Today, U.S. Senator Maria Cantwell (D-WA) praised the Federal Energy Regulatory Commission (FERC) and its enforcement office as a "shining light" in the use of a law she authored to give regulators greater authority to stop market manipulation that raises energy rates for consumers.
"I just want to make sure we all step back and realize the home run that has been hit by FERC when it comes to enforcing anti-manipulation language that we gave to them in 2005," Cantwell said. "They are the shining light in a regulatory scheme of making sure that energy prices are just and reasonable. We wish we would have had that happen before - but there were a lot of attempts by a lot of previous people to make sure they weren't enforced. That is why we have the new law."
Cantwell's remarks came during the Senate Committee on Energy and Natural Resources confirmation hearing for two FERC nominees: Norman Bay, President Obama's nominee for FERC chairman; and Cheryl LaFleur, FERC's acting director, who is up for nomination to a second term as a FERC commissioner.
FERC oversees energy markets and the interstate transmission of electricity, natural gas and oil. Bay, FERC's chief enforcement officer since 2009, told the Senate committee that the FERC has issued 49 market settlement orders. FERC's enforcement actions under Bay have recovered $800 million in penalties and unjust returns for energy consumers and taxpayers.
In the aftermath of Enron's schemes that cost Washington ratepayers billions, Cantwell authored an amendment to the Energy Policy Act of 2005 that gave FERC authority to investigate and punish energy market manipulation. Today, by committing additional resources and assembling a team of experts capable of understanding the complex energy and financial markets, FERC is using that law to root out fraud, impose civilian fines and disgorge illicit profits from energy manipulators.
"I believe so much in investment, and I believe in access to capital. But I also believe that our energy markets cannot be the tool of a lot of people who just want to invest for the purposes of their own manipulation of the market," Cantwell said. "We have to have policemen on the beat. So while we drill down here, I will remind people that the policemen have been on the beat and have done a lot of great work."
Cantwell also responded to critics of Bay -- a former federal prosecutor and University of Mexico law professor -- and his leadership of the FERC enforcement division.
"I don't think that is about Mr. Bay as much as it's about whether Wall Street has been policed in efficient ways to not drive up artificially the cost of energy markets," Cantwell said. "I think energy markets are the life blood of any economy. If we don't police them properly we are going go place ourselves out of economic development."
Since the 2005 law took effect, FERC has conducted more than 200 investigations, resulting in 81 settlements and $586 million in civil penalties. Those investigations also resulted in companies being forced to surrender $299 million in unjust profits.
In addition, FERC ordered Barclays in July 2013 to pay $435 million in civil penalties within 30 days for manipulating West Coast power markets. The order also directed Barclays to disgorge $34.9 million in unjust profits, plus interest, from its manipulative scheme that allegedly harmed ratepayers in Washington state, Oregon, California and Arizona. Barclays is fighting that order in federal court.
The 2005 Energy Bill also contained Cantwell's provision that prevented a bankruptcy court from forcing Snohomish Public Utility District (PUD) and its customers to pay millions of dollars in termination fees for electricity that was never delivered. This measure reaffirmed FERC's authority to decide whether charges related to manipulated power contracts could be deemed invalid.
Cantwell has aggressively fought throughout her career to protect consumers from energy price manipulation. In addition to the 2005 legislation, she successfully fought in 2007 to give the Federal Trade Commission oversight of the wholesale petroleum markets. In 2010 under the Dodd-Frank Consumer Protection Act, she worked to give the Commodity Futures Trading Commission oversight in the derivatives markets. From her first days in office Cantwell pushed to expose Enron's manipulation of deregulated energy markets. On December 2, 2001 Enron filed for Chapter 11 bankruptcy leading to the dismissal of more than 22,000 employees. Cantwell helped uncover numerous "smoking gun' audio tapes and memos that detailed the tricks Enron used to artificially drive up electricity prices.