2017 Energy Regulatory Compliance Survey report


2017 energy regulatory compliance survey report

Industry insights on FERC compliance, NERC compliance, and more

Now in its eighth year, our energy regulatory compliance survey report highlights the latest compliance trends, leading practices, and insights from executives in your industry. Our goal? To help you focus on the regulatory areas that pose the greatest risk.

About the survey and key findings

Over the past decade, the energy industry has faced extensive regulatory changes and heightened expectations from regulators, prompting many companies to rethink how they approach compliance management and oversight. The pace of change is unprecedented, and the environment is often muddled by political uncertainty and lack of regulatory clarity. This can make it difficult for companies to keep up, forcing many compliance leaders to creatively allocate their scarce resources.

Now, at a time of heightened regulatory uncertainty, there’s increased potential for changes in direction and disruption of ongoing trends. In this dynamic environment, it’s important for companies to concentrate on the regulatory areas that they believe represent the highest risk to their organization, doing their best to create a resilient business while focusing on things that are within their control. That way, companies can focus on applying the strategies that can help them lead in their industry, navigate risks and opportunities, and disrupt the status quo.

This report groups the survey highlights on energy regulatory compliance into five categories:

Enterprise compliance

Energy companies are increasingly deploying hybrid governance models in their enterprise compliance programs—perhaps an indication of their desire to reduce inefficiencies and improve compliance services through a fit-for-purpose governance structure.

Finding: 47 percent of organizations surveyed have a single chief compliance officer for multiple areas of regulatory compliance.

The survey findings also highlighted a common area of interest when designing such a program: benchmarking what the scope of compliance responsibilities should be. And many survey respondents noted that they’re becoming increasingly interested in understanding how the compliance function is perceived by the organization, as well as measuring the compliance culture of an organization and its effectiveness. The chart below shows how organizations are measuring their culture of compliance and integrity.

How do your responses compare to our survey results? We’d be happy to talk to you about how you stack up against overall respondents or a specific sub-group. Contact us to discuss.

How organizations measure their culture of compliance and integrity:


NERC compliance continues to absorb the largest portion of compliance resources and spending compared to the other compliance areas surveyed.

Finding: 73 percent of organizations surveyed have a separate NERC compliance budget of over $1M.

The percentage of companies with separate NERC compliance budgets of 10 million dollars or more increased from 3 percent in 2015 to 11 percent in 2016. These increases are largely being driven by the effort required to comply with the complex requirements of Version 5 and Version 6 of the Critical Infrastructure Protection (CIP) standards.

Approximate budget size for NERC compliance activities:


The vast majority of FERC compliance budgets (88 percent) were flat over the past 12 months. This suggests that FERC compliance oversight may be less of a priority than in previous years, or that companies are able to comply with a more efficient use of budget and resources.

Consistent with the 2015 survey results, the two areas of FERC regulation that companies rate as the most challenging are market manipulation rules (46 percent) and NERC reliability standards (46 percent). Despite the increasing challenges of market manipulation compliance—or perhaps because of them—the recording and monitoring of trader communications is down across all the standard channels.

Finding: The top three methods of trader communication monitored by compliance organizations are phones, IMs, and emails.

Types of trader communications that are being recorded/monitored:


Over the past several years, spending and resourcing for CFTC compliance have remained flat. This is most likely due to the fact that CFTC regulations have been relatively static. But survey results showed that many energy companies are still struggling to fully understand how CFTC requirements apply to their businesses.

Finding: 54 percent of energy company compliance executives don’t agree with the statement that CFTC regulations are clear and understandable.

Survey results also indicated a downward shift in the number of companies with dedicated teams for Dodd-Frank monitoring/surveillance—down to 50 percent from 69 percent in 2015. In addition, the size of those teams also trended downward, with 74 percent of companies now utilizing one to two FTEs in this capacity.

Organizations that have a separate and active monitoring and surveillance group in place for Dodd-Frank compliance:

Environmental, RTO/ISO, and PUC compliance

Environmental, RTO/ISO, and PUC compliance are emerging as areas receiving an increasingly larger amount of attention from compliance departments.

Finding: The top challenge energy companies face is understanding new requirements and how they apply to their specific businesses

Other challenges include the speed of emerging requirements and a lack of clarity for new requirements—both of which steepen the learning curve.

Roughly a third of responding companies agree or strongly agree that environmental and PUC regulations are clear and understandable, while just over half are neutral on the subject. However, the results are significantly less positive for RTO and ISO regulations.

Environmental, RTO/ISO, and PUC regulations are clear and understandable:

Moving forward

The energy industry’s regulatory environment continues to move forward and mature, even in the face of significant uncertainty. To tackle the challenges, companies need to adopt a committed yet flexible approach to energy regulatory compliance—keeping a close eye on emerging developments while continuing to improve their existing compliance programs and compliance levels. This means actively monitoring and engaging in the development of new regulations, focusing on requirements that are relatively stable, taking action in areas that are within their control, and maintaining the flexibility to adapt to unforeseen changes.

Look back: 2016 energy regulatory compliance survey report

The in-depth survey was conducted in late 2015 and early 2016. A total of 49 companies participated, 34 of which also participated in 2014. The survey included major oil companies, integrated utility companies, independent power producers, and independent system operators. Respondents included chief compliance officers, senior compliance directors/managers, and associate/general counsels.

The list below highlights some of the key findings from the 2016 report:

Enterprise compliance
  • Shifting toward centralized governance models
  • Staying informed through compliance champions
  • Linking performance metrics to compensation
  • Gauging how the compliance organization is perceived
  • Using the results of compliance assessments
  • NERC spend is on the rise for many
  • CIP V5 is introducing complex challenges
  • Most companies feeling comfortable with their preparation efforts for CIP V5
  • Identifying a sustainment budget for CIP V5 remains a challenge
  • CFTC budget and staffing is flat
  • Companies are expanding their capabilities for trade monitoring and surveillance
  • CFTC inquiries and information requests are down
  • Most companies do not reconcile trades reported to swap data repositories
  • Taking a cautious approach to preparing for position limit rules
  • FERC budgets and staffing remain flat
  • Companies continue to struggle with market manipulation rules
  • Use of automated tools to monitor trader communications
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