How Can FERC Function Without a Quorum?

With the Trump administration’s elevation of Democrat Cheryl LaFleur to acting chairman of Federal Energy Regulatory Commission and the demotion of Norman Bay (and his subsequent resignation) the agency now lacks a quorum as of Friday, Feb. 3. What are the practical consequences?

Cheryl LaFleur, acting FERC chairman once again

Cheryl LaFleur, acting FERC chairman once again

This is not a unique situation at FERC. In early 1993, as the Clinton administration took over Washington, the agency faced a similar situation. Commissioner Charles Trabandt resigned at the end of March. Commissioner Martin Allday resigned on April 18, and commissioners Jerry Langdon and Branko Terzic said they intended to quit soon. That would have left Chair Betsy Moler as the only member of the five-member commission.

At the time, April 16, 1993, William Scherman, FERC general counsel, wrote an order delegating authority to various FERC officials to direct the agency’s continuing functioning. Scherman wrote, “To meet its responsibility to protect the public interest, the Commission is delegating certain authority to the Secretary, the Directors of the Office of Pipeline and Producer Regulation and the Office of Electric Power Regulation, and the General Counsel, to be exercised in circumstances where the absence of a quorum would otherwise allow various actions to occur without Commission consideration.”

Scherman noted, “Any action taken by the staff under this order may, to the extent authorized by law, be the subject of a petition for rehearing to the Commission….”

Scherman told me last week, “First, the commission’s position will not come to a halt…. So, many of the basic decisional functions of the commission will be able to continue. In addition, all the non-decisional functions, like settlement conferences, technical conferences, can continue.” He added, “Second, in the short term it will cramp the commission on major issues, but I expect this to be short lived.” Scherman is now a Washington attorney with the law firm of Gibson, Dunn & Crutcher LLP.

Ken Irvin, a Washington-based FERC litigator at the Sidley Austin law firm, said that a lot of rate filings at FERC could become effective by default, “a non-appealable decision.” Press accounts have speculated, without any on-the-record evidence, that LaFleur’s elevation and Bay’s departure could mean more deference to utilities and market traders. Irvin cautions that anti-manipulation enforcement is unlikely to slow. “They’ve made a robust effort and collected a lot of monetary penalties,” he said. “I don’t expect to see any let-up.”

Bay was chief of FERC’s enforcement division before being tapped for a slot on the commission. He drew fire from many power marketers for an aggressive approach to innovative trading strategies, including winning major, multi-million dollar settlements from deep pocket traders. But a small trading group in eastern Pennsylvania, Powhatan Energy Fund, refused to buckle under to Bay’s enforcement police. They are engaged in long-standing litigation over the matter.

Shortly after LaFleur’s elevation and Bay’s resignation, Don Santa (a former FERC commissioner), head of the Interstate Natural Gas Association of America, the gas pipeline’s Washington lobby, wrote to Trump. He said, “Given your focus on infrastructure and domestic energy resources, we urge you to nominate candidates to fill the commission’s three existing vacancies as quickly as possible. It is important to note that these natural gas pipeline systems are financed with private capital. The most significant barrier to building this infrastructure is often the permitting and approval process, not a lack of financial resources. We must have a functioning FERC to move forward with building this critical energy infrastructure.”

Full disclosure: I wrote in 2014 that Bay was the wrong choice to head FERC, supporting LaFleur. My objections were that Bay’s enforcement strategy was flawed and his law enforcement background (he was U.S. Attorney for New Mexico before joining FERC) was not appropriate for the commission. Also, Bill Scherman has challenged FERC’s aggressive legal theories about market behavior under Bay’s direction.