AICPA SOC Service Organizations - Certrec

FERC Levies a Civil Penalty of $360,000 and a Disgorgement of $154,623 on Pacific Summit Energy, LLC (PSE) Due to a Violation of Section 4A of the NGA

Summary of NERC Penalties

REGION

WHEN?

ENTITY

COMPLIANCE AREA

VIOLATION

REASON

PENALTY AMOUNT

FERC

Quarter 3 - July 2023

Pacific Summit Energy, LLC (PSE)

NGA and FERC's regulations

Section 4A of the NGA, 15 U.S.C. § 717c-1.7 and Commission’s corresponding regulation, 18 C.F.R. § 1c.1

PSE’s October 2017 Bidweek physical trading had the effect of inflating physical natural gas prices in Transco Zone 6, resulting in increases in the value of PSE’s existing financial basis positions

$514,623

FERC Enforcement concluded that PSE’s October 2017 Bidweek physical trading had the effect of inflating physical natural gas prices in Transco Zone 6, resulting in increases in the value of PSE’s existing financial basis positions. This inflationary effect on physical natural gas prices was magnified by two factors: 1) PSE purchasing physical natural gas at prices Enforcement determined were uneconomically high and 2) PSE concentrating its purchases during the first hour of the first day of Bidweek trading when it would have a signaling effect on later trades and the highest likelihood to effect market prices. Enforcement further determined that PSE was, or should have been, aware of the effect the above-described physical trading would have on its October 2017 financial basis positions after having made materially similar trades during the September 2017 Bidweek. Enforcement determined PSE made its uneconomic purchases of physical gas in the first hour of the first day of October 2017 Bidweek trading with either the intent or with a reckless disregard for how such trading would inflate the value of its existing financial positions. FERC concluded that, on net, PSE’s October 2017 physical First of Month index positions, financial index swap positions, and financial basis swap positions improperly benefited PSE by $154,623. FERC Enforcement concluded that during the October 2017 Bidweek, PSE engaged in a related-positions fraudulent scheme that violated Section 4A of the NGA, 15 U.S.C. § 717c-1.7. FERC also concluded that PSE’s October 2017 Bidweek trading also violated the Commission’s corresponding regulation, 18 C.F.R. § 1c.1. PSE agreed to (a) pay a civil penalty of $360,000to the United States Treasury; (b) disgorge $154,623; and (c) submit annual compliance monitoring reports to Enforcement for a period of two years.
 

PSE is the North American energy marketing and trading affiliate of  Sumitomo formed PSE in 2004 to expand its midstream presence in the North American energy industry. PSE has approximately 70 employees across California, Texas, and Virginia. PSE primarily trades natural gas, power, and crude oil. PSE actively trades natural gas for a wide variety of purposes. PSE trades physical natural gas to, among other things, serve customers with gas requirements. PSE also transacts in futures markets for hedging and speculative purposes.

Penalty Determination

FERC considered the fact that PSE fully cooperated with Enforcement’s investigation and that PSE had a compliance program in place, including annual compliance training. These factors served to reduce/not escalate the penalties levied. 

About Certrec:
Certrec is a leading provider of regulatory compliance solutions for the energy industry with the mission of helping ensure a stable, reliable, bulk electric supply. Since 1988, Certrec’s SaaS applications and consulting expertise have helped hundreds of power-generating facilities manage their regulatory compliance and reduce their risks.

Certrec’s engineers and business teams bring a cumulative 1,500 years of working experience in regulatory areas of compliance, engineering, and operations, including nuclear, fossil, solar, wind facilities, and other Registered Entities generation and transmission.

Certrec has helped more than 120 generating facilities establish and maintain NERC Compliance Programs. We manage the entire NERC compliance program for 60+ registered entities in the US and Canada that trust us to decrease their regulatory and reputational risk. Certrec is ISO/IEC 27001:2013 certified and has successfully completed annual SOC 2 Type 2 examinations.

For press and media inquiries, please contact marketing@certrec.com.

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