JPMorgan Probe Shows Regulator's Renewed Focus On Market Manipulation

Bloomberg reports that the FERC on July 2 sued New York-based JPMorgan to release e-mails, revealing an investigation of possible gaming of power markets in California and the Midwest. Since January 2011 the agency has announced 11 probes of alleged manipulation in electricity and natural gas markets and a record $245m settlement with Constellation Energy Group Inc.

'There is a theme here', Susan Court, a former director of the FERC’s Office of Enforcement, said in a telephone interview. 'I see a fairly steady activity in the enforcement area'.

In February, the FERC created a division within its enforcement office to police the markets, where electricity is bought and sold by power generators and utilities. A 2005 overhaul of U.S. energy policy, passed after the collapse of energy trader Enron Corp., gave the agency the authority to fine companies as much as $1m a day per violation, a vast increase in the agency’s enforcement powers.

The agency is investigating JPMorgan for potential violations that were reported to FERC between March and June of last year, identified after power-grid operators reported unusual trading offers for the supply of energy.

'Our team of Ph.D. economists is vigilant about keeping an eye on questionable activities and stands prepared to address potential issues and report them immediately' to FERC, said Steven Greenlee, a spokesman for the California Independent System Operator Corp., one of the grid managers that reported unusual trading patterns.

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JPMorgan Probe Shows FERC Priority Policing Energy