On May 6, 2016, in a pending civil penalty assessment proceeding, the Federal Energy Regulatory Commission ("FERC") denied the motion of ETRACOM LLC ("ETRACOM") and Michael Rosenberg (collectively, "Movants") to require production of data ("Motion") from the California Independent System Operator Corporation ("CAISO"). In denying the motion, FERC explained that civil penalty assessment procedures do not allow for the same discovery rights afforded to litigants in administrative proceedings.
On December 16, 2015, FERC issued an Order to Show Cause and Notice of Proposed Penalty against the Movants, requiring them to show cause why they should not be found to have "engaged in market manipulation by interfering with or obstructing a 'well-functioning market.'" Specifically, FERC's Office of Enforcement ("OE") alleged that Movants submitted virtual supply transactions in order to affect power prices and benefit ETRACOM's Congestion Revenue Rights. In addition, the order stated that Movants had the option of electing, within 30 days, a penalty assessment proceeding instead of the default administrative law judge hearing process. On January 14, 2016, Movants filed a joint election for a penalty assessment should FERC determine that a civil penalty is appropriate.
On March 4, 2016, subsequent to submitting a joint answer to the Order to Show Cause that included nearly 90 pages of argument and multiple affidavits and exhibits, the Movants filed the Motion. The Motion requested that FERC require CAISO to disclose to Movants information and materials related to "relevant market design flaws and software pricing/modeling errors." In the Motion, Movants asserted that CAISO's flaws and errors raise material issues about the basis of OE's allegations that Movants engaged in market manipulation. Movants stated further that their direct requests for information to CAISO had been unsuccessful.
In denying the Motion, FERC found that "the Motion lacks merit because the Movants have elected to forgo discovery in an administrative hearing at FERC before an administrative law judge." FERC explained that Movants cannot seek both the perceived benefits of civil penalty assessment procedures and the discovery rights afforded to litigants in administrative proceedings at FERC. Going forward, Movants will have seven days to elect whether they wish to proceed with their previous election for civil penalty assessment procedures or to seek a hearing before an administrative law judge under FERC's formal Rules of Practice and Procedure.
The order is available here.
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