for investigations to be transparent, Casey in July urged Friedman to look at seven specific aspects of FERC's enforcement program, including whether the agency has pursued enforcement actions against entities "that were not acting in violation of then-current applicable laws and regulations," and is "properly allocating its limited resources to investigation of cases that have the most deleterious effects on energy markets."

Then, in September, Barrasso and Sen. Susan Collins, R-Maine, asked the inspector general to explore allegations questioning the fairness and transparency of FERC's enforcement program, including those made in an Energy Law Journal article co-authored by a former FERC general counsel asserting that the commission's enforcement process has become "lop-sided and unfair."

The two senators specifically asked if FERC is holding certain parties to different standards with regard to market manipulation. For instance, Barrasso and Collins questioned whether the public is being given "actionable notice" of the types of conduct FERC considers to be market manipulation. They also asked Friedman to explore the article's allegations that the targets of FERC investigations and their employees are not being afforded the due process "required by FERC's own regulations and precedents" and that provided by other federal enforcement agencies.

The IG will also be investigating any "quid pro quo" connections between enforcement actions and other unrelated FERC actions, and some craziness about career vs. non-career positions.

FERC has publicly offered a recent defense against the allegations.

Some have wondered whether FERC applies different standards to those it considers outsiders to its little energy fiefdom.  Does FERC go after its utility regulars with the same zeal it reserves for banks, traders, companies or individuals that don't regularly wander its halls and hearing rooms?  Is FERC's OE all about big headlines, or is it about justice?  Are utility transgressions dealt with by sweeping the matter under the rug or slapping the offender on the wrist?

It's going to be interesting.  Let's hope we don't next have an investigation of DOE IG's investigation to determine whether that investigation was carried out in a fair manner.  They could run out of inspectors to inspect each other at some point.