NEW YORK Jan 6 Commodity merchant Louis Dreyfus
Energy Services may have manipulated North Dakota power markets
four years ago, U.S. regulators said on Monday.
In the latest example of the Federal Energy Regulatory
Commission's crack-down on power market players, the agency's
enforcement arm said it has made a preliminary determination
that the firm had violated rules on market manipulation.
At the time, the unit was part of a joint-venture between
privately held trader Louis Dreyfus and JPMorgan Chase & Co
hedge fund Highbridge.
The firm had placed "virtual trades in MISO at a node in
North Dakota to affect the value of its nearby Financial
Transmission Rights (FTRs) during the period November 2009 to
February 2010," it said, referring to the Midwest Independent
System Operator (MISO) that runs the power grid in the region.
No further details of the trading activity were available.
Virtual trades are a form of financial transaction in the
cash electricity market that do not involve any actual supply or
purchase of power. FTRs are hedging tools used to protect
against price risk when delivering energy on the power grid.
Highbridge and Dreyfus sold the energy-trading firm in 2012
to a group of investors who renamed it Castleton Commodities
International. Officials at Castleton did not immediately reply
to an email seeking comment.
Over the past two years, FERC has rattled the U.S. power
industry with a series of allegations and charges related to
market manipulation. Experts say several of these cases
represent a significantly tougher approach on gray-area trading
activities such as physical-versus-financial deals.
Congress expanded FERC's powers in 2005. Over the summer,
the agency approved a record $410 million penalty against
JPMorgan in combined civil penalties and the disgorgement of
unjust profits for alleged power market manipulation.
FERC is also poised for a legal battle with Barclays Plc
over other charges that the UK bank denies.
Its enforcement office staff opened 24 investigations in
fiscal 2013, up sharply from 16 in fiscal 2012, FERC said in
November. Of the investigations opened in 2013, the commission
said 11 involve market manipulation or false statements.
Monday's so-called "notice of alleged violations" is the
first public step in the enforcement process, and occurs after
FERC staff has investigated alleged misconduct and believes
there is likely sufficient evidence to move toward formal
However it can take many more months before the office makes
a formal finding, or seeks commissioners' support to enforce
penalties. Many such cases are settled in the interim.