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The Federal Energy Regulatory Commission (FERC) says it has approved a stipulation and consent agreement under which JP Morgan Ventures Energy Corp. (JPMVEC) will pay $410 million for allegations of energy market manipulation. According to FERC, the allegations stem from JPMVEC's bidding activities in electricity markets in California and the Midwest from September 2010 through November 2012.

The settlement follows a recently announced FERC order that Barclays Bank PLC and four of its traders pay $453 million in civil penalties for similar actions. For more on the order, click HERE.

Under the JPMVEC agreement, FERC says the company will pay a civil penalty of $285 million to the U.S. Department of the Treasury and disgorge $125 million in “unjust” profits.

The first $124 million of the disgorged profits will go to ratepayers in the California Independent System Operator (CAISO) market. The other $1 million will go to ratepayers in the Midcontinent Independent System Operator (MISO) market.

“The California ISO is extremely pleased with the FERC-ordered settlement with JPMorgan. This is a vindication for California ratepayers and for market participants who play by the rules and work to support an effective market,” said Nancy Saracino, CAISO general counsel, in a statement.

FERC Commissioner Tony Clark calls the settlement “a historic one.”

“It highlights the important work of the commission and its Office of Enforcement, and it sends a strong signal that market manipulation is being taken seriously,” he said in a statement.

According to FERC, JPMVEC admits the facts set forth in the agreement, but neither admits nor denies the violations. The company did, however, agree to waive claims for additional payments from CAISO relating to two of the strategies under investigation. JPMVEC also will conduct a comprehensive assessment by outside counsel of its policies and practices in the power business.

The case stems from multiple referrals to FERC from CAISO and MISO market monitors in 2011 and 2012 regarding JPMVEC’s bidding practices. These practices were the subject of four emergency tariff filings by the two system operators, each of which was approved by FERC.

FERC says investigators determined that JPMVEC engaged in 12 manipulative bidding strategies designed to make profits from power plants that were usually out of the money in the marketplace. In each of them, FERC says the company made bids designed to create artificial conditions that forced the ISOs to pay JPMVEC outside the market at premium rates.

FERC says investigators further determined that JPMVEC knew that CAISO and MISO received no benefit from making inflated payments to the company, thereby defrauding the ISOs by obtaining payments for benefits that the company did not deliver beyond the routine provision of energy. Investigators also determined that JPMVEC’s bids displaced other generation and altered day-ahead and real-time prices from the prices that would have resulted had the company not submitted the bids, FERC adds.


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