JPMorgan Chase & Co. may settle with CA over energy market manipulation case
JPMorgan Chase & Co. (one of MY former accounts in my high-tech days) may settle with the Federal Energy Regulatory Commission (FERC) over its role in trading electricity in California and allegations that the nation’s biggest bank MANIPULATED the state’s energy market. Conceivably, 
California utility customers could split over $100 million if federal regulators settle.
I’ll believe it when I see it.
It was unclear how much of a settlement would wind up going to the U.S. Treasury and how much might be returned to California ratepayers. JPMorgan could wind up paying around $500 million including civil penalties, said this person, who was not authorized to discuss the matter publicly.
JPMorgan caught regulators’ attention in 2011. That year the California Independent System Operator, which manages much of the state’s wholesale power market, suspected that JPMorgan was manipulating the power market.
Cal-ISO alleged that the bank was involved in placing deceptive bids to profit from energy trading and inflated payments. The scheme resulted in more than $100 million in unjust profits, Cal-ISO spokeswoman Stephanie McCorkle said.
Although JPMorgan and FERC representatives declined to comment, the disgorged (don’t you love the adjective?) profits could first go to utilities (of course!) and then to ratepayers through a California Public Utilities Commission proceeding. LATimes.com continues, with regard to another former customer of mine in high tech (at another company this time), Barclays:
The looming possible settlement with JPMorgan comes as FERC this week ordered the British bank Barclays and four of its traders to pay $453 million in civil penalties in a separate case of alleged market manipulation. They were accused of gaming electricity markets in California and other markets from late 2006 through late 2008.
FERC’s order also called for Barclays to disgorge $34.9 million, plus interest, in “unjust profits.” Those funds would go to energy-assistance programs for low-income residents of California, Arizona, Oregon and Washington.
Barclays, for its part, has pledged to fight FERC’s order: “We believe that our trading was legitimate and in compliance with applicable law,” the bank said in a statement.
In January, ANOTHER bank, the German banking giant, Deutsche Bank, settled a market-manipulation probe by agreeing to pay FERC a $1.5-million civil penalty and disgorge profits of $172,645. Consumer advocates believe that Wall Street manipulation is MUCH more widespread that the recent cases would indicate. According to LATimes.com:
“FERC has managed to catch a small fraction of the very complex manipulation schemes engineered by sophisticated banks, and we’re just seeing a tip of the iceberg,” said Tyson Slocum, energy program director at the advocacy group Public Citizen in Washington, D.C. “The manipulation is so widespread that FERC is simply catching what it can.”
Even though a $500-million settlement with JPMorgan would be a record for FERC, Slocum said the amount would not be enough.
He called on FERC to calculate how much JPMorgan’s manipulation might have cost individual customers. “A company stole money from California consumers, lied about it and they’re going to get a slap on the wrist,” Slocum said. “That’s not justice.”
The news of settlement negotiations between JPMorgan Chase & Co. and FERC was first reeported by the Wall Street Journal and New York Times.
-Bill at
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