After almost eight years since the Federal Energy Regulatory Commission (FERC) commenced its investigation against Barclays Bank PLC (Barclays) and four of its traders, Scott Connelly, Daniel Brin, Karen Levine and Ryan Smith, for allegedly manipulating the California electricity markets, Barclays filed its answer in federal district court. As expected, Barclays denied all of FERC’s substantive allegations and asserted that the District Court should give no merit to FERC’s findings of fact or legal conclusions. FERC, according to Barclays and the individual traders, must prove its case before an independent arbiter and cannot rely on anything that happened at the agency level. FERC is seeking a $435 million civil penalty against Barclays; $15 million against Connelly; and $1 million each from Brin and Levine. (more…)
WE KNOW ENERGY®
Robert E. Pease, David Perlman and Michael Brooks
Mark Lewis and Robert E. Pease
On June 17, 2015, the Federal Energy Regulatory Commission’s (FERC) Division of Audits and Accounting, Office of Enforcement (DAA), issued two audit reports involving oil pipelines, the Colonial Pipeline Company Docket No. FA14-4 and Enterprise Products Partners, L.P., Docket No. FA14-1. The Enterprise audit focused on Mid-American Pipeline Company, LLC (MAPL), a subsidiary of Enterprise. These reports are significant because they demonstrate that FERC audit staff is taking a comprehensive look at oil pipeline accounting and rate issues along with enhanced scrutiny of affiliate issues. DAA found five minor areas of noncompliance in the Colonial audit and ten findings of noncompliance with respect to Enterprise. The Enterprise findings were more significant because they involved under recovery of revenues as a result of dealings with an affiliate and failure to follow proper accounting for depreciation and prepaid leases, among other findings. In addition to Colonial and Enterprise, FERC has also announced two other oil pipeline company audits involving Enbridge Energy Partners LP, Docket No. FA15-4, and Plantation Pipe Line Company, Docket FA15-12. Prior to these audits, FERC had not audited an oil pipeline in many years. (more…)
David Perlman, Stephen Hug and Caitlin Tweed
On June 9, 2015, FERC issued an order accepting PJM’s proposal to modify its forward capacity market, the Reliability Pricing Model (“RPM”), to establish a new capacity product, the Capacity Performance Resource. PJM’s proposal is designed to tighten the performance standards applicable to resources that receive a capacity obligation through the RPM and is intended to address poor resource performance that has been experienced since implementation of the RPM, especially during the 2014 polar vortex.
Once implemented, PJM’s proposal will impose more stringent performance standards on resources that receive a capacity obligation through the RPM, including imposing non-performance charges when resources fail to perform and bonus payments for over-performance. All capacity resources will be eligible to offer as Capacity Performance Resources, and demand resources, energy efficiency resources, capacity storage resources, and intermittent resources will be allowed to aggregate their capabilities in order to reliably perform during emergency conditions. A Non-Performance Charge will be assessed on resources who fail to perform during system emergencies. (more…)
FERC Finds Manipulation Violations by Company and Trader that Complied with Tariff but did not Act to Further Market Design GoalsFriday, May 29, 2015 2:50 pm by Robert E. Pease and David Perlman
On May 29, 2015, the Federal Energy Regulatory Commission (FERC) issued an Order Assessing Civil Penalties against Powhatan Energy Fund and its affiliates as well as against Houlian Chen, Powhatan’s chief trader, for violating FERC’s anti-manipulation rule. FERC ordered Powhatan to pay $28.8 million in penalties and over $4.7 million in disgorgement and it ordered Chen to pay an additional $1 million penalty. In this assessment order, FERC rejected all of Powhatan’s arguments and instead adopted the Division of Enforcement’s recommendations on the facts, the law and the penalty amounts. The Order directs Powhatan and Chen to pay the penalties and the disgorgement amounts within 60 days of the date of the order. Similar to the Barclays case currently pending in federal district court in California, because Powhatan previously elected to have the matter heard de novo in federal district court, if Powhatan and Chen fail to pay, FERC must go to federal district court to enforce its penalty assessment.
Federal District Court Denies Barclays Motion to Dismiss FERC Petition Which Alleges Manipulation and Assesses Significant PenaltiesThursday, May 21, 2015 2:02 pm by Jennifer Lias, Robert E. Pease, David Perlman and Michael Brooks
For the past two years we have been tracking and reporting on an enforcement proceeding brought by the Federal Energy Regulatory Commission (“FERC”) against Barclays Bank PLC (“Barclays”), Daniel Brin, Scott Connelly, Karen Levine, and Ryan Smith (collectively, the “Traders” and together with Barclays, “Defendants”) for alleged manipulative trading in the western electricity markets from November 2006 to December 2008. Yesterday, the United States District Court for the Eastern District of California denied a motion by the Defendants to dismiss the manipulation action. Although the court’s order did not address the merits of the manipulation charge, the court’s order is significant because it is the first judicial ruling on the scope of FERC’s enforcement authority over the physical electricity markets and the court found that FERC can pursue civil penalty actions against individuals as well as companies. (more…)
FERC Assesses $5 Million Penalty Against Maxim Power for Alleged Manipulation of ISO-NE Market and for Misleading the Independent Market MonitorTuesday, May 5, 2015 8:18 am by Robert E. Pease
On May 1, 2015 the Federal Energy Regulatory Commission (FERC) assessed a $5 million civil penalty against Maxim Power Corporation (Maxim) and its affiliates and an additional $50,000 civil penalty against Kyle Mitton, an energy marketing analyst working for Maxim, for allegedly violating FERC’s anti-manipulation rule and a regulation against submitting false or misleading information to a market monitor. Specifically, FERC alleges that Maxim bid in its Pittsfield generating plant in the ISO-NE day ahead market on oil during certain hot summer days in 2010 when it actually ran on much cheaper natural gas. According to FERC, Maxim hoped to be paid the significantly higher oil price even though it actually ran on cheaper natural gas. FERC maintains that Maxim mislead the ISO-NE Independent Market Monitor (IMM) when its bidding was questioned, giving the IMM the impression that Maxim actually ran on oil. This misrepresentation, according to FERC, also constituted a fraud in violation of FERC’s anti-manipulation rule. Maxim, on the other hand, argued in response to FERC’s earlier Order to Show Cause that due to pipeline restrictions serving the Pittsfield plant, it bid conservatively to avoid running on a fuel costing more than it bid into the market. Maxim further states that it never provided false information to the IMM. FERC admits that Maxim did not make a false statement and that it eventually did disclose to the IMM that it ran on natural gas. In the end, Maxim was not paid the more expensive price for oil; instead the IMM mitigated the price Maxim was paid to run the Pittsfield plant, a mitigation $3 million. (more…)