Schiff Hardin has assisted a number of clients in the preparation and implementation of Federal Energy Regulatory Commission (FERC) and North American Electric Reliability Corporation (NERC) compliance programs. Our attorneys have been on the cutting edge of many groundbreaking FERC and NERC compliance and enforcement matters.
Because companies have differing business interests and objectives, they face different FERC compliance issues. In preparing a compliance program for a client, Schiff Hardin works closely with senior management and the employees on the frontlines to tailor the program to the client's specific needs.
Our lawyers have prepared compliance programs for a company engaged in all aspects of the natural gas industry, including marketing and trading, gathering, intrastate transportation, and local distribution of gas. We are currently developing two versions of training materials for this client. The first version will be provided to employees with day-to-day involvement in FERC jurisdictional activities, while the second version will be addressed to employees with less direct responsibility for FERC-related matters.
- We obtained a favorable settlement for a client in the first case brought by FERC's Office of Enforcement (OE) alleging failure to comply with a FERC order issued in a complaint proceeding.
- We obtained a dismissal of an investigation of a possible violation of FERC's Standards of Conduct.
- We obtained waivers of FERC's Codes of Conduct.
- We represent clients in ongoing investigations by OE regarding FERC's rules governing the use of interstate pipeline capacity, including the capacity release requirements, the shipper-must-have-title rule, and the prohibition on buy-sell transactions. We have developed procedures to be used by our clients for internal audits related to compliance with these rules and participated in such audits. We have evaluated the results of internal audits, assisted our clients in replying to data requests from OE, participated in meetings with OE Staff, and developed reports to OE regarding our clients' conduct.
- We work with senior management to develop custom-tailored internal compliance programs and training sessions for company employees regarding FERC compliance requirements. We have also evaluated internal compliance programs and provided advice on how such programs should be modified to comport with FERC's guidance on compliance plans.
- We assisted a client with respect to an audit conducted by FERC's Chief Accountant.
Firm attorneys have participated in numerous industry and Commission-sponsored conferences addressing compliance and enforcement issues. Schiff Hardin attorneys also have experience in compliance matters related to other agencies, including the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of Justice.
NERC Compliance Matters
Many entities in the electric power industry are now required to comply with NERC reliability standards. NERC standards approved by FERC have been mandatory and enforceable since June 2007. Non-compliance with NERC standards can result in significant monetary penalties, as well as the need to expend resources to establish and carry out a corrective action or "mitigation" plan. Two large utilities have already been assessed substantial penalties.
Compliance with NERC standards is monitored by NERC and its Regional Entities through a variety of processes including compliance audits, spot checks and self-certification requests. The entity may be required to demonstrate it has been in compliance with applicable standards for a long historic period preceding the date of the audit or other compliance monitoring activity.
While different entities may have different needs depending on how well they have documented compliance with applicable NERC reliability standards, areas in which Schiff Hardin can provide assistance may include:
- Reviewing and consulting on the entity's operations, maintenance and testing procedures, protocols, standing orders and similar documents for sufficiency to demonstrate compliance with particular reliability standards
- Reviewing and consulting on sufficiency of written responses and documentation packages assembled to respond to self-certification requests, spot checks and periodic data submittal requests from the Regional Entity
- In advance of a scheduled compliance audit, working with the entity to compile documentation packages and written explanatory materials to demonstrate compliance with those reliability standards expected to be covered in the compliance audit. (The NERC compliance audit schedule for the calendar year is generally finalized by October of the previous year, allowing plenty of time for entities to prepare.)
- Working with the entity to prepare written responses and assemble documentation packages to be submitted in response to the pre-audit questionnaire that the entity will receive from the Regional Entity audit team at least 60 days before the scheduled date of the audit
- Participating in mock audits in which the entity's presentation and supporting documentation are reviewed and challenged and its personnel are questioned on matters related to compliance with applicable reliability standards
- Outside the context of specific preparation activities for an upcoming audit or other compliance monitoring activity, consulting with the entity on questions concerning compliance requirements and coverage of particular reliability standards