Texas regulators not aware of potential CFTC manipulation probe

HOUSTON, June 25 Wed Jun 25, 2014 7:52pm EDT

HOUSTON, June 25 (Reuters) - Texas electric regulators are not aware of any investigation of trading activity in the state's $30 billion wholesale market by the U.S. Commodity Futures Trading Commission, an agency spokesman said on Wednesday.

Trade publication Energy Risk, citing unnamed sources, said the CFTC has been looking into bidding activity by GDF Suez' North American energy unit in the Electric Reliability Council of Texas, the agency which oversees the state's real-time power market.

"I'm not aware that anyone from that agency has contacted anyone from this agency," said Terry Hadley, spokesman for the Texas Public Utility Commission.

GDF Suez Energy North America, based in Houston, is being sued by Raiden Commodities LP and Aspire Commodities LP. The firms allege GDF Suez manipulated the Texas power market, costing one firm more than $20 million.

GDF Suez is seeking dismissal of the lawsuit.

The claim of market manipulation comes as the grid agency and regulators debate the need for power market reform in Texas, where electric demand is growing faster than supply.

About the time the lawsuit against GDF Suez was filed in federal court in Houston in late April, Raiden Commodities also filed a petition with the PUC to eliminate a rule that exempts small generating companies from certain market-power rules.

The so-called small-fish rule says companies that control less than 5 percent of the generating capacity in ERCOT lack the ability to control prices on a sustained basis.

The "small-fish exemption" covers GDF Suez which owns six power plants in ERCOT with total capacity of about 4,100 megawatts.

Raiden's petition did not mention GDF Suez or any generator by name.

Last Friday, the PUC rejected the petition, with little discussion.

PUC Chairman Donna Nelson said companies that try to bid generation into the real-time market at a high price represent a "short-term issue that the market handles well."

"A small fish takes a risk; sometimes it works out and sometimes it does not," added commissioner Brandy Marty.

A GDF Suez Energy North America spokeswoman said the company does not comment on potential government investigations or pending litigation. "All of our actions have been fully transparent and compliant with applicable regulations," said Julie Vitek by email.

The plaintiffs accused GDF Suez of withholding electric generation during times of tight supply to drive prices in the ERCOT real-time market higher, then potentially profiting from "artificially" high prices on commodities markets such as the IntercontinentalExchange (ICE).

The CFTC, which regulates commodity markets like ICE, declined to comment.

In recent years, the CFTC and the Federal Energy Regulatory Commission have sought large fines from Barclays PLC, JPMorgan Chase & Co, BP PLC and traders for allegedly manipulating power or natural gas markets.

The case is Aspire Commodities LP, Raiden Commodities LP v GDF Suez Energy North America Inc, et al, U.S. District Court, Southern District of Texas, No. 4:14-CV-01111 (Additional reporting Scott DiSavino in New York; Editing by Mohammad Zargham)

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