FERC sus­pends Jpmor­gan unit's power-trad­ing author­ity

The Pak Banker - - Front Page -


US Fed­eral En­ergy Reg­u­la­tory Com­mis­sion yes­ter­day sus­pended a JPMor­gan Chase & Co. (JPM) unit's elec­tri­cal-trad­ing author­ity, say­ing it had filed false in­for­ma­tion to reg­u­la­tors.

The ac­tion, part of a more ag­gres­sive ef­fort by the com­mis­sion to mon­i­tor US power mar­kets, pro­hibits J.P. Mor­gan Ven­tures En­ergy Corp. from sell­ing elec­tric­ity at mar­ket­based rates for six months start­ing April 1, 2013. The FERC said the com­pany made "fac­tual mis­rep­re­sen­ta­tions" and omit­ted ma­te­rial in­for­ma­tion in com­mu­ni­ca­tions with the Cal­i­for­nia In­de­pen­dent Sys­tem Op­er­a­tor, or Caiso, and in fil­ings to the com­mis­sion. Caiso op­er­ates the state's power grid.

"This is very sig­nif­i­cant in the his­tory of that agency," Charles Pe­abody, a bank an­a­lyst with Por­tales Part­ners in New York, said in an in­ter­view. "FERC has re­ally been step­ping up its in­ves­ti­ga­tions into power ma­nip­u­la­tion."

In its or­der re­leased late yes­ter­day, FERC said the JPMor­gan unit will es­sen­tially be al­lowed to par­tic­i­pate as a by­stander in whole­sale power mar­kets, grant­ing it the abil­ity to of­fer elec­tric­ity into the mar­ket with­out a price at­tached.

This will en­sure that util­i­ties have the abil­ity to ob­tain enough power to serve the de­mand from cus­tomers. JPMor­gan would still be able to trade de­riv­a­tives un­der the or­der. "The pro­vi­sion of false, mis­lead­ing or in­ac­cu­rate in­for­ma­tion un­der­mines the in­te­gri- ty of the FERC de­ci­sion-mak­ing process, the smooth op­er­a­tion of mar­kets and FERC's abil­ity to en­sure just and rea­son­able rates for cus­tomers," FERC said in an e-mailed state­ment. "The com­mis­sion con­tin­u­ously has warned mar­ket par­tic­i­pants of the con­se­quences as­so­ci­ated with fail­ing to abide by FERC rules and reg­u­la­tions."

"This is a novel use of FERC's author­ity over mar­ket­based rates and is un­sup­ported by FERC's own reg­u­la­tions," Jen­nifer Zuc­carelli said in an e-mail.

The com­mis­sion is also in­ves­ti­gat­ing al­leged ma­nip­u­la­tion by traders for Deutsche Bank AG (DBK) and Bar­clays Plc. (BARC) Since Jan­uary 2011, the agency has an­nounced 11 mar­ket-ma­nip­u­la­tion probes, and in March it reached a $245 mil­lion set­tle­ment with Con­stel­la­tion En­ergy Group Inc. over one of those cases. Last month, the agency pro­posed a record $469.9 mil­lion in penal­ties for Bar­clays, which says it will con­test the find­ing.

The JPMor­gan en­ergy unit re­ported $2.2 bil­lion paid by cus­tomers in New Eng­land, the Mid­west and Cal­i­for­nia in 2011, ac­cord­ing to FERC fil­ings.

While the unit ac­counted for a small por­tion of JPMor­gan's $97.2 bil­lion in 2011 rev­enue, yes­ter­day's de­ci­sion adds to reg­u­la­tory trou­ble for the New York­based com­pany. At least 10 fed­eral agen­cies and a U.S. Se­nate panel are in­ves­ti­gat­ing a multi­bil­lion-dol­lar trad­ing loss at its chief in­vest­ment of­fice in Lon­don.

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