Federal Energy Regulatory Commission's Compliance With Requirement to Adjust Civil Monetary Penalties for Inflation
Gao ID: GAO-02-888R July 15, 2002The Federal Civil Penalties Inflation Adjustment Act of 1990 required each federal agency to issue a regulation adjusting its covered maximum civil monetary penalties for inflation by October 23, 1996. The act also required agencies to make necessary adjustments at least once every 4 years thereafter. During a review of the act's implementation, GAO found that the Federal Energy Regulatory Commission's (FERC) Office of the General Counsel indicated that four of the agency's civil penalties are covered by the act but that the agency had not adjusted them for inflation. FERC's Office of the General Counsel stated that the agency has several other statutory penalties that appear not to be covered by the Inflation Adjustment Act. GAO's review did not reveal any FERC regulations that increased the agency's civil penalties for inflation.
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Director: J. Christopher Mihm Team: Government Accountability Office: Strategic Issues Phone: (202) 512-6082GAO-02-888R, Federal Energy Regulatory Commission's Compliance With Requirement to Adjust Civil Monetary Penalties for Inflation
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United States General Accounting Office:
GAO:
July 15, 2002:
The Honorable Patrick H. Wood III:
Chairman:
Federal Energy Regulatory Commission:
Subject: Federal Energy Regulatory Commission‘s Compliance With
Requirement to Adjust Civil Monetary Penalties for Inflation:
Dear Mr. Wood:
Earlier this year, we initiated a governmentwide review of the
implementation of the Federal Civil Penalties Inflation Adjustment Act
of 1990, as amended (’Inflation Adjustment Act“). [Footnote 1] The
Inflation Adjustment Act required each federal agency to issue a
regulation adjusting its covered maximum civil monetary penalties for
inflation by October 23, 1996, and to make necessary adjustments at
least once every 4 years thereafter. During our review, the Federal
Energy Regulatory Commission‘s (FERC) Office of the General Counsel
indicated that four of the agency‘s civil penalties are covered by the
act but the agency had not adjusted them for inflation. This report is
intended to bring this matter to your attention and to recommend
corrective action.
FERC Identified Four Civil Penalties That Are Covered by the Inflation
Adjustment Act:
Section 3 of the Inflation Adjustment Act defines a covered civil
penalty as any ’penalty, fine, or other sanction that — is for a
specific monetary amount as provided by Federal law“ or ’has a maximum
amount provided for by Federal law,“ and ’is assessed or enforced by an
agency pursuant to Federal law“ and ’is assessed or enforced pursuant
to an administrative proceeding or a civil action in the Federal
courts.“ FERC‘s Office of the General Counsel provided us with a list
of civil penalties that it considered covered by the Inflation
Adjustment Act. Table 1 lists those penalties as well as their maximum
penalty amounts, assessment methods, and the dates that the penalties
were last set or adjusted.
Table 1: FERC Civil Penalties Covered by the Inflation Adjustment Act:
U.S.C. citation: 15 U.S.C. 3414 (b)(6)(A)(i);
Description of violation: Knowing violation of any provision of any
rule or order under the Natural Gas Policy Act;
Maximum penalty/forfeiture amount: $5,000;
Assessment method: Per violation;
Date penalty was last set or adjusted: 1978.
U.S.C. citation: 16 U.S.C. 825n(a);
Description of violation: Willful failure to comply with any order,
rule, or regulation by the Commission or failure to submit any required
document or information or to appear in response to a Commission
subpoena in relation to the Federal Power Act;
Maximum penalty/forfeiture amount: $1,000 (in addition to any other
penalty);
Assessment method: Per violation;
Date penalty was last set or adjusted: 1935.
U.S.C. citation: 16 U.S.C. 823b(c);
Description of violation: Failure to comply with any rule, regulation,
condition of a license, permit, or exemption under subchapter 12 of the
Federal Power Act (Regulation of the Development of Water Power and
Resources);
Maximum penalty/forfeiture amount: $10,000;
Assessment method: Per day;
Date penalty was last set or adjusted: 1986.
U.S.C. citation: 16 U.S.C. 825o-1(b);
Description of violation: Violation of sections 824(j) (wheeling
authority), 824(k) (orders requiring interconnection or wheeling), or
825(m) (sales by exempt wholesale generators) of the Federal Power Act;
Maximum penalty/forfeiture amount: $10,000;
Assessment method: Per day;
Date penalty was last set or adjusted: 1992.
Source: FERC‘s Office of the General Counsel.
[End of table]
FERC‘s Office of the General Counsel told us that the agency has
several other statutory penalties that appear not to be covered by the
Inflation Adjustment Act (e.g., criminal penalties, civil penalties
that are assessed by the President, and penalties that are recoverable
only in civil suit brought by a U.S. Attorney).
FERC Has Not Adjusted Its Covered Civil Penalties for Inflation:
Under the Inflation Adjustment Act, FERC (like other covered federal
agencies) was required to publish a regulation by October 23, 1996,
adjusting its maximum civil penalties for inflation. The amount of the
adjustment was to be based on changes in the Consumer Price Index (CPI)
between June of the calendar year in which the penalty was last set or
adjusted and June of the year prior to the adjustment (i.e., June 1995
for adjustments made in October 1996). However, the statute limited the
first adjustments of the agencies‘ penalties to 10 percent of the
penalty amounts. Because the CPI had increased by more than 10 percent
since three of the four civil penalties in table 1 were last set or
adjusted, FERC should have published a regulation in the Federal
Register by October 23, 1996, increasing each of these three covered
penalties by 10 percent. One of the penalties was last set or adjusted
in 1992 (16 U.S.C. 825o-1(b)). The CPI increased nearly 9 percent
between June 1992 and June 1995. Therefore, FERC could have increased
this penalty as well.
The Inflation Adjustment Act also required FERC to examine its civil
penalties by October 23, 2000, and, if necessary, make a second round
of inflation adjustments. The calendar year 2000 adjustments were to be
based on changes in the CPI between June of the year in which the
penalties were last adjusted (which should have been done in 1996) and
June of the year prior to the adjustment (1999). Because the CPI
increased by about 6 percent during that period, FERC could have
increased its penalty amounts again.
However, our review of the Federal Register for calendar years 1996
through 2001 did not reveal any FERC regulations that increased the
agency‘s civil penalties for inflation. FERC‘s Deputy General Counsel
confirmed that FERC had not published any penalty adjustment
regulations pursuant to the Inflation Adjustment Act, but was not aware
why the agency had not done so.
Recommendation for Executive Action:
We recommend that the Chairman of FERC initiate a regulatory action to
adjust for inflation all of the agency‘s civil penalties that are
covered by the Inflation Adjustment Act.
Agency Comments and Our Evaluation:
On June 28, 2002, we provided a draft of this report to the Chairman of
FERC for his review and comment. On July 8, 2002, the Chairman
responded by letter indicating that he was directing his staff to
prepare a draft regulation that would adjust the agency‘s civil
penalties by 10 percent”the maximum allowed by the statute for a first-
time adjustment. He also noted that the draft regulation would provide
for periodic adjustments thereafter as required by law.
We are sending copies of this report to the appropriate congressional
committees, and it will be available on GAO‘s homepage at [hyperlink,
http://www.gao.gov]. If you or your staff have any questions on the
matters discussed in this letter, you may contact Curtis Copeland or me
at (202) 512-6806.
Sincerely yours,
Signed by:
Victor S. Rezendes:
Managing Director:
Strategic Issues:
[End of section]
Footnotes:
[1] The Inflation Adjustment Act is codified at 28 U.S.C. 2461 note.
The 1990 act was amended in 1996 by the Debt Collection Improvement
Act, which added the requirement for agencies to adjust their civil
penalties by regulation (Pub. Law 104-134, Sec. 31001, 110 Stat. 1321-
373).
[End of section]
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