ENERGY MARKETS

Climate bill amendment widens FERC enforcement power

An amendment to the House climate bill would vastly expand the enforcement power of the Federal Energy Regulatory Commission to cover manipulation not only in new climate emissions markets but across the entire range of FERC's jurisdiction, according to attorneys representing energy companies.

The amendment was offered by Rep. Bart Stupak (D-Mich.), who chairs the House Energy and Commerce Committee's Oversight and Investigations Subcommittee and has been seeking to strengthen FERC's enforcement powers. He described his amendment, which cleared the committee Wednesday, as a way to prevent manipulation of the new market for trading carbon-emission allowances that would be created by the climate bill.

"If we are going to create this whole new market, let's do it where we have robust regulation, not let the horse out of the barn," Stupak said. "Let's have regulation and oversight over the new market so we don't create a nightmare like we have seen in the financial market with energy."

Attorneys following the legislation said the Stupak amendment substituted the word "act" for the word "part" in language describing FERC's authority, expanding the scope of the amendment from a "part" of the climate bill to the entire Federal Power Act.

That was Stupak's purpose, said his press spokesman, Nick Choate, following the vote. "His intent is to provide the authority across the whole board, and he's had legislation for this for some time," Choate said. "His interest is in clamping down on energy markets."

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FERC officials have sought such expanded powers after a conflict with the Commodity Futures Trading Commission over the investigation of Amaranth Advisors, a Greenwich, Conn., hedge fund that collapsed in 2006 after taking huge losses on speculative energy trades.

In January, Joseph Kelliher, then FERC's chairman, wrote to Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) urging that the commission be granted authority to issue "cease and desist" orders against companies it is investigating for market manipulation. The authority could be used to prevent a suspected company from moving its assets out of regulators' reach, he said.

Anna Cochrane, acting director of FERC's office of enforcement, asked senators in March to give the commission cease-and-desist authority under both the Federal Power Act and the Natural Gas Act.

"While the Commission currently has the ability to seek United States District Court injunctive relief, direct cease and desist authority would expand the Commission's enforcement tool box to match those of the SEC [Securities and Exchange Commission] and the CFTC," Cochrane wrote. She also recommended that FERC get the authority to seize assets of a company under investigation for market manipulation.

The Stupak amendment gives FERC exceptionally strong authority to go after suspected targets, some energy attorneys said, including the right to issue cease-and-desist orders and to issue temporary orders for the seizure of assets, without a prior public hearing, if it concluded a hearing would be "impracticable or contrary to the public interest."

A company receiving such an order could ask FERC to reconsider it and could request a hearing on FERC's action. FERC would hold a hearing and issue a decision "at the earlier possible time." The amendment says that a company facing a cease-and-desist order could not appeal to the federal courts until after FERC had held a hearing.

The issue, according to some attorneys, was whether FERC might use its new authority on regulatory issues other than enforcement.

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