UPDATE 1-FERC extends time to consider rehearing in JPMorgan case

Mon Jan 14, 2013 3:59pm EST

* FERC does not say when it will decide on rehearing
    * FERC to block JPMorgan from some power trading
    * Banks reduced exposure to power markets since 2008


    By Scott DiSavino
    Jan 14 (Reuters) - U.S. federal energy regulators on Monday
extended the amount of time available to decide if they will
grant a rehearing against JPMorgan that would temporarily
suspend the bank's energy desk from trading in a segment of the
power market.
    In November, the U.S. Federal Energy Regulatory Commission
(FERC) temporarily banned JPMorgan Chase & Co's J.P.
Morgan Ventures Energy Corp energy arm from trading power at
market-based rates for six months, starting in April, for
failing to disclose information in a market manipulation
investigation.
    FERC has not accused the U.S. bank of market manipulation.
JPMorgan has said it would fight the sanction.
    Market-based rate authority allows a company to trade power
at whatever price the market will bear.
    Mary O'Driscoll, a spokeswoman at FERC, told Reuters
JPMorgan asked for a rehearing and this order gives the
commission more time to decide on that request. She said the
order does not impose any date on the commission to make a
decision.
    Officials at JPMorgan were not immediately available for
comment.
    The FERC sanction does not affect the bank's ability to
trade derivatives, futures, natural gas and other commodities.
This sanction only bans JPMorgan from trading physical power at
market-based rates.
    In a separate but related action, O'Driscoll said FERC on
Friday filed an appeal in federal court in Washington of a
magistrate's ruling in November blocking FERC from seeing
redacted portions of emails the regulator requested as part of
its investigation into possible market manipulation by the bank
in California and the Midwest.
    FERC sued JPMorgan over the summer to get the redacted
portions of the emails. But the bank said the information was
confidential.
    
    BANKS REDUCE POWER EXPOSURE
    As other banks have reduced their power trading over the
past few years since the Great Recession began in 2007, JPMorgan
continued to trade large amounts of physical power, according to
data submitted to FERC.
    In U.S. power markets, JPMorgan's physical electricity sales
reached $3 billion in 2008, $2.9 billion in 2009, $2.8 billion
in 2010 and almost $3 billion in 2011. In the first three
quarters of 2012, the bank sold about $1.4 billion of physical
power, according to a Reuters analysis of the FERC power sales
data.
    JPMorgan stuck with power trading while other banks reduced
their exposure to the market.
    There are many reasons for the decline. Power prices have
fallen to 10-year lows across most of the United States thanks
to an abundance of cheap natural gas. See 
    With decades worth of cheap fuel ahead, fewer utilities have
been looking to hedge their output; tough new capital
requirements and regulations banning proprietary deals have cut
into commodity trading; and some European banks, facing a
persistent debt crisis back home, have fled dollar-intensive
businesses.
    But many bankers and analysts see another cause for the
pull-back by banks: the risk that a more aggressive FERC may
target them for anything suggestive of nefarious trading.
    Some in the power industry feel FERC's sanction against
JPMorgan could drive the bank to reduce its exposure to the
power market.
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