STIPULATION AND CONSENT AGREEMENT
EXHIBIT
99.2
UNITED
STATES OF AMERICA
FEDERAL
ENERGY REGULATORY COMMISSION
)
Cleco
Corporation, et
al.
)
Docket No. IN07-28-000
)
I. INTRODUCTION
Staff
of
the Office of Enforcement (Enforcement) of the Federal Energy Regulatory
Commission (Commission) and Cleco Corporation (Cleco Corp.), Cleco Power
LLC
(Cleco Power), Cleco Midstream Resources LLC (Cleco Midstream), Cleco Xxxxxxxxxx
LLC (Xxxxxxxxxx), Acadia Power Partners, LLC (Acadia), and Cleco Support
Group
LLC (Cleco Support) (collectively, Cleco) enter into this Stipulation and
Consent Agreement (Agreement) to resolve a nonpublic investigation conducted
by
Enforcement, pursuant to Part 1b of the Commission regulations, 18 C.F.R.
Part
1b (2006). The investigation concerned possible violations of the
Stipulation and Consent Agreement approved by the Commission in Cleco
Corporation, et al., 104 FERC ¶ 61,125 (2003) (2003 Settlement
Agreement).
II. STIPULATED
FACTS
Enforcement
and Cleco hereby stipulate and agree to the following:
A. Background
1. Cleco
Corp. is an energy services company headquartered in Pineville,
Louisiana. Its two main businesses are: (a) Cleco Power, a regulated
electric public utility engaged in the generation, purchase, transmission,
distribution and sale of electric power at retail and wholesale; and (b)
Cleco
Midstream, a wholesale energy business. Cleco Midstream has an
indirect 50% ownership interest in Acadia, which is an exempt wholesale
generator (EWG). Acadia owns and operates a 1,160-MW electric
generating facility located in Eunice, Louisiana. Cleco Midstream
also owns Xxxxxxxxxx, an EWG that owns and operates a 775-MW combined-cycle
natural gas-fired electric generation facility located in St. Xxxxxx,
Louisiana. Xxxxxxxxxx has entered into a Capacity Sale and Tolling
Agreement with a third party pursuant to which, for 20 years, it will supply
the
natural gas needed to fuel the plant and has the right to own, dispatch and
market the electricity produced by the facility. Cleco Power, Acadia
and Xxxxxxxxxx are power marketers and, as such, have market-based rate
authority, which are conditioned upon compliance with their codes of
conduct. Cleco Midstream also owned Perryville Energy Partners,
L.L.C. (Perryville) until February 1, 2007, when Perryville became a direct
subsidiary of Cleco Corp. Prior to June 30, 2005, Perryville was an
EWG engaged in the generation and wholesale sale of electric energy from
its
718-MW natural gas-fired generating facility located
near
Perryville, Louisiana (the Perryville Generating Facility). On June
30, 2004, Perryville sold the Perryville Generating Facility to Entergy
Louisiana, Inc. (XXX) and, as of July 1, 2005, Perryville provides
interconnection service to XXX pursuant to an agreement accepted by the
Commission. Cleco Support is a subsidiary of Cleco Corp that performs
various support services for Cleco’s other subsidiaries.
2. The
Commission's order approving the 2003 Settlement Agreement was issued in
Docket
No. IN03-1-000 and resolved Enforcement’s formal investigation into Cleco’s
compliance with, among other things, its codes of conduct and sections 205
and
214 of the Federal Power Act (FPA). Under the 2003 Settlement
Agreement, Cleco agreed, among other things, to: (1) pay a $750,000 civil
penalty under section 214 of the FPA; and (2) follow a detailed three-year
compliance plan in order to ensure compliance with the 2003 Settlement
Agreement.
3. In
addition, as part of the 2003 Settlement Agreement, Cleco agreed to the
imposition of a stricter, consolidated code of conduct. Specifically,
Section 1 of Article I of Cleco’s Code of Conduct states: “To the
maximum extent practical, the employees of Cleco Power LLC (Cleco Power),
Cleco
Marketing & Trading LLC (CMT), Cleco Xxxxxxxxxx LLC (Xxxxxxxxxx), Acadia
Power Partners, LLC (Acadia), and Perryville Energy Partners, L.L.C.
(Perryville) (collectively referred to as the Cleco Companies) will operate
independently of each other” (the independent functioning
requirement). See Revised Code of Conduct approved on
October 23, 2004 in Docket Nos. ER03-1368, 1369, 1371 and 1372.
4. Section
6 of Article I of Cleco’s revised Code of Conduct also contains a related
provision prohibiting the sharing of non-public market information, which
states:
All
market information shared between any of Cleco Companies will be disclosed
simultaneously to the public on Cleco Companies’ Internet
website. Market information includes, but is not limited to, any
communication concerning power or transmission business, present or future,
positive or negative, concrete or potential. Employees shared between
the companies in a support role are not bound by this provision, but they
may
not serve as an improper conduit of information to non-support
personnel.
5. Article
IV(8)(a) of the 2003 Settlement Agreement requires that:
Within
30
days after each of the first through third anniversaries of the Effective
Date,
Cleco et al., shall file with the Commission a report in Docket No. IN03-1-000
explaining how, during the previous 12-month period, it implemented the
Compliance Plan and ensured continued compliance with the applicable provisions
of this Agreement and the Compliance Plan (Compliance Report).
-2-
6. Article
IV(8)(c) of the Settlement Agreement provides that:
Should
any audit or reporting activity conducted pursuant to this Agreement or the
Compliance Plan indicate that during the period in which the Compliance Plan
is
in effect, Cleco et al. or any affiliate of it subject to the Compliance
Plan
engaged in any apparent violation of any rule, regulation, or statutory
requirement administered by the Commission, Cleco, et al. shall describe
in the
applicable Compliance Report each such violation and any remedy for it that
Cleco, et al. implemented after consultation with Enforcement.
7. In
lieu of annual Compliance Reports, Cleco volunteered to submit and, with
Enforcement's concurrence, did submit quarterly Compliance Reports.
B. Origins
and Nature of the Investigation
1. In
November 2005, after review of Cleco’s October 2005 Quarterly Compliance Report
under the Compliance Plan, Enforcement opened a non-public, preliminary
investigation of certain statements by Cleco in connection with the 2003
Settlement Agreement. During the investigation, on February 1, 2006,
Cleco submitted a self-report that, after the effective date of the Compliance
Plan, Cleco had shared certain personnel and information among certain Cleco
entities in possible violation of its Code of Conduct and the 2003 Settlement
Agreement.
2. In
the investigation, Enforcement examined the immediately foregoing matters,
and
inter alia, whether there were actual violations, the causes of the
violations, whether they reflected any undue preference or undue discrimination
by Cleco, and whether they caused harm to competitors or captive
customers.
III. PARTIES'
STATEMENTS
A. Statement
of Enforcement
1. Enforcement
alleges that Cleco violated the independent functioning requirement in Cleco’s
Code of Conduct by having two employees perform operational functions for
all of
Cleco Midstream’s EWGs from at least as early as September 23, 2003
(i.e., the effective date of the 2003 Settlement Agreement) until April
2004. Among other things, those operational employees engaged in
restructuring activities for more than one of Cleco Midstream’s EWGs, including
commencing discussions (inside and outside of Cleco) regarding the possible
sale
of some of those entities.
2. Enforcement
alleges that Cleco also violated the independent functioning requirement
in
Cleco’s Code of Conduct by having a third employee perform operational functions
for all of Cleco Midstream’s EWGs from at least as early as September 23, 2003
and continuing until July 1, 2004. An accounting services employee in
Cleco Support was involved in the pricing and
-3-
supply of replacement power (which affected purchase power decisions) for the tolling agreements for Xxxxxxxxxx, Acadia, and Perryville. As such, those activities went beyond the scope of the permissibly shared accounting support duties related to the billing processes for those entities, including processing all the invoices for those EWGs.
3. Enforcement
alleges that Cleco violated the independent functioning requirement in Cleco’s
Code of Conduct, from as early as September 23, 2003 until December 31, 2005,
by
sharing six Technical Services Department Planning Group (Technical Service
Department) employees among Cleco Power, Xxxxxxxxxx and
Perryville. They performed generation outage planning, coordinating,
and scheduling activities for Xxxxxxxxxx and Perryville until June 30, 2005,
and
for Xxxxxxxxxx thereafter, as well as for Cleco Power.
4. Enforcement
alleges that Cleco violated the information sharing provision in Cleco’s Code of
Conduct by giving the impermissibly-shared employees discussed in paragraphs
III.A.1, 2, and 3 above access to market information (from as early as September
23, 2003 until as late as December 31, 2005) that was not simultaneously
available to the general public.
5. Enforcement
alleges that Cleco violated the information sharing provision in its Code
of
Conduct, from as early as September 23, 2003 until June 2, 2005, by distributing
a monthly risk report to the Chief Operating Officer of Cleco
Midstream. That report contained trading risk information related to
Cleco Power and Cleco Midstream’s EWGs, including generation-related market
information (about available capacity, excess capacity, and projected load),
which was not contemporaneously available to the general public.
6. Enforcement
alleges that from as early as September 23, 2003 until June 1, 2004, Cleco
violated the information sharing provision in its Code of Conduct by
distributing daily status reports to Acadia, Xxxxxxxxxx and Perryville that
contained non-public market information regarding outages for the Acadia,
Xxxxxxxxxx, and Perryville units (e.g., the status of the plant,
online/offline information, and the number of trips since the last
report).
7. Enforcement
alleges that although Cleco was under an obligation to report apparent
violations, it did not disclose the matters described above in its quarterly
Compliance Reports.
8. Enforcement
found no evidence that customers were directly harmed by any of the alleged
violations discussed herein. In particular, Cleco’s alleged sharing
of operational employees and market information did not give Cleco a competitive
advantage over its non-affiliated competitors or result in harm to its captive
customers. In addition, Cleco’s failure to disclose the
non-compliance issues in reports to Enforcement did not cause any harm to
customers. However, Enforcement alleges that Cleco’s violations had
the potential to harm customers and are similar in nature to the activities
identified in the 2003 investigation.
9. Cleco
has responded to the violations alleged herein by taking steps to remedy
the
causes of the matters giving rise to the alleged violations, including, but
not
limited to, reorganizing some of the relevant business units, taking responsive
personnel action, and replacing management over its compliance
efforts.
-4-
10. Cleco
cooperated with this investigation and self-reported some of the
issues. However, Enforcement alleges that although Cleco was aware of
the violations regarding the Technical Services Department employees and
the
compliance issues regarding the distribution of the risk reports and the
daily
status reports, they were not self-reported in a timely manner.
11. During
the course of this investigation, Cleco voluntarily extended the Compliance
Plan
appended to the 2003 Settlement Agreement.
B. Statement
of Cleco
1. Cleco
neither admits nor denies the allegations contained in Section
III.A.
2. Although
Cleco does not admit to the alleged violations, Cleco has agreed to enter
into
this Agreement to avoid extended litigation with respect to the matters referred
to herein, to avoid uncertainty, and to effect a complete and final resolution
of the issues as set forth in this Agreement.
IV. REMEDIES
For
purposes of settling any and all civil and administrative disputes arising
from
Enforcement’s investigation of Cleco’s violations of the 2003 Settlement
Agreement, and in lieu of any other remedy that the Commission might assess,
determine, initiate, or pursue, concerning any of the matters referred to
above,
Cleco agrees that after the Commission issues an order approving this Agreement
without modification, it shall take the following actions:
A. Civil
Penalty
1. Cleco
shall pay a civil penalty for alleged violations occurring after August 8,
2005
in the amount of $ 2,000,000 payable to the United States Treasury, within
10
days of the Commission issuing an order approving this Agreement without
modification.
2. The
civil penalty shall not be passed through, directly or indirectly, to any
present or future customers or ratepayers.
B. New
Compliance Plan
1. Cleco
shall undertake the following measures set forth below for a period of 12
months
from the Effective Date of this Agreement (New Compliance Plan).
-5-
a. Cleco
will make two semi-annual submittals to Enforcement consisting of a report
by
Cleco's Chief Compliance Officer (the CCO), or the CCO's designee, under
oath
(the CCO Report). The CCO Report shall, for the relevant period for
each CCO Report:
|
|
(i)
|
identify
the employees who have been shared between Cleco Power and Acadia
and
between Cleco Power and Xxxxxxxxxx; including the name, title,
function
and business unit of each shared employee, and the nature of the
work that
each shared employee performed for Cleco Power and Acadia, or for
Cleco
Power and Xxxxxxxxxx, and
|
|
|
(ii)
|
state
whether the Code of Conduct restrictions on the sharing of operating
employees between Cleco Power and Acadia and between Cleco Power
and
Xxxxxxxxxx were violated; if so, identify each violation, the
circumstances of the violation, and any remedial actions taken
or planned
in response to the violation.
|
|
|
(iii)
|
identify
each instance in which Cleco Power shared non-public market information
with Acadia or Xxxxxxxxxx in violation of the Code of Conduct,
including
the circumstances of the sharing of the market information, and
any
remedial actions taken or planned in response to the sharing of
the market
information.
|
b. The
first CCO Report must be submitted to Enforcement no later than 6 months
from
the Effective Date of this Agreement, and the second CCO Report must be
submitted no later than 12 months from the Effective Date of this
Agreement. Within 30 days from the date that each CCO Report is
submitted, Enforcement will provide to the CCO, or the CCO's designee, a
written
statement that the CCO Report either is acceptable to Enforcement or raises
specified concerns that are explained in the written statement.
c. No
later than the end of the tenth (10th) month after the Effective Date, Cleco
will contract for an annual audit by Deloitte & Touche, or another
independent auditor to be chosen by Cleco with Enforcement’s
approval. The independent auditor will submit a report (Audit Report)
contemporaneously to Cleco and Enforcement, covering the 12-month period
from
the Effective Date of this Agreement. The Audit Report will be
submitted no later than 45 days after the end of the 12-month period from
the
Effective Date of this Agreement. The Audit Report will:
|
|
(i)
|
state
whether, during the 12-month period from the Effective Date of
this
Agreement, Cleco Power has shared employees with Acadia and Xxxxxxxxxx
consistent with the requirements of the Code of
Conduct;
|
|
|
(ii)
|
identify
all violations of the Code of Conduct’s restrictions on the sharing of
operating employees and non-public market information between Cleco
Power
and Acadia and between Cleco Power and Xxxxxxxxxx (reported or
not
reported), the circumstances of the violations, any remedial actions
taken
or planned in response to them, and the names of any employees
involved in
those violations; and
|
-6-
|
|
(iii)
|
evaluate
the effectiveness of Cleco’s compliance monitoring concerning the sharing
of operating employees and non-public market information between
Cleco
Power and Acadia and between Cleco Power and Xxxxxxxxxx under the
Code of
Conduct.
|
d. Within
30 days from the Effective Date of this Agreement, Cleco Power, Acadia and
Xxxxxxxxxx may file with the Commission proposed amendments to their currently
effective codes of conduct to conform to the pro forma Code of Conduct
outlined in the Notice of Proposed Rulemaking, Market-Based Rates for
Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public
Utilities, Docket No. RM04-7-000, as may be revised by the
Commission. Enforcement and Cleco agree that such revisions to the
codes of conduct of Cleco Power, Acadia and Xxxxxxxxxx, as approved by the
Commission, will eliminate any restrictions on sharing employees and market
information between Acadia and Xxxxxxxxxx.
2. Cleco
Corp. shall maintain a “Hotline” telephone number so infractions, if any, of the
Commission’s rules, can be reported anonymously to the CCO and make this number
readily available to its employees. Cleco may combine this Hotline
with its Ethics Helpline.
3. Within
90 days of the Effective Date, Cleco Corp shall provide training related
to the
Codes of Conduct to all Cleco officers and employees whose duties are related
to
the transmission system, generation facilities, wholesale sales or purchases,
or
support activities such as information technology, accounting, contract
administration, billing, software development or legal services.
4. If,
as a result of information Enforcement receives from a CCO Report or the
Audit
Report, Enforcement concludes that Cleco has not implemented the New Compliance
Plan so as to ensure compliance with its Code of Conduct, Enforcement may,
at
its discretion, require Cleco to comply with the New Compliance Plan for
an
additional 12-month period.
V. TERMS
OF CONSENT AGREEMENT
A. The
Effective Date of this Agreement shall be the date on which the Commission
issues an order approving this Agreement without modification.
B. Cleco
consents to the use of this Agreement in this proceeding and in any other
proceeding before the Commission or to which the Commission is a party for
purposes of assessing the factors set forth in the October 20, 2005 Policy
Statement on Enforcement,1 including
whether Cleco
has a history of violations; provided, however, that Cleco does not consent
to
the use of this Agreement as the sole basis for any other proceeding brought
by
the Commission, nor does Cleco consent to the use of this Agreement by any
other
party in any other proceeding.
______________________
1
Enforcement
of
Statutes, Orders, Rules, and Regulations, 113 FERC ¶ 61,068
(2005).
-7-
C. Unless
the Commission issues an order approving the Agreement in its entirety and
without modification, the Agreement shall be null and void and of no effect
whatsoever, and neither Enforcement nor Cleco shall be bound by any provision
or
term of the Agreement, unless otherwise agreed in writing by Enforcement
and
Cleco.
D. The
Agreement binds Cleco and its agents, successors and assigns. The
Agreement does not create or impose any additional or independent obligations
on
Cleco, or any affiliated entity, its agents, officers, directors or employees,
other than the obligations identified in Sections IV.A. and IV.B. of this
Agreement.
E. In
connection with the payment of the civil penalty provided for herein, Cleco
agrees that the Commission’s order approving the Agreement without modification
shall be a final order assessing a civil penalty under section 316A(b) of
the
FPA, 16 U.S.C. § 825o-1(b), as amended. Cleco further waives
rehearing of any Commission order approving the Agreement without modification,
and judicial review by any court of any Commission order approving the Agreement
without modification.
F. Commission
approval of this Agreement without modification shall release Cleco, its
agents,
officers, directors and employees, both past and present, and any successor
in
interest to Cleco from, and forever bar the Commission from bringing against
Cleco, any and all administrative or civil claims arising out of, related
to or
connected with the facts or alleged violations addressed herein in Docket
No.
IN07-28-000; including the matters investigated in Docket No. IN03-1-000,
representations made by Cleco in the course of the investigation in Docket
No.
IN03-1-000, and/or Cleco's compliance with the 2003 Settlement Agreement,
including without limitation the Compliance Plan and the Code of Conduct
attached thereto. Upon the Effective Date of this Agreement,
Enforcement's investigation of Cleco shall terminate in Docket No.
IN07-28-000.
G. Cleco
and Enforcement agree that the Settlement Agreement and the Compliance Plan
approved in Docket No. IN03-1-000 and voluntarily extended by Cleco, are
hereby
modified and superseded by this Agreement upon the Effective Date of this
Agreement, and that Cleco need not file any further reports under the prior
Compliance Plan.
H. Cleco
and Enforcement agree that currently effective codes of conduct for Cleco
Power,
Acadia and Xxxxxxxxxx filed pursuant to the 2003 Settlement Agreement will
be
replaced by the codes of conduct filed by Cleco Power, Acadia and Xxxxxxxxxx
pursuant to this Agreement subject to the Commission’s final action on those
codes of conduct. Nothing in this Agreement relieves Cleco of the
obligations under the standards of conduct or codes of conduct, as those
requirements are amended or revised.
I. Failure
to make a timely payment or to comply with the New Compliance Plan agreed
to
herein, or any other provision of this Agreement, shall be deemed a violation
of
a final order of the Commission issued pursuant to the FPA, 16 U.S.C. § 792, et
seq., and may subject Cleco to additional action under the enforcement and
penalty provisions of the FPA.
-8-
J. If
Cleco does not make the payment above at or before the time agreed by the
parties, interest payable to the United States Treasury will begin to accrue,
pursuant to the Commission’s regulations at 18 C.F.R. § 35.19(a)(2)(iii), from
the date that payment is due.
K. The
signatories to the Agreement agree that they enter into the Agreement
voluntarily and that, other than the recitations set forth herein, no tender,
offer or promise of any kind by any member, employee, officer, director,
agent
or representative of Enforcement or Cleco has been made to induce the
signatories or any other party to enter into the Agreement.
L. Each
of the undersigned warrants that he or she is an authorized representative
of
the entity designated, is authorized to bind such entity and accepts the
Agreement on the entity’s behalf.
M. The
undersigned representative of Cleco affirms that he or she has read the
Agreement, that all of the matters set forth in the Agreement are true and
correct to the best of his or her knowledge, information and belief, and
that he
or she understands that the Agreement is entered into by Enforcement in express
reliance on those representations.
N. The
Agreement may be signed in counterparts.
O. This
Agreement is executed in duplicate, each of which so executed shall be deemed
to
be an original.
Agreed
to
and accepted:
/s/ Xxxxx
X.
Court May
29,
2007
Xxxxx
X.
Court,
Director Date
Office
of
Enforcement
/s/ Xxxxxxx
X.
Xxxxxxx May
22,
2007
Xxxxxxx
X.
Xxxxxxx
Date
President
and Chief Executive Officer
Cleco
Corporation
-9-
