In re Candor, RM22-20-000
| Court | Federal Energy Regulatory Commission |
| Writing for the Court | Debbie-Anne A. Reese, Deputy Secretary. |
| Citation | 180 FERC ¶ 61, 052 |
| Parties | Duty of Candor |
| Docket Number | RM22-20-000 |
| Decision Date | 28 July 2022 |
180 FERC ¶ 61,052
Duty of Candor
No. RM22-20-000
United States of America, Federal Energy Regulatory Commission
July 28, 2022
18 CFR Part 1d
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of proposed rulemaking.
SUMMARY: The Federal Energy Regulatory Commission (Commission) proposes to add a requirement that all entities communicating with the Commission or other specified organizations related to a matter subject to the jurisdiction of the Commission submit accurate and factual information and not submit false or misleading information or omit material information. An entity is shielded from violation of the regulation if it has exercised due diligence to prevent such occurrences.
DATES: Comments are due [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].
ADDRESSES: Comments, identified by docket number, may be filed in the following ways. Electronic filing through https://www.ferc.gov, is preferred.
• Electronic Filing: Documents must be filed in acceptable native applications and print-to-PDF, but not in scanned or picture format
• For those unable to file electronically, comments may be filed by U.S. Postal Service mail or by hand (including courier) delivery
o Mail via U.S. Postal Service only: Addressed to: Federal Energy Regulatory Commission, Office of the Secretary, 888 First Street NE, Washington, DC 20426.
o For delivery via any other carrier (including courier): Deliver to: Federal Energy Regulatory Commission, Office of the Secretary, 12225 Wilkins Avenue, Rockville, MD 20852.
FOR FURTHER INFORMATION CONTACT:
Gabe Sterling, Legal Information
Office of Enforcement, Division of Investigations
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC 20426
(202) 502-8891
gabriel.sterling@ferc.gov
Andrea Cerbin, Legal Information
Office of Enforcement, Division of Investigations
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC 20426
(202) 502-8362
andrea.cerbin@ferc.gov
SUPPLEMENTARY INFORMATION:
NOTICE OF PROPOSED RULEMAKING
Debbie-Anne A. Reese, Deputy Secretary.
TABLE OF CONTENTS
Paragraph Number
I. Background .............................................................................................................. 7
A. Existing Duties of Candor ................................................................................. 8
B. 18 CFR 35.41(b) ................................................................................................. 16
C. Limitations of the Existing Duty of Candor Rules ............................................ 20
II. Discussion ................................................................................................................. 23
A. The Need for a Broad Duty of Candor .............................................................. 26
B. 18 CFR 35.41(b) Provides a Fair Basis for a Broader Duty of Candor ............ 32
C. Authority for the Proposed Rule ........................................................................ 35
D. Interpretive Guidance and Application of the Proposed Rule .......................... 39
III. Information Collection Statement ........................................................................... 45
IV. Environmental Analysis ........................................................................................... 46
V. Regulatory Flexibility Act Analysis ........................................................................ 47
VI. Comment Procedures ............................................................................................... 49
VII. Document Availability ............................................................................................. 52
1. Pursuant to sections 206, 215, 307, and 309 of the Federal Power Act (FPA),[1]sections 5, 14, and 16 of the Natural Gas Act (NGA),[2] sections 1(5)(a), 12(1)(a), 13, and 15 of the Interstate Commerce Act (ICA),[3] sections 311(c) and 501(a) of the Natural Gas Policy Act of 1978 (NGPA),[4] and sections 402(a)(2) and 402(h) of the Department of Energy Organization Act,[5] the Commission proposes to add a new section to 18 CFR part 1 to require that any entity communicating with the Commission or other specified organizations (as identified below) related to a matter subject to the jurisdiction of the Commission submit accurate and factual information and not submit false or misleading information, or omit material information.[6] However, the Commission proposes that
exercising due diligence to prevent such occurrences would be an affirmative defense to violations of the requirement.
2. A variety of current Commission regulations prohibit, in defined circumstances, inaccurate communications to the Commission and other organizations upon which the Commission relies to carry out its statutory obligations in the Commission-jurisdictional electric, natural gas, and oil industries and markets. However, these existing requirements cover only certain communications and impose a patchwork of different standards of care for such communications.
3. The Commission relies extensively upon the accuracy of information provided to it and to other organizations for effective decision making. Reliance on inaccurate information inhibits the Commission's regulatory oversight and could lead to substantial harm, whether it is communicated to the Commission or to the other organizations upon which the Commission relies to assist it to carry out its regulatory responsibilities. We are concerned that the Commission has no explicit requirement that communications related to a matter subject to the jurisdiction of the Commission be accurate or even that they not include intentional misrepresentations.
4. We believe that a broadly applicable duty of candor will improve the Commission's ability to effectively oversee jurisdictional markets by ensuring the Commission and organizations upon which the Commission relies base decisions on accurate information. Effective Commission oversight depends on entities' use of due diligence to reduce the possibility that false or inaccurate information is communicated to the Commission and
other organizations upon which it relies. Further, intentional or reckless communication of false or inaccurate information is always unacceptable.
5. All persons appearing before the Commission and entities communicating with organizations regulated by the Commission should know that truthfulness is expected and required, that communications should be made following due diligence, and that communications should never be intentionally or recklessly misleading. However, we understand that there is a balance between ensuring accurate communications and the burden required to ensure that accuracy. By adopting a flexible standard, "due diligence," and limiting the relevant communications to specific recipients related to matters subject to the jurisdiction of the Commission, we expect that such additional burdens, if any, would be minimal.
6. We seek comment on all aspects of the proposed rule, including specifically the following: the need for a broad duty of candor rule; whether 18 CFR 35.41(b) provides a reasonable foundation for the proposed expanded duty of candor rule; the Commission's authority for the proposed rule; whether there are categories of entities or individuals that should be exempted from the duty of candor; the scope of the communications covered by the rule; and whether the regulation properly identifies all organizations who assist the Commission to carry out its statutory obligations and communications to whom should be subject to a duty of candor.
I. Background
7. Among the existing patchwork of Commission requirements imposing a duty of candor applicable to some Commission-regulated entities and markets is 18 CFR 35.41(b),
which applies only to "Sellers" in electric markets, defined as a person who has either obtained or applied for market-based rate authority under the auspices of the FPA.[7] The Commission proposes here to adopt a broader regulation based upon our significant experience with § 35.41(b). By way of background, we first discuss some of the other duties of candor applicable to entities within the Commission's jurisdiction. Then, we discuss 18 CFR 35.41(b) and its history in greater detail. Then, we turn to the limitations of these requirements.
A. Existing Duties of Candor
8. The Commission has adopted various regulations imposing a duty of candor for specific types of communications, and the vast majority of these regulations involve communications to the Commission or Commission staff. In each instance, the controlling regulation was adopted as part of specific regulatory requirements or procedures rather than as a broad requirement applicable to all of the Commission's oversight responsibilities, including areas where the Commission relies on other organizations to assist it in exercising its authorities. This history, discussed in the paragraphs to follow, has resulted in a limited set of requirements that may fail to ensure that the Commission can make decisions based on accurate information.
9. For many decades, the Commission's governing statutes and adopted regulations have required that certain submissions to it be made under oath and penalty of perjury.
For example, FPA 304 requires that entities submit periodic or annual reports under oath,[8]FPA 307(a) requires that written statements in investigations be under oath,[9] and FPA 4(b) allows the Commission to require certain hydroelectric-related filings to be submitted under oath.[10] The NGA allows submissions under oath in investigations,[11] periodic forms must be provided under oath,[12] and 18 CFR 385.1907 requires compliance reports to be under oath as well....
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