- JPMorgan Settles FERC Manipulation Allegations for $410 Million
- July 31, 2013 | Authors: Jeffrey M. Jakubiak; Daniel L. Larcamp
- Law Firm: Troutman Sanders LLP - Washington Office
Earlier today, FERC approved a settlement with JPMorgan Ventures Energy Corporation over allegations of manipulating electricity markets between September 2010 and November 2012 for $125 million in disgorgements and $285 million in civil penalties. This settlement comes on the heels of FERC’s July 16, 2013 order directing Barclays Bank and four of its traders to pay over $487 million for manipulation of electric energy markets in and around California from 2006 to 2008.
FERC alleged that JPMorgan engaged in a variety of manipulative trading schemes in California ISO and Midwest ISO markets including uneconomic negative day-ahead bids, various schemes to receive high ramping payments, and submission of false unit information. Among other things, FERC accused JPMorgan of submitting self-schedules and/or bids that sometimes varied widely from hour-to-hour. This practice increased the ISOs’ ramping needs and, thus, acceptance of JPMorgan’s bids of up to $999/MWh for ramping service. FERC also accused JPMorgan of falsifying the minimum run time of a 545 MW Jackson, Michigan generating facility.
Unlike other recent cases that garnered national attention, such as those involving Barclays, Constellation, and Energy Transfer Partners, the allegations against JPMorgan did not involve the interplay between physical and financial commodity markets. Rather, FERC accused JPMorgan of “straight up” manipulation through exploitation of the ISOs’ market rules - the first time FERC has prosecuted such a case of this scale in many years. In addition, this case is the first in recent memory in which FERC has prosecuted an entity in large part for its actions in ISO/RTO regulation markets.
Last week, JPMorgan announced that it was exiting the business of physical commodities trading, including energy. It has been speculated that the decision was driven in part by recent investigations by federal regulators, including FERC, of various JPMorgan business units.