posted on Thursday, August 23, 2007 9:05 AM by Jennifer Rinker

FERC Shows Zero Tolerance in $500,000+ Settlement for Reporting Violations

Stressing the harm to the regulatory process and to rules central to the mission of the agency, the Federal Energy Regulatory Commission (FERC) on August 20 approved a settlement of $500,000 civil penalties plus disgorgement of profits against Gexa Energy, LLC, (Gexa) despite:  (1) new owner FPL Energy's (FPL) prompt self-report, cooperation during the investigation, and demonstrated commitment to compliance; and (2) FERC's admission that Gexa's violations resulted in no harm to the market or market participants.  The order, issued notationally, explained that "absent the self-report and these remedial measures, the civil penalty would have been substantially higher" — FERC is authorized to impose civil penalties of up to $1 million per violation per day.

In May 2004, Gexa obtained market-pricing authority under the Federal Power Act (FPA).  On June 17, 2005, power marketer Gexa merged with FPL, but failed to disclose to FPL that Gexa had obtained authority for and was making sales at market-based rates.  As a consequence, the parties violated section 203 of the FPA by failing to seek permission from FERC for disposition of jurisdictional facilities.  In addition, Gexa violated FPA section 205 "by entering into a series of unauthorized wholesale balancing transactions to sell excess generation in interstate commerce into the ISO-NE's hourly or day[-]ahead market" three weeks before obtaining market-based rate authority to do so for which Gexa must disgorge $12,498.41 in profits.  In addition, Gexa failed to file change in status notifications with FERC consistent with Order No. 652 and failed to timely file Electric Quarterly Reports for market-based rate sales from March 2005 to February 2006.

FERC noted among FPL's cooperative actions and prompt steps to prevent future violations, FPL removed Gexa's senior management involved in the violations that Chairman Kelliher characterized as "knowing", "deliberate" and "blatant."