Civil Monetary Penalties Adjusted for Inflation

2015 Statute Requires FERC to Make Civil Penalty Amount Inflation Adjustments Every January
Mark Reishus
January 8, 2019 at 14:16:40 ET
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On Jan. 8, 2019, FERC issued Order No. 853, “a final rule to amend its regulations governing the maximum civil monetary penalties assessable for violations of statutes, rules, and orders within the Commission’s jurisdiction. The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended most recently by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, requires the Commission to issue this final rule.” Order No. 853, effective upon publication in the Federal Register, increases the Commission’s existing maximum civil monetary penalty amounts. For example, the maximum civil monetary penalty assessed pursuant to Federal Power Act (FPA) section 316A increases from $1,238,271 per violation, per day to $1,269,500 per violation, per day.

2015 Adjustment Act

FERC explained that the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Adjustment Act) “required the head of each federal agency to issue a rule by July 2016 adjusting for inflation each ‘civil monetary penalty’ provided by law within the agency’s jurisdiction and to make further inflation adjustments on an annual basis every January 15 thereafter.”

The 2015 Adjustment Act requires FERC to first determine the percentage by which the Department of Labor’s Consumer Price Index for all-urban consumers (CPI-U) for October of the preceding year exceeds the CPI-U for October of the year before that. The CPI-U for October 2018 exceeded the CPI-U for October 2017 by 2.522 percent.

Next, the 2015 Adjustment Act requires FERC to multiply the CPI-U percentage increase by the applicable existing maximum civil monetary penalty. “This step results in a base penalty increase amount.”

The third step requires FERC to round the base penalty increase amount to the nearest dollar and add that amount to the base penalty to calculate the new adjusted maximum civil monetary penalty.

The 2015 Adjustment Act directs FERC to use the civil monetary penalty applicable at the time of assessment of a civil penalty, regardless of the date on which the violation occurred.

FPA Section 316A(b) Penalties

Section 316A(b) of the FPA provides that any person who violates any provision of FPA Part II (Regulation of Electric Utility Companies Engaged in Interstate Commerce) or any provision of any rule or order thereunder “shall be subject to a civil penalty of not more than $1,000,000 for each day that such violation continues. Such penalty shall be assessed by the Commission, after notice and opportunity for public hearing, in accordance with the same provisions as are applicable under section 31(d) in the case of civil penalties assessed under section 31. In determining the amount of a proposed penalty, the Commission shall take into consideration the seriousness of the violation and the efforts of such person to remedy the violation in a timely manner.”

In 2018, FERC adjusted this amount for inflation, to $1,238,271 per violation, per day.

Order No. 853 increases this amount to $1,269,500 per violation, per day.

FPA Section 31(c) Penalties

FERC currently has civil monetary penalty authority of $22,363 per violation, per day under FPA section 31(c). This civil monetary penalty applies to licensees, permittees, and exemptees who: (a) violate or fail or refuse to comply with any rule or regulation issued under Part I of the FPA; (b) violate or fail or refuse to comply with any term or condition of a license, permit, or exemption under Part I of the FPA; or (c) violate or fail or refuse to comply with any order issued pursuant to the Commission’s authority to monitor and investigate licenses and permits issued under Part I of the FPA.

Order No. 853 increases this amount to $22,927 per violation, per day.

FPA Section 315(a) Penalties

Under section 315(a) of the FPA, public utilities or licensees are currently subject to civil forfeiture “for any willful failure to: comply with any order of the Commission; file any report required under the FPA or any rule or regulation promulgated pursuant to the FPA; submit any information or document required by the Commission in the course of an investigation conducted under the FPA; or to appear at any hearing or investigation in response to a subpoena issued under the FPA.”

FERC increases this penalty amount from $2,852 per violation to $2,994 per violation.

NGA Section 22 Penalties

Section 22 of the Natural Gas Act (NGA) establishes a civil monetary penalty for violations of the NGA, and for violations of rules, regulations, restrictions, conditions and orders promulgated pursuant to the NGA. It gives FERC the authority to impose a civil monetary penalty of up to $1,000,000 per violation, per day.

FERC adjusted this penalty amount to $1,238,271 in 2018.

FERC increases this penalty amount to $1,269,500 per violation, per day.

NGPA Section 504(b)(6)(A)(i) Penalties

Section 504(b)(6)(A)(i) of the Natural Gas Policy Act establishes a maximum civil penalty amount of $1,000,000 per violation, per day for violations of any provision of the NGPA and any rule or order issued under the NGPA.

In 2018, FERC adjusted this penalty amount to $1,238,271 per violation, per day.

The new rule increases this penalty amount to $1,269,500 per violation, per day.

ICA Section 6(10) Penalties

Section 6(10) of the Interstate Commerce Act (ICA) subjects pipeline carriers, receivers and trustees to a civil penalty for failure or refusal to comply with regulations or orders concerning posting and filing rate schedules issued by FERC under section 6 of the ICA.

FERC increased this penalty in 2018 from $1,270 per offense and $64 per day after the first day, to $1,296 per offense and $65 per day after the first day.

Order No. 853 increases these amounts to $1,329 per offense and $67 per day after the first day.

ICA Section 16(8) Penalties

Section 16(8) of the ICA subjects pipeline carriers, representatives or agents of carriers, receivers, trustees or their agents to a civil penalty “for knowing or neglectful failure to comply with orders issued by the Commission under sections 3 (prohibiting undue or unreasonable preferences, advantages, discrimination, or disadvantages), 13 (concerning Commission investigations and power to set aside, after full hearing, any ‘rate, fare, charge, classification, regulation, or practice caus[ing] any undue or reasonable advantage, preference, or prejudice … .’), or 15 (empowering the Commission, after full hearing, to set aside any rate, fare, or charge that ‘is or will be unjust or unreasonable or unjustly discriminatory or unduly preferential or prejudicial, or otherwise in violation of any provisions of [the ICA]’).”

In 1910, Congress set this penalty at $5,000 per offense, per day. In 2018, FERC adjusted it to $12,964 per offense, per day.

The new rule increases this penalty amount to $13,291 per violation, per day.

ICA Section 19a(k) Penalties

Section 19a(k) of the ICA subjects pipeline carriers, receivers and operating trustees to a civil penalty for their failure to comply with FERC’s requirements to provide information, or to provide access, in connection with FERC’s valuation of a pipeline carrier’s property under ICA section 19(a).

In 1913, Congress set this penalty at $500 per offense, per day, and FERC increased it in 2018 to $1,296 per offense, per day.

FERC increases this penalty amount to $1,329 per offense, per day.

ICA Section 20(7)(a) Penalties

Section 20(7)(a) of the ICA subjects pipeline carriers and their lessors to a civil penalty for their failure to keep or submit certain accounts, records, or memoranda required by FERC under authority granted in ICA section 20.

Congress last adjusted this penalty in 1940 at $500 per offense, per day. In 2018, FERC increased this penalty to $1,296 per offense, per day.

Order No. 853 increases this penalty to $1,329 per offense, per day.

For More Information

See ¶1504-01: Maximum Civil Penalty and ¶1602-01: Civil Penalties, as Adjusted for more information on FERC’s civil penalty amounts.

Order No. 853: Civil Monetary Penalty Inflation Adjustments, Final Rule, 166 FERC ¶61,014 (2019) [Docket No. RM19-9-000].