FERC takes aim at Deutsche Bank over power market manipulation

NEW YORK Thu Sep 6, 2012 6:29pm EDT

NEW YORK (Reuters) - Federal energy regulators have asked Deutsche Bank Energy Trading LLC to provide proof that it did not manipulate California energy markets or face a $1.5 million fine, the regulator said in an order issued on Wednesday.

The U.S. Federal Energy Regulatory Commission (FERC) alleged that the bank's energy trading unit "engaged in manipulation and submitted false information in connection with its trading" at the 17 megawatt Silver Peak interconnection in the California ISO between January 29, 2010 and March 24, 2010.

"Enforcement staff alleges that employees of Deutsche Bank, including senior level employees, conceived and executed a fraudulent scheme of scheduling physical transactions to benefit Deutsche Bank's financial CRR (Congestion Revenue Rights) position," the order says.

A CRR is a financial instrument that can be used as a hedge to manage the cost of transmitting electricity.

The bank unjustly profited by $123,198 from its trades, FERC said.

The bank intends to contest the allegations, it said, and has 30 days from the date of the order to respond to FERC.

"Deutsche Bank Energy Trading engaged in transactions that it believed were appropriate and beneficial to the energy markets and consumers. We believe that the FERC enforcement staff's conclusions are erroneous and we intend to contest them," the bank said in an emailed statement.

FERC has been cracking down on electricity market manipulation in recent months.

JPMorgan Chase & Co is being investigated by the energy regulator following complaints that its traders may have bid up electricity prices in California and the Midwest by some $73 million.

In April, FERC alleged that Barclays Plc bid up California power prices between November 2006 and December 2008.

In March, the agency won a record $245 million fine from Constellation Energy over charges of power market manipulation.

(Reporting By Jeanine Prezioso; Editing by Steve Orlofsky)