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Enforcement Arrow Prohibition of Energy Market Manipulation

 
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Prohibition of Energy Market Manipulation



Conduct involving fraud and market manipulation poses a significant threat to the markets overseen by the Commission, and is an enforcement priority. Such misconduct undermines the Commission’s goal of providing efficient energy services at a reasonable cost, because the financial harm imposed by such actions ultimately is borne by consumers. Of particular concern to the Commission are cases involving the greatest harm to the public, where there is either significant gain to the violator or significant loss to the victims of the misconduct.

Under the Commission’s Anti-Manipulation Rule, 18 C.F.R. § 1c External link, it is unlawful for any entity, directly or indirectly, in connection with the purchase or sale of electric energy or natural gas or the purchase or sale of transmission or transportation services subject to Commission jurisdiction:


  1. To use or employ any device, scheme, or artifice to defraud,
  2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
  3. To engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any entity.


Additional guidance on the application of the Commission’s Anti-Manipulation Rule can be found in numerous public Orders (including the matters listed below), in particular, the Commission’s Order No. 670 that implemented this Rule following the passage of the Energy Policy Act of 2005 (EPAct 2005).

Examples of significant investigations involving market manipulation include the matters listed below. All of the Commission’s post-EPAct 2005 market manipulation matters resulting in settlements or Order to Show Cause proceedings.

2014:

August 11, 2014 – FERC approves a settlement arising from a self-report by Direct Energy Services, which identified manipulation in the price of physical natural gas at two hubs by two traders formerly employed by the company. $20,000 civil penalty, $31,935 in disgorgement. Direct Energy Services, LLC, 148 FERC ¶ 61,114 (2014) PDF .

February 7, 2014 – FERC approves market manipulation settlement with Louis Dreyfus Energy Services, resolving allegations that virtual transactions were placed to increase the value of the company’s financial transmission rights. $4,072,257 in penalties paid by LDES, $310,000 in penalties paid by an LDES trader, $3.34 million in disgorgement. MISO Virtual and FTR Trading (Louis Dreyfus Energy Services), 146 FERC ¶ 61,072 (2014) PDF.

2013:

August 29, 2013 – FERC issues Order Assessing Civil Penalty against Lincoln Paper & Tissue for alleged fraudulent inflation of baseline energy consumption in the New England ISO market in connection with a Day-Ahead Load Response Program. Lincoln elected the procedures of Federal Power Act § 31(d)(3) in which the Commission assesses a penalty and institutes an action in federal district court to affirm the assessment. $5 million assessed civil penalty, $379,016 assessed disgorgement. Lincoln Paper & Tissue, LLC, 144 FERC ¶ 61,162 (2013) PDF .

August 29, 2013 – FERC issues Order Assessing Civil Penalty against Competitive Energy Services for alleged fraudulent inflation of baseline energy consumption in the New England ISO market in connection with a Day-Ahead Load Response Program. CES elected the procedures of Federal Power Act § 31(d)(3) in which the Commission assesses a penalty and institutes an action in federal district court to affirm the assessment. $7.5 million assessed civil penalty, $166,841.13 assessed disgorgement. Competitive Energy Services, LLC, 144 FERC ¶ 61,163 (2013) PDF.

August 29, 2013 – FERC issues Order Assessing Civil Penalty against Richard Silkman for alleged fraudulent inflation of baseline energy consumption in the New England ISO market in connection with a Day-Ahead Load Response Program. Silkman elected the procedures of Federal Power Act § 31(d)(3) in which the Commission assesses a penalty and institutes an action in federal district court to affirm the assessment. $1.25 million assessed civil penalty. Richard Silkman, 144 FERC ¶ 61,164 (2013) PDF.

August 5, 2013 – FERC issues Order to Show Cause and Notice of Proposed Penalty against BP America for alleged manipulative sales of natural gas at specific natural gas trading hubs to affect the index price at which related financial instruments settled. $28 million proposed civil penalty, $800,00 proposed disgorgement. BP America Inc., et al., 144 FERC ¶ 61,100 (2013). On May 15, 2014, the Commission issued an order setting the matter for hearing before an Administrative Law Judge. BP America Inc., et al., 147 FERC ¶ 61,130 (2014) PDF.

July 30, 2013 – FERC approves market manipulation settlement with JP Morgan Ventures Energy Corporation, resolving allegations that the company engaged in multiple strategies in the CAISO and MISO markets intended to obtain above-market payments through fraudulent billing practices. $285 million in penalties, $125 million in disgorgement to ratepayers. In re Make-Whole Payments and Related Bidding Strategies (JP Morgan Ventures Energy Corporation), 144 FERC ¶ 61,068 (2013) PDF.

July 16, 2013 – FERC issues an Order Assessing Civil Penalties against Barclays Bank for alleged manipulation in connection with trading electricity in the western United States to affect the index price at which related financial instruments settled. Barclays and the individual traders elected the procedures of Federal Power Act § 31(d)(3) in which the Commission assesses a penalty and institutes an action in federal district court to affirm the assessment. $435 million assessed civil penalty for Barclays, $34.9 million assessed disgorgement for Barclays; $15 million assessed civil penalty for one trader and $1 million assessed civil penalty for each of three other traders. Barclays Bank PLC, et al., 144 FERC ¶ 61,041 (2013) PDF.

March 22, 2013 – FERC approves market manipulation settlement with Rumford Paper Company in connection with allegations that the company had fraudulently inflated its baseline energy consumption in connection with the ISO-NE Day-Ahead Load Response Program. $10 million in penalties, $2,836,419.08 in disgorgement. Rumford Paper Co., 142 FERC ¶ 61,218 (2013) PDF.

January 22, 2013 – FERC approves market manipulation settlement with Deutsche Bank Energy Trading, resolving allegations that the company traded exports in CAISO to affect the value of related congestion revenue rights. $1.5 million in penalties, $172,645 in disgorgement. Deutsche Bank Energy Trading, LLC, 142 FERC ¶ 61,056 (2013) PDF.

2012:

November 19, 2012 – FERC approves market manipulation settlement with Gila River Power, resolving allegations that the company falsely labeled transactions submitted to CAISO in order to artificially relieve congestion at interties and increase profits on imports. $2.5 million in penalties, $910,553 in disgorgement. Gila River Power, LLC, 141 FERC ¶ 61,136 (2012) PDF.

March 9, 2012 – FERC approves settlement with Constellation Energy Commodities Group, resolving allegations that the company traded energy in ISO-NE and NYISO markets to affect market prices in financial instruments based on those prices, and misrepresented the purpose of the trades to the NYISO market monitor. $135 million in penalties, $110 million in disgorgement. Constellation Energy Commodities Group, Inc., 138 FERC ¶ 61,168 (2012) PDF.


CONTACT
Enforcement Hotline
Telephone: 202-502-8390
Toll-free: 1-888-889-8030
FAX: 202-208-0057
Email: hotline@ferc.gov

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Updated: December 8, 2014