NRRI-13-11 FERC Anti-Manipulation Authority


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Recent federal enforcement actions against large financial participants in the U.S. electric power markets have gained national media attention, as well as the attention of the U.S. Senate and Department of Justice. The ultimate victims of market prices distorted due to manipulation are the end-user customers who purchase electricity from public utilities regulated by the state.

Yet the state’s role in protecting the end users’ interests in federal actions against market manipulation is unclear. Given the number of actions and the dollar amounts of recent penalty assessments (totaling over $1 billion), it seems clear that the manipulation taking place is having significant impacts on the market, and that states ought to have a forum to ensure that end-use ratepayer interests are adequately represented in both the enforcement actions and the allocations of recovered amounts.

This briefing paper represents the first part of a two-part study that will outline for the state regulatory community (1) opportunities for and barriers to their participation in federal enforcement matters, (2) whether it is worth their while to engage in enforcement actions, and (3) what benefits could accrue to end-use ratepayers if state regulators were to engage in antimanipulation actions.

The briefing paper offers a brief history of Federal Energy Regulatory Commission (FERC) enforcement authority up to the passage of the Energy Policy Act of 2005. It discusses the 2005 reforms and the series of administrative policies FERC has since adopted in order to effectuate its enhanced enforcement authority.

The briefing paper then examines four recent actions brought by the FERC Office of Enforcement against (1) Deutsche Bank Energy Trading, LLC; (2) Constellation Energy Commodities Group, Inc.; (3) JPMorgan Ventures Energy Corporation; and (4) Barclays Bank, PLC. This section discusses the federal allegations of market manipulation, penalties, and profit disgorgements that have been assessed, and the procedural postures of cases yet to be resolved.

Finally, the briefing paper introduces some of the topics that will be examined in the second phase of the report. The forthcoming report (February 2014) will examine powermarketer participation in the electric power markets and the impacts of market manipulation on end-use ratepayers. It will examine more closely the strategies employed to manipulate electric power markets. It will also describe the various federal agencies that bring enforcement actions in electric-market manipulation cases in order to determine which forums may be open for state participation. It will analyze the jurisdictional boundaries, both among the federal enforcement agencies and between federal and state agencies that may have interests in pursuing enforcement actions against electric-power-market participants. Finally, it will inform the state regulatory community what enforcement options exist and what ratepayer benefits can accrue from their participation in such actions.

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