In the last couple months, FERC has leveled eye-popping fines against alleged market manipulators, putting to avid use the enforcement authority it was given in 2005 so it could prevent Enron-style game-rigging.
Yesterday, the Hill quoted FERC Chairman Jon Wellinghoff as saying: “We’re an equal-opportunity enforcer. We’ll go after anybody who we believe is engaged in an activity that is inappropriate or is in violation of the statute.” The statement is unapologetically stern and suggests that those who have been watching FERC recently and trying to read the tea leaves were correct to conclude that the agency is stepping up its enforcement.
FERC’s recently released 2012 Report on Enforcement sent much the same message. According to the report, FERC initiated more investigations in FY2012 than in the previous year (16 compared to 12) and increased its emphasis on market manipulation. Notably, FERC’s Office of Enforcement created a new Division of Analytics and Surveillance to sniff out manipulation and anticompetitive behavior. To give the division punch, the agency issued two new rules – Orders No. 760 and 768.
Order No. 760 requires regional transmission organizations and independent system operators to submit electronic data on bids, offers, market awards, resource outputs, marginal cost estimates, shift factors, financial transmission rights, internal bilateral contracts, uplift and interchange pricing. Order No. 768 is intended to improve transparency by modifying Electric Quarterly Report (EQR) data fields and by requiring EQRs to be filed by market participants that because of their de minimis market presence had not previously been required to file.
As it was making these regulations, FERC conducted a high-profile investigation into power outages in the Southwest and Northeast and imposed a record-breaking fine – a $245 million settlement ($135 million of that a civil penalty, the rest a disgorgement) with Constellation Energy over alleged manipulation of the New York wholesale power market.
This pace shows no sign of slowing. Recently, Gila River Power admitted to manipulating prices in California – the first time a market participant has admitted to violating the FERC’s anti-manipulation rule in an energy trading case. And the agency prohibited JPMorgan Ventures Energy from selling at market-based rates for six months for allegedly excluding material information from filings associated with activity in the California market.