• FERC Provides Warning: Persons Who Fail to Seek Prior Authorization to Hold Interlocking Directorates May Be Found in Violation of the Federal Power Act.
  • January 14, 2005
  • Law Firm: Leonard, Street and Deinard, Professional Association - Minneapolis Office
  • On December 22, 2004, the Federal Energy Regulatory Commission issued an order in Docket No. ID-3998-000 denying Douglas R. Oberhelman's application for authorization to hold interlocking directorate positions at Caterpillar, Inc. and Union Electric Company, Central Illinois Public Service Company, Central Illinois Light Company, and Ameren Energy Generating Company ("Ameren Companies"). In his application, Mr. Oberhelman disclosed that Caterpillar supplied the Ameren Companies with various electrical equipment. In its Order, the Commission noted that Section 305(b) of the Federal Power Act "prohibits persons from concurrently holding positions as officer or director of both a public utility and a company supplying electrical equipment to that public utility, unless the Commission authorizes the interlock upon a finding that neither public nor private interests will be adversely affected." In the case of Mr. Oberhelman, the Commission determined that he failed to meet his burden to justify the "interlock and demonstrate that the interlock will not adversely affect public or private interests."

    In a separate concurring opinion, Commissioner Kelliher went further in stating that because Mr. Oberhelman served as Caterpillar's Group President at the same time he served on the boards of several Ameren Companies without prior Commission approval, he was in violation of the Federal Power Act. Commissioner Kelliher concluded that because the Federal Power Act required prior Commission authorization before Mr. Oberhelman could hold interlocking directorates, it was unnecessary for the Commission to address the merits of his application. Commissioner Kelliher concluded "I believe that this Commission has a duty under the statute to find late filers in violation of section 305(b)."

    While not part of the majority's opinion, Commissioner Kelliher's concurrence signals a change with respect to the Commission's oversight of the Federal Power Act's interlocking directorate requirements. Under the Commission's regulations, applications for authorization to hold interlocking directorates must be filed within 30 days of the election or appointment to interlocking directorate, i.e., 30-day grace period. (See 18 CFR ยง 45.3(b)) As Commissioner Kelliher noted in his opinion, however, "[i]t does not matter that the Commission may have, on occasion, been inconsistent in its application of section 305(b) to late filers, or that the Commission's own regulations contain contrary language to the statute, because the plain language of the statute governs." With this admonition, at least one member of the Commission appears ready to deny those applications for authorization to hold interlocking directorates that are not filed prior to an individual assuming the directorates, irrespective of the 30-day grace period set forth in the Commission regulations. In this respect, individuals may be well served to heed Commissioner Kelliher's warning and rely on the 30-day grace period at their own peril.