Compliance with FERC Conduct Requirements

Regulated utilities are under unprecedented pressure to internalize and enforce employee conduct standards to ensure non-discriminatory access to the grid by all users. We are proactive in helping our clients establish a strong compliance culture, develop management tools to promote compliance, conduct internal audits and, as necessary, manage the process of reporting identified violations and responding to regulatory concerns. We work with utilities on all aspects of compliance, including:

• Standards of Conduct;

• Affiliate restrictions;

• Cross-subsidization within utility holding companies;

• Market behavior rules;

• Market manipulation; and

• Transmission tariff administration and OASIS operations.

We have authored authoritative writings on compliance, including a book prepared on behalf of the Edison Electric Institute concerning FERC’s Order No. 889 Standards of Conduct and a comprehensive desk reference manual on compliance with the subsequent Order No. 2004 Standards of Conduct.

Annual Training

FERC expects utilities to have robust annual training programs in place as a part of their compliance programs. BGM designs training programs and conducts annual training on all significant aspects of FERC conduct regulation. The firm also develops training materials for in-house use.

Audits

BGM began advising clients to conduct self-audits of compliance with FERC requirements in the late 1990s. Since then, we have conducted compliance audits on all significant aspects of FERC regulation, and have comprehensively evaluated utility-developed compliance programs and self-audits. We have provided our clients with analyses of reporting and filing requirements, assisted in the preparation and correction of Electronic Quarterly Reports, and assessed compliance with the Standards of Conduct and Code of Conduct.

We also perform detailed audits for our clients that simulate those that FERC’s Audit Staff conduct because we understand the issues that FERC is likely to consider. Our audits include:

• On-site interviews of key personnel;

• Evaluations of the physical plant;

• Review of electronic files and computer systems;

• Preparation of draft audit reports;

• Follow-up discussions to identify and correct deficiencies; and

• Preparation of a final audit report that addresses deficiencies and appropriate steps to correct them.

We have developed programs for these audits that can be adapted readily to a utility’s specific circumstances, making the preparation for and conduct of the audits realistic and cost effective.

In addition, BGM attorneys have the experience and expertise to guide clients through the FERC audit process, from the time an audit is initiated to its resolution. We assist clients in interpreting and drafting responses to data requests, we meet with FERC auditors to discuss areas of noncompliance, and we advise clients in negotiating the contents of the final audit report.

Business Practices and Procedures

BGM has prepared several comprehensive analyses of electric utility compliance obligations focused on the clients’ specific business activities. These compliance analyses provide a platform for developing a compliance plan that includes:

• A manual identifying applicable compliance obligations;

• Audit protocols for internal and external audits;

• A matrix of appropriate corrective actions;

• Detailed policies and procedures; and

• Periodic employee training.

Our attorneys have written or revised business policies and procedures relating to compliance with FERC’s Standards of Conduct, Code of Conduct, requirements for processing transmission requests and guidelines relating to power trading, including the proper use of network transmission service and the development of contracts that are consistent with FERC’s network resource requirements.