PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
February 5, 2024
FROM: Catherine Bloom, Partner, and Hannah Brinkley, Associate Calderwood & Harkness LLP 1001 Fannin Street, Suite 4200 Houston, TX 77002
TO: Martin Llewellyn, General Counsel, Dunmore Energy Holdings Ltd. Jennifer Caulfield, Chief Compliance Officer, Dunmore Energy Holdings Ltd. Rhonda Vasquez, Vice President, Regulatory Affairs, Dunmore Energy Holdings Ltd.
RE: Enhanced Compliance Plan — Implementation Roadmap; FERC Docket No. IN23-7-000
C&H Matter Number: 1016-00004 C&H Billing Code: 71420.00001
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I. Purpose and Background
This memorandum provides a detailed implementation roadmap for the Enhanced Compliance Plan (the "Plan") set forth in Appendix A to the Stipulation and Consent Agreement executed January 31, 2024, between the staff of the Federal Energy Regulatory Commission ("FERC" or the "Commission") and Dunmore Energy Holdings Ltd. ("DEH") and Dunmore Power Trading LLC ("DPT") (collectively, "Dunmore" or "Respondents") in Docket No. IN23-7-000 (the "Consent Agreement"). The purpose of this memorandum is to provide Dunmore's leadership with a comprehensive, actionable framework for fulfilling every obligation imposed by the Plan, organized by responsible party, target deadline, and interdependency, so that implementation proceeds in an orderly and timely fashion.
As discussed in our prior communications, the Commission order approving the Consent Agreement is anticipated to issue on or about February 9, 2024 (the "Effective Date"). The issuance of that order will trigger the commencement of the 36-month compliance monitoring period, which will run through February 9, 2027. Because several critical obligations under the Plan are keyed to the Effective Date and carry specific deadlines measured from that date, it is essential that Dunmore be prepared to begin implementation immediately upon the order's issuance.
By way of background, the Consent Agreement resolves the investigation initiated by the FERC Office of Enforcement ("OE") concerning DPT's trading activities in the Midcontinent Independent System Operator, Inc. ("MISO") organized wholesale electricity markets during the period from approximately January 2020 through December 2021 (the "Relevant Period"). The terms of the resolution are as follows:
• A civil penalty of $4.75 million, payable in two equal installments of $2.375 million each (the first installment due within 30 days of the Effective Date; the second installment due within 180 days of the Effective Date);
• No disgorgement of trading profits;
• A 36-month Enhanced Compliance Plan, the terms of which are set forth in Appendix A to the Consent Agreement; and
• A neither-admit-nor-deny resolution, consistent with the Commission's standard settlement framework.
The Plan imposes a series of specific and measurable compliance obligations on Dunmore, including: quarterly reporting to the FERC Office of Enforcement; annual compliance training for all trading personnel meeting minimum hour requirements; quarterly compliance audits conducted by an independent compliance monitor; implementation of automated trade surveillance systems capable of detecting potential market manipulation patterns; and annual compliance certifications signed by Dunmore's Chief Executive Officer and Chief Compliance Officer. These obligations are discussed in detail in Section II below and are then mapped to specific milestones, responsible parties, and deadlines in the implementation timeline that follows.
This memorandum assigns responsible parties within Dunmore for each element of the Plan's implementation and establishes a phased timeline designed to ensure that all obligations are met on schedule and in full compliance with the Consent Agreement's terms. This memorandum should be read in conjunction with the Consent Agreement itself (including Appendix A) and should be treated as privileged attorney-client communication and attorney work product.
II. Key Compliance Plan Obligations — Summary
The following is a summary of the core obligations imposed by Appendix A to the Consent Agreement. Each obligation is discussed in further detail in the implementation timeline set forth in Sections IV and V below.
1. Designation of Chief Compliance Officer Reporting Directly to the Board. The Plan requires that Dunmore designate a Chief Compliance Officer ("CCO") who reports directly to the DEH Board of Directors, independent of the General Counsel and other management reporting chains. Jennifer Caulfield has been confirmed in the CCO role. Ms. Caulfield was hired on February 6, 2023, during the pendency of the investigation, and has been actively involved in the development of the compliance program and the negotiation of the Consent Agreement. Her appointment satisfies the Plan's requirement, but the direct Board reporting line must be formalized through a Board resolution, as discussed in Section III.A below.
2. Annual Compliance Training for All Trading Personnel. The Plan mandates that all DPT trading personnel complete a minimum of 16 hours of compliance training per calendar year. The training must cover topics relevant to FERC anti-manipulation rules, organized wholesale electricity market rules, and the specific compliance issues identified in the investigation. The training curriculum must be developed by the independent compliance monitor in coordination with the CCO, and training records must be maintained and made available for audit and FERC review.
3. Quarterly Compliance Audits by Independent Compliance Monitor. The Plan requires that an independent compliance monitor conduct quarterly on-site compliance audits of DPT's trading operations. Ridgeway Compliance Solutions LLC ("Ridgeway") has been engaged as the independent compliance monitor. Ridgeway is led by Dr. Carolyn Whitford, Founder and Managing Director, and is located at 3000 Richmond Avenue, Suite 800, Houston, TX 77098. Ridgeway was engaged on October 15, 2023, pursuant to a flat-fee engagement of $385,000, covering compliance program design, training curriculum development, and 12 months of monitoring services. The scope and duration of Ridgeway's engagement relative to the 36-month monitoring period is discussed further in Section VII.B below.
4. Implementation of Automated Trade Surveillance Systems. The Plan requires Dunmore to implement automated trade surveillance systems capable of detecting patterns consistent with potential market manipulation in DPT's trading activities. The system must be capable of monitoring trading activity across the MISO and SPP organized wholesale electricity markets in which DPT participates. Specific detection capabilities are discussed in Section IV, Phase 2 (Milestone 2.1) below.
5. Quarterly Reporting to FERC Office of Enforcement. The Plan requires Dunmore to submit quarterly written reports to the FERC Office of Enforcement for the entirety of the 36-month monitoring period. Each quarterly report must summarize compliance plan implementation progress, training activities, audit results, surveillance system alerts and resolutions, and any compliance incidents or concerns. A total of 12 quarterly reports will be required over the monitoring period.
6. Annual Compliance Certification by CEO and CCO. The Plan requires that on each anniversary of the Effective Date (or as close thereto as practicable), Dunmore's Chief Executive Officer, Gavin Harcourt, and its Chief Compliance Officer, Jennifer Caulfield, jointly sign and submit to FERC OE an annual compliance certification. The certification must attest to the effectiveness of the compliance program and confirm that no known violations of FERC anti-manipulation rules occurred during the certification period.
7. Policies and Procedures for Trading Desk Oversight and Transaction Review. The Plan requires Dunmore to adopt, maintain, and enforce written policies and procedures governing: (a) trading desk oversight protocols; (b) Financial Transmission Rights ("FTR") position monitoring; and (c) cross-product transaction review, including review of relationships between Day-Ahead, Real-Time, and virtual trading positions, as well as coordination with gas nomination practices at affiliated entities. These policies must be subject to periodic review by the independent compliance monitor and updated as necessary.
III. Governance and Organizational Structure
A. Chief Compliance Officer Reporting Line
As noted above, the Plan requires that the CCO report directly to the DEH Board of Directors. This reporting structure is designed to ensure the independence of the compliance function and to provide the Board with unfiltered visibility into compliance activities, audit findings, and any potential issues. Jennifer Caulfield currently serves as CCO but her reporting line has, as a practical matter, run through the General Counsel's office. While this arrangement has been effective during the investigation phase, the Consent Agreement mandates a formal, direct reporting relationship between the CCO and the Board.
We recommend that this reporting structure be formalized through a resolution of the DEH Board of Directors. The resolution should explicitly state that the CCO reports directly to the Board (or, if the Board so designates, to a committee of the Board such as the Compliance Committee described below); that the CCO has unrestricted access to the Board and may request a meeting with the Board or any committee thereof at any time; and that the CCO's performance evaluation, compensation, and any termination or replacement is subject to Board approval. This last provision, while not strictly required by the Consent Agreement, is consistent with best practices for ensuring CCO independence and would demonstrate Dunmore's good faith commitment to the compliance program.
Target Completion Date: February 28, 2024.
Responsible Parties: Martin Llewellyn will prepare the draft Board resolution for review by Calderwood & Harkness. Gavin Harcourt will present the resolution to the Board for adoption.
B. Compliance Committee
Although the Consent Agreement does not expressly require the formation of a Compliance Committee, we strongly recommend that Dunmore establish a standing Compliance Committee as a governance best practice and as a mechanism for coordinating the various compliance plan implementation activities across functions. The formation of such a committee will also demonstrate to FERC OE and to the independent compliance monitor that Dunmore has adopted a robust and serious approach to compliance oversight.
We recommend that the Compliance Committee comprise the following members:
• Jennifer Caulfield, CCO (Chair)
• Rhonda Vasquez, VP, Regulatory Affairs
• Derek Sung, SVP, Power Marketing & Trading, DPT
• One independent Board-level designee (to be identified by the Board)
The Committee should meet on a monthly basis to review compliance activities, discuss Ridgeway audit findings and recommendations, review trade surveillance system alerts and their disposition, assess the status of compliance training, and address any emerging compliance issues or concerns. Monthly meetings will also ensure that the Committee is well-positioned to contribute to the preparation of quarterly FERC reports and annual certifications.
We recommend that Jennifer Caulfield prepare a draft Compliance Committee charter for review by Martin Llewellyn and Calderwood & Harkness, and that the charter be submitted to the Board for adoption.
Target Completion Date: March 15, 2024 (charter adoption and inaugural meeting).
Responsible Parties: Jennifer Caulfield will draft the proposed committee charter. Martin Llewellyn will coordinate Board review and approval.
C. Coordination with Ridgeway Compliance Solutions LLC
Ridgeway Compliance Solutions LLC serves as the independent compliance monitor under the terms of the Plan. As noted above, Ridgeway was engaged on October 15, 2023, pursuant to a flat-fee engagement of $385,000, which covers compliance program design, training curriculum development and delivery, and 12 months of monitoring services (including quarterly on-site audits). Dr. Carolyn Whitford, Founder and Managing Director of Ridgeway, leads the engagement and serves as the primary point of contact.
For purposes of day-to-day coordination, Dr. Whitford will interface primarily with Jennifer Caulfield and Rhonda Vasquez. Calderwood & Harkness will remain available to provide legal guidance on compliance plan interpretation and to review Ridgeway's audit reports and other work product before any filing with FERC. It is important that all communications between Ridgeway and FERC OE be coordinated through Jennifer Caulfield and, as appropriate, through Calderwood & Harkness, to ensure consistency and to preserve applicable privileges.
We note that Ridgeway's 12-month monitoring engagement will expire on or about October 15, 2024. Because the FERC compliance monitoring period runs for 36 months through February 9, 2027, Dunmore will need to ensure that independent monitoring continues beyond the initial Ridgeway engagement. We recommend that Dunmore initiate discussions with Ridgeway regarding a potential engagement extension no later than August 2024, and that if Ridgeway is unable or unwilling to continue, Dunmore promptly identify and engage a successor independent monitor. This issue is discussed further in Section VII.B below.
IV. Implementation Timeline — Phased Milestones
The implementation roadmap is organized into four phases, progressing from foundational steps immediately following the Effective Date through the establishment of ongoing compliance operations that will continue for the duration of the 36-month monitoring period. Each milestone is assigned a target completion date, a description of the required deliverables, and identification of the responsible party or parties.
Phase 1: Foundation (February–March 2024)
Milestone 1.1 — FERC Order and Penalty Payment Logistics
The anticipated FERC order approving the Consent Agreement is expected to issue on or about February 9, 2024. Upon issuance of the order, the Effective Date will be established and all deadlines under the Plan will begin to run.
The Consent Agreement provides for the payment of the $4.75 million civil penalty in two equal installments:
• First installment: $2,375,000.00, due within 30 days of the Effective Date. Based on an anticipated Effective Date of February 9, 2024, the first installment would be due by March 10, 2024.
• Second installment: $2,375,000.00, due within 180 days of the Effective Date. Based on an anticipated Effective Date of February 9, 2024, the second installment would be due by August 7, 2024.
Payment is to be made by wire transfer to the United States Treasury, in accordance with the instructions that will be specified in the FERC order. We will provide detailed payment instructions promptly upon receipt of the order.
Responsible Parties: Martin Llewellyn will coordinate with the DEH Treasury function to ensure timely payment execution for both installments. Martin Llewellyn will also coordinate with Douglas Fenn, CPA, Engagement Partner at Prescott & Hargrove LLP (DEH's independent auditor, located at 700 Louisiana Street, Suite 3500, Houston, TX 77002) regarding the proper accrual, reserve treatment, and disclosure of the civil penalty in Dunmore's financial statements. We recommend that Prescott & Hargrove be informed promptly of the final payment amounts and timing, as the penalty may have implications for DEH's financial reporting obligations, including any applicable SEC or lender reporting requirements.
Milestone 1.2 — Board Resolution on CCO Reporting
As discussed in Section III.A above, a Board resolution formalizing Jennifer Caulfield's direct reporting line to the Board of Directors must be adopted as early as practicable following the Effective Date. The resolution should be drafted to satisfy both the specific requirements of the Consent Agreement and corporate governance best practices for compliance officer independence.
Target Completion Date: February 28, 2024.
Responsible Party: Martin Llewellyn will prepare the draft Board resolution. Calderwood & Harkness is available to review the draft upon request. Gavin Harcourt will present the resolution for Board action.
Milestone 1.3 — Updated Compliance Policies and Procedures
The Plan requires Dunmore to adopt and maintain written compliance policies and procedures covering several specified areas. As an initial step, Ridgeway Compliance Solutions will complete an initial gap assessment of DPT's existing compliance policies and procedures, identifying areas where current policies are insufficient, absent, or inconsistent with the requirements of the Plan.
Following the gap assessment, Ridgeway will prepare draft updated policies and procedures covering the following areas:
(a) Trading desk oversight protocols, including supervisory review of trading activity, trader authority limits, and escalation procedures for unusual or potentially non-compliant trading patterns;
(b) FTR position monitoring, including procedures for tracking FTR acquisitions and dispositions, monitoring FTR portfolio risk, and reviewing the economic rationale for FTR positions;
(c) Cross-product transaction review between Day-Ahead, Real-Time, and virtual positions, including procedures for identifying and reviewing transactions that may involve coordinated positions across products or markets;
(d) Gas nomination coordination with Dunmore Midstream Partners LP ("DMP"), including protocols for ensuring that gas nominations and scheduling by DMP are not used to influence or manipulate electricity prices at related pricing nodes in MISO or SPP.
Target for Draft Policies: March 31, 2024.
Responsible Parties: Dr. Carolyn Whitford (Ridgeway) will serve as lead drafter of the updated policies and procedures. Jennifer Caulfield will conduct internal review and coordinate with other Dunmore personnel as needed. Derek Sung will provide trading desk operational input to ensure that the policies are practical and workable. Rhonda Vasquez will provide regulatory coordination, including review of applicable MISO and SPP market rules and tariff provisions. Calderwood & Harkness will review the draft policies for legal sufficiency and consistency with the Consent Agreement requirements before finalization.
Milestone 1.4 — Compliance Committee Charter
As discussed in Section III.B above, the Compliance Committee charter should be drafted, reviewed, and adopted by the Board, and the inaugural meeting of the Committee should be convened promptly thereafter.
Target Completion Date: March 15, 2024 (charter adoption and inaugural Committee meeting).
Responsible Party: Jennifer Caulfield will prepare the draft charter for review by Martin Llewellyn and Calderwood & Harkness.
Phase 2: Systems and Infrastructure (April–June 2024 / Q2 2024)
Milestone 2.1 — Automated Trade Surveillance System Procurement
The Consent Agreement requires Dunmore to implement an automated trade surveillance system capable of monitoring DPT's trading activity in the MISO and SPP organized wholesale electricity markets. This is among the most significant operational requirements of the Plan, and its successful implementation is essential to demonstrating Dunmore's commitment to the compliance program.
The surveillance system must be capable of detecting patterns consistent with potential market manipulation, including, at a minimum:
• Uneconomic bidding patterns, including offers submitted at prices that are inconsistent with the marginal cost of generation or the economic fundamentals of the relevant market;
• Cross-product position coordination, including identification of relationships between a trader's or the firm's positions across Day-Ahead, Real-Time, virtual, and FTR markets that may suggest a coordinated manipulation strategy;
• Congestion-related anomalies at key pricing nodes, including but not limited to Indiana Hub and Minnesota Hub, which were among the nodes at issue during the Relevant Period;
• Unusual trading volumes or position sizes relative to historical norms;
• Patterns of trading activity that are temporally correlated with gas nominations or scheduling activity by Dunmore Midstream Partners LP.
The procurement process should proceed on the following timeline:
• RFP Issuance: By March 15, 2024. The request for proposals should be distributed to at least three qualified vendors with demonstrated experience in energy market trade surveillance.
• Vendor Selection: By April 30, 2024. Selection should be based on system capabilities, integration with DPT's existing trading infrastructure, vendor track record, and cost.
• System Deployment and Testing: By June 30, 2024 (end of Q2 2024). The system should be fully deployed and operational, with a post-deployment testing and calibration period in July 2024.
Responsible Parties: Jennifer Caulfield will lead the procurement process. Derek Sung will provide trading desk requirements and input regarding the operational characteristics of DPT's trading activity. The Dunmore IT department will be responsible for infrastructure requirements, system integration, and technical deployment. Ridgeway will serve in an advisory capacity regarding system specification and capability requirements. Calderwood & Harkness is available to review any vendor agreements.
Note: During the Relevant Period, DPT's MISO trading desk employed approximately 14 traders. The surveillance system must be designed to accommodate this scale of activity, as well as any anticipated growth in trading desk headcount or expansion into additional markets during the monitoring period.
Milestone 2.2 — First Quarterly Compliance Audit by Ridgeway
The first quarterly compliance audit by Ridgeway is targeted for May 2024, covering the period from the Effective Date through approximately April 30, 2024. This initial audit will necessarily focus on the foundational implementation steps completed during Phase 1, as the trade surveillance system and certain other operational elements will still be in the deployment phase.
Ridgeway will conduct the audit on-site at DPT's trading operations, located at 2200 Post Oak Boulevard, Suite 3100, Houston, TX 77056. The audit scope for this initial review will include:
• Review of updated compliance policies and procedures (as drafted or finalized);
• Assessment of trading desk practices and supervisory procedures;
• Preliminary assessment of trade surveillance system readiness (procurement status, vendor selection, deployment timeline);
• Review of trader communications, including instant messages, emails, and recorded telephone lines, for a sample period;
• Assessment of the CCO reporting structure and Compliance Committee governance;
• Review of any compliance incidents or concerns identified since the Effective Date.
Ridgeway will prepare a written audit report following each quarterly audit. Before any audit report is submitted to FERC OE or otherwise shared outside of Dunmore, the report must be provided to Calderwood & Harkness for review. This review is intended to ensure legal accuracy, consistency with the Consent Agreement, and preservation of applicable privileges. We will work with Ridgeway and Jennifer Caulfield to establish a review protocol that allows sufficient time for legal review without delaying the reporting cycle.
Responsible Parties: Dr. Carolyn Whitford (Ridgeway) will conduct the audit and prepare the written report. Jennifer Caulfield will coordinate scheduling, access, and document production for the audit.
Milestone 2.3 — First Quarterly Report to FERC OE
The first quarterly report to the FERC Office of Enforcement is due approximately 90 days from the Effective Date. Based on an anticipated Effective Date of February 9, 2024, the first quarterly report would be due on or about May 10, 2024. The exact due date will be confirmed based on the language of the FERC order; we will notify you promptly upon receipt of the order if the reporting schedule differs from our current assumption.
The quarterly report is to be submitted to the following individuals at FERC OE:
Margaret Hollowell, Director Division of Investigations FERC Office of Enforcement 888 First Street NE Washington, D.C. 20426
Thomas Adebayo, Lead Investigator FERC Office of Enforcement 888 First Street NE Washington, D.C. 20426
The first quarterly report should include, at a minimum, the following content:
• A summary of compliance plan implementation progress to date, including the status of each Phase 1 milestone;
• A description of the compliance policies and procedures adopted or under development;
• The status of the automated trade surveillance system procurement and deployment;
• A summary of the first Ridgeway quarterly audit, if completed prior to the report submission date, or a description of the planned audit scope and timing;
• Identification of any compliance incidents, concerns, or issues that have arisen since the Effective Date;
• A description of any corrective actions taken or planned.
Responsible Parties: Jennifer Caulfield and Rhonda Vasquez will jointly prepare the quarterly report. Calderwood & Harkness will conduct a legal review of each quarterly report before submission to FERC OE. We anticipate requiring at least five business days for legal review; accordingly, we recommend that drafts be provided to Calderwood & Harkness no later than 10 business days before the submission deadline.
Subsequent quarterly reports will be due every 90 days for the duration of the 36-month monitoring period, for a total of 12 quarterly reports. The reporting schedule is set forth in the Master Schedule in Section V below.
Phase 3: Training and Operationalization (Q2–Q3 2024)
Milestone 3.1 — Annual Compliance Training — Year 1
The Plan requires that all DPT trading personnel complete a minimum of 16 hours of compliance training per calendar year. For purposes of the first year of the monitoring period (Year 1), the training obligation runs from the Effective Date through the first anniversary of the Effective Date (approximately February 9, 2025), although we recommend that Dunmore aim to complete all 16 hours of training for each trader by December 31, 2024, to ensure compliance with the calendar-year framework and to allow sufficient time for make-up sessions if scheduling conflicts arise.
The training curriculum will be developed by Ridgeway Compliance Solutions in coordination with Jennifer Caulfield. The curriculum should cover, at a minimum, the following topics:
• FERC anti-manipulation rules, including Section 222 of the Federal Power Act, 16 U.S.C. § 824v, and the Commission's implementing regulations at 18 C.F.R. § 1c.2;
• MISO and SPP market rules applicable to DPT's trading activities;
• Proper bidding practices, including the economic rationale requirement for offers and bids;
• FTR trading compliance, including position monitoring and documentation requirements;
• Cross-product position management and the risks associated with coordinated positions across Day-Ahead, Real-Time, and virtual markets;
• Internal reporting obligations, including the duty to report potential compliance issues to the CCO;
• Case studies drawn from the Consent Agreement and the underlying investigation, as well as other relevant FERC enforcement actions, to illustrate the types of conduct that may give rise to manipulation concerns.
Target for Year 1 Training Completion: The first training session should be conducted by June 2024. All 16 hours of training for all trading personnel should be completed by December 31, 2024.
Training records — including attendance logs, training materials, completion certifications, and any assessments — must be maintained by Jennifer Caulfield and made available for Ridgeway audit review and FERC inspection.
Responsible Parties: Dr. Carolyn Whitford (Ridgeway) will design and deliver the training curriculum. Jennifer Caulfield will manage scheduling and attendance tracking. Derek Sung will ensure that all DPT trading desk personnel participate in the required training sessions, including arranging coverage as necessary to permit traders to attend without disruption to trading operations.
Note: The training obligation applies to all DPT trading desk personnel involved in MISO and SPP markets. A current roster of covered personnel should be compiled by Jennifer Caulfield and Derek Sung and maintained as a living document, updated as personnel are hired, transferred, or separated.
Milestone 3.2 — Trade Surveillance System Go-Live
Based on the procurement timeline set forth in Milestone 2.1 above, the target go-live date for the automated trade surveillance system is June 30, 2024. A post-deployment testing period of approximately one month (July 2024) should follow go-live to calibrate alert thresholds, validate system performance against known trading patterns, and train compliance staff on system operation and alert management.
Upon go-live, the system should be configured to generate automated alerts for review by Jennifer Caulfield and designated compliance staff. Alerts should be triaged, investigated, and documented in accordance with written procedures to be developed as part of the trading desk procedure update (Milestone 3.3 below). Alert thresholds and detection parameters should be calibrated in consultation with Ridgeway and should be reviewed and adjusted periodically based on operational experience and evolving market conditions.
Responsible Parties: Jennifer Caulfield (compliance system oversight); Dunmore IT (technical deployment and maintenance); Ridgeway (advisory on parameter calibration and alert management).
Milestone 3.3 — Updated Trading Desk Procedures
Updated trading desk procedures incorporating the new compliance requirements under the Plan should be finalized and distributed to all DPT trading personnel by the end of Q3 2024. These procedures represent the operational implementation of the compliance policies drafted in Phase 1 (Milestone 1.3) and should provide practical, day-to-day guidance for traders and their supervisors.
The updated trading desk procedures should cover, at a minimum:
• Pre-trade approval thresholds: Specification of transaction sizes, position concentrations, or market conditions that require supervisory pre-approval before execution;
• Real-time position monitoring: Procedures for ongoing monitoring of open positions across Day-Ahead, Real-Time, virtual, and FTR markets, including intraday position reports and escalation triggers;
• Escalation protocols: Clear procedures for escalating potential compliance issues from the trading desk to the CCO, including timelines for escalation and documentation requirements;
• Documentation requirements for bidding rationale: Requirements that traders document the economic rationale for certain categories of bids and offers, particularly offers below marginal cost, negative-price offers, and bids or offers in congested areas of the grid. This requirement is directly responsive to the types of conduct at issue in the underlying investigation;
• FTR acquisition and disposition documentation: Procedures for documenting the business rationale for FTR acquisitions and dispositions, including any relationship to physical generation or load positions;
• Coordination protocols with Dunmore Midstream Partners LP: Procedures governing communications and coordination between DPT traders and personnel at Dunmore Midstream Partners LP regarding gas nominations, gas scheduling, and gas transportation. These protocols should establish appropriate information barriers and documentation requirements to mitigate the risk of cross-product manipulation.
Target Completion Date: July 31, 2024.
Responsible Parties: Derek Sung will lead the development of the trading desk operational procedures, drawing on the compliance policies developed in Phase 1. Jennifer Caulfield will provide compliance overlay and review. Ridgeway will review and validate the procedures for consistency with the Plan's requirements and compliance best practices.
Phase 4: Ongoing Compliance Operations (Q3 2024 – February 2027)
Milestone 4.1 — Quarterly Compliance Audit Cycle
Following the first quarterly audit in May 2024 (Milestone 2.2), Ridgeway will conduct quarterly on-site compliance audits throughout the duration of its 12-month engagement, which runs through approximately October 2024. The anticipated audit schedule is as follows:
Each audit will produce a written report covering the monitor's findings, recommendations, and assessment of Dunmore's compliance with the Plan. As noted above, all audit reports must be reviewed by Calderwood & Harkness for privilege, legal accuracy, and consistency with the Consent Agreement before being submitted to or shared with FERC OE.
Important Note: The Q4 Audit (February 2025) falls outside the current 12-month Ridgeway engagement period. Dunmore must either extend the Ridgeway engagement or engage a successor independent monitor before the Q3 Audit (November 2024) to ensure continuity of the quarterly audit cycle. This issue is discussed further in Section VII.B below.
For the period from approximately November 2024 through the end of the monitoring period in February 2027, an additional eight quarterly audits will be required (for a total of 12 audits over the 36-month period), and Dunmore must ensure that an independent compliance monitor is engaged and available to conduct each audit on schedule.
Responsible Parties: Dr. Carolyn Whitford (Ridgeway) will conduct the audits during the initial engagement period. Jennifer Caulfield will coordinate audit logistics and ensure that DPT personnel and records are available.
Milestone 4.2 — Quarterly FERC Reporting Cycle
Quarterly reports to FERC OE are due every 90 days from the Effective Date for the full 36-month monitoring period, for a total of 12 quarterly reports. Based on an anticipated Effective Date of February 9, 2024, the approximate reporting schedule is as follows:
Each quarterly report should cover the following topics:
• Compliance activities undertaken during the reporting period;
• Training sessions completed and attendance records;
• Summary of the most recent Ridgeway (or successor monitor) audit results, including any findings or recommendations and the status of corrective actions;
• Trade surveillance system alerts generated during the period, including a summary of the nature of each alert, the investigation and resolution of each alert, and any actions taken;
• Any compliance incidents, violations, or concerns identified during the period;
• Status of any corrective actions or remedial measures previously identified.
Responsible Parties: Jennifer Caulfield and Rhonda Vasquez will jointly prepare each quarterly report. Calderwood & Harkness will conduct a legal review of each report before submission. As noted above, we recommend that draft reports be provided to Calderwood & Harkness at least 10 business days before the submission deadline to allow adequate time for review and any necessary revisions.
Milestone 4.3 — Annual CEO/CCO Certification
The Plan requires that an annual compliance certification be jointly signed by CEO Gavin Harcourt and CCO Jennifer Caulfield and submitted to FERC OE on each anniversary of the Effective Date. The certification must attest to the effectiveness of the compliance program during the certification period and confirm that neither the CEO nor the CCO is aware of any violations of the FERC anti-manipulation rules by Dunmore during the certification period. The certification schedule is as follows:
The certification is a significant undertaking because it requires the CEO and CCO to personally attest to the effectiveness of the compliance program. To support the certification, Jennifer Caulfield should prepare a comprehensive memorandum summarizing the year's compliance activities, audit results, training completion, surveillance system performance, and any incidents, which will serve as the factual basis for the certification. This memorandum should be reviewed by Martin Llewellyn and Calderwood & Harkness before the certification is signed.
Responsible Parties: Jennifer Caulfield will draft each annual certification and the supporting memorandum. Martin Llewellyn will conduct legal review. Gavin Harcourt will review and sign the certification as CEO. Calderwood & Harkness will review the certification and supporting materials for legal sufficiency.
V. Master Schedule — Summary Table
The following table summarizes all key milestones, target dates, responsible parties, and dependencies for the implementation of the Enhanced Compliance Plan:
VI. Responsible Party Assignments — Summary
The following is a summary of the principal responsibilities assigned to each individual and entity under this implementation roadmap:
Jennifer Caulfield, Chief Compliance Officer, DEH/DPT: Overall compliance plan implementation lead. Ms. Caulfield bears primary responsibility for the day-to-day management and execution of the Plan's requirements. Her specific responsibilities include: coordinating compliance training scheduling and attendance tracking; overseeing the procurement, deployment, and operation of the automated trade surveillance system; preparing (jointly with Rhonda Vasquez) all quarterly reports to FERC OE; serving as the primary internal point of contact for Ridgeway Compliance Solutions and coordinating all audit activities; chairing the Compliance Committee; maintaining all training records, surveillance alerts, and compliance documentation; and serving as co-signatory (with CEO Gavin Harcourt) on the annual compliance certifications.
Martin Llewellyn, General Counsel, DEH: Mr. Llewellyn is responsible for preparing the Board resolution formalizing the CCO's direct reporting line to the Board; conducting legal review of annual certifications and other significant compliance documents; coordinating with Prescott & Hargrove LLP (DEH's independent auditor) regarding the financial statement treatment and disclosure of the civil penalty and related compliance costs; and serving as the primary point of engagement with Calderwood & Harkness on legal matters arising from the compliance plan implementation. Mr. Llewellyn is also responsible for overseeing document retention practices related to the compliance plan and the underlying investigation.
Rhonda Vasquez, Vice President, Regulatory Affairs, DEH: Ms. Vasquez is responsible for coordinating FERC reporting logistics, including determining the precise reporting schedule, managing the submission process, and interfacing with FERC OE staff on procedural and logistical matters related to quarterly reporting. Ms. Vasquez will jointly prepare quarterly FERC reports with Jennifer Caulfield and will serve as a member of the Compliance Committee.
Derek Sung, Senior Vice President, Power Marketing & Trading, DPT: Mr. Sung is responsible for leading the development and implementation of updated trading desk procedures; ensuring the participation of all DPT trading personnel in required compliance training; providing trading desk operational requirements and input for the automated trade surveillance system procurement; and serving as a member of the Compliance Committee. Mr. Sung's cooperation is essential to ensuring that compliance requirements are integrated into the daily operations of the trading desk in a practical and effective manner.
Gavin Harcourt, Chairman & Chief Executive Officer, DEH: Mr. Harcourt is responsible for presenting the Board resolution on CCO reporting for Board action and for serving as co-signatory (with CCO Jennifer Caulfield) on the annual compliance certifications submitted to FERC OE.
Dr. Carolyn Whitford / Ridgeway Compliance Solutions LLC: Ridgeway is responsible for the following during the term of its engagement: compliance program design and gap assessment; drafting updated compliance policies and procedures; developing and delivering the compliance training curriculum; conducting quarterly on-site compliance audits of DPT's trading operations; preparing written audit reports; and providing advisory support for the automated trade surveillance system specification and calibration.
Calderwood & Harkness LLP (Catherine Bloom, Partner; Hannah Brinkley, Associate): Calderwood & Harkness will provide legal review of all quarterly FERC reports, annual CEO/CCO certifications, Ridgeway audit reports, and updated compliance policies and procedures before submission to or filing with FERC. Calderwood & Harkness will also provide advisory services on the interpretation of the Consent Agreement's obligations and the Plan's requirements, and will be available for consultation throughout the 36-month monitoring period on any legal issues arising from compliance plan implementation.
VII. Risk Areas and Recommendations
A. Trade Surveillance System Implementation
The Consent Agreement requires the "implementation" of automated trade surveillance systems as a condition of the Enhanced Compliance Plan. We recommend treating the June 30, 2024 target date for system deployment as a hard deadline. Failure to have a functioning surveillance system in place by the time of the second quarterly FERC report (approximately August 2024) could expose Dunmore to criticism from FERC OE and could be cited in any future enforcement action as evidence of non-compliance with the Plan.
If procurement or deployment delays arise — whether due to vendor availability, system integration challenges, or other factors — we recommend that Dunmore document all good-faith efforts to meet the timeline and include a candid description of the status, the reasons for any delays, and the anticipated revised timeline in the applicable quarterly FERC report. Proactive disclosure of delays, coupled with evidence of diligent efforts, is far preferable to having FERC OE discover the delay independently.
The surveillance system must be capable of monitoring DPT's trading activity across both MISO and SPP organized wholesale electricity markets. We recommend that the system be designed with sufficient flexibility to accommodate potential expansion into additional markets or trading products during the monitoring period.
B. Ridgeway Engagement Duration
As noted in Section III.C above, Ridgeway's current flat-fee engagement of $385,000 covers compliance program design, training curriculum development and delivery, and 12 months of monitoring services. Based on the October 15, 2023 engagement date, this 12-month period will expire on or about October 15, 2024.
The FERC compliance monitoring period, by contrast, runs for 36 months through February 9, 2027. This means that approximately 24 months of the monitoring period will fall outside the current Ridgeway engagement. During that period, Dunmore will continue to be obligated to conduct quarterly compliance audits by an independent monitor, and the absence of such audits would constitute a material breach of the Plan.
We recommend the following course of action:
• By August 2024, Jennifer Caulfield and Martin Llewellyn should initiate discussions with Ridgeway regarding the potential extension of the engagement to cover the full 36-month monitoring period;
• If Ridgeway is willing to continue, the parties should negotiate terms for the extended engagement, including scope, fees, and deliverables, and should execute an amended or supplemental engagement letter;
• If Ridgeway is unable or unwilling to continue, Dunmore should promptly identify and engage a qualified successor independent compliance monitor. Any successor monitor should be retained no later than October 2024 to ensure a seamless transition and continuity of the quarterly audit cycle;
• Any change in the identity of the independent compliance monitor should be disclosed in the next quarterly FERC report and should be discussed with Calderwood & Harkness to assess whether FERC OE notification or approval is required under the terms of the Consent Agreement.
C. Investor Communications
Dunmore's principal equity investors — Pendleton Capital Partners, LP (holding approximately 27% of DEH equity, Managing Partner Richard Ostrander) and Greenvale Infrastructure Fund III (holding approximately 19% of DEH equity, Managing Director Susan Tanaka) — should be kept apprised of the status of compliance plan implementation.
While the Consent Agreement does not impose specific investor notification obligations, transparency with major equity holders regarding the progress of the compliance program is advisable from a governance and investor relations perspective. We recommend that periodic updates be provided through existing Board reporting channels, with the content and timing coordinated by Gavin Harcourt with guidance from Martin Llewellyn. Any written communications to investors regarding the Consent Agreement or the compliance plan should be reviewed by Calderwood & Harkness before distribution to ensure consistency with the neither-admit-nor-deny posture and to avoid inadvertent admissions or characterizations that could be used adversely.
D. Document Retention
All documents relating to the implementation of the Enhanced Compliance Plan — including compliance policies and procedures, training materials and records, Ridgeway audit reports, trade surveillance system alerts and investigation files, quarterly FERC reports, annual CEO/CCO certifications, Compliance Committee meeting minutes, correspondence with FERC OE, and all internal memoranda and communications relating to compliance plan implementation — must be preserved for the duration of the monitoring period and for at least three years beyond the end of the monitoring period. Based on a monitoring period ending February 9, 2027, this retention obligation would extend through at least February 2030.
This document retention requirement supplements, and does not replace, the existing litigation hold that has been in place since the commencement of the underlying FERC investigation. The litigation hold should remain in effect until Calderwood & Harkness advises that it may be lifted.
Responsible Parties: Martin Llewellyn bears primary responsibility for overseeing document retention practices. Jennifer Caulfield is responsible for ensuring the preservation of all compliance-related records within the compliance function.
E. Ongoing Cooperation Obligation
The Consent Agreement includes a continuing cooperation commitment pursuant to which Dunmore has agreed to cooperate fully with FERC Staff in connection with any further inquiries, investigations, or proceedings related to the matters addressed in the Consent Agreement. This obligation extends for the duration of the monitoring period and potentially beyond.
Dunmore must remain responsive to any further FERC inquiries related to the investigation or to the compliance plan implementation. All substantive communications with FERC OE outside of routine quarterly reporting — including any inquiries, information requests, or meeting requests from FERC Staff — should be reported promptly to Calderwood & Harkness. We strongly recommend that Dunmore consult with Calderwood & Harkness before responding to any such communications to ensure that responses are appropriate, consistent, and do not inadvertently waive applicable privileges or create issues under the cooperation obligation.