On May 16, 2019, the Federal Energy Regulatory Commission (FERC or "the Commission") rescinded its 2009 Notice of Alleged Violations policy. The policy provided for the Director of the Office of Enforcement ("Enforcement") to issue a Staff Notice of Alleged Violations (NAV) publicly identifying the subject of an Enforcement investigation and the alleged violation once the subject had the opportunity to respond to Enforcement staff's preliminary findings—but prior to Enforcement staff finalizing its findings or FERC itself formally considering the case. The NAV policy was controversial from the outset as it upset longstanding policy that Enforcement investigations, including the identities of investigation subjects, were kept nonpublic unless and until the Commission approved a settlement or initiated an enforcement action. The Commission recognized that the policy could cause reputational harm but thought the policy was justified because NAVs would allow third-party market participants to bring relevant information to Enforcement's attention and, additionally, provide educational value to other market participants.
As Akin Gump energy lawyers explained in a 2017 article, FERC Should Rescind Its Notice of Alleged Violations Policy, published in George Washington University Law School's Journal of Energy and Environmental Law, the NAV policy proved to be ineffective and harmful. On the one hand, an analysis of the Commission's experience implementing the policy showed that it did not deliver the benefits the Commission intended—that is, NAVs did not prompt third parties to come forward with relevant information, nor did they provide market participants with meaningful educational value. On the other hand, NAVs continued to risk causing real reputational harm to investigation subjects prior to any formal consideration of the matter by the Commission. Additionally, advances in Enforcement's investigative tools, and its development of more effective means of providing compliance guidance to market participants, further supported the conclusion that the NAV policy was neither necessary nor effective.
FERC informally stopped issuing NAVs in 2018, but did not announce any official change in the policy prior to formally rescinding it in the May 16 order. In explaining its decision to rescind the policy, FERC stated that "the anticipated effects and benefits of the [NAV] policy generally have not materialized," and that "the potential adverse consequences that NAVs pose for investigative subjects are no longer justified in light of the limited transparency NAVs have generated and the more effective, alternative means of adding transparency that the Commission has developed" since implementing the NAV policy. FERC also noted that improvements in the "sources of information" available to Enforcement staff further supported rescinding the policy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
