* JP Morgan seeks $3.7 million from California ISO * FERC agrees with ISO request for more time to settle Dec 5 (Reuters) - U.S. federal energy regulators on Wednesday dismissed a complaint by the energy trading arm of JPMorgan Chase & Co against California's power grid operator for energy generated in the second quarter of 2012. J.P. Morgan Ventures Energy Corp, the JPMorgan unit, filed the complaint with the U.S. Federal Energy Regulatory Commission (FERC) against the California Independent System Operator (California ISO), on Sept. 14, 2012, alleging the state's grid operator violated its tariff by underpaying JP Morgan about $3.7 million. This dispute is a side issue to FERC's recent decision to temporarily suspend JP Morgan's market based rate authority to trade physical power for six months starting April 2013, which regulators imposed due to the bank's alleged factual misrepresentations during an investigation into market manipulation in the California ISO. JP Morgan said in the dismissed complaint that it generated energy pursuant to the California ISO's exceptional dispatch instructions. The instructions enable the California ISO to commit resources that are not cleared through normal market procedures in order to maintain reliable grid operations under unusual circumstances, like the loss of excessive amounts of generation or transmission facilities. In most cases of exceptional dispatch, the California ISO pays the generator a premium for the power produced. JP Morgan alleged in its complaint that it did not receive the required premium. JP Morgan and its subsidiary BE CA LLC control through tolling agreements 10 generating units in the California ISO market. JP Morgan alleged that between April 2012 and June 2012, the California ISO exceptionally dispatched its units 18 times. Tolling agreements are like rental agreements - the bank rents the plants from their owners and operates the facilities. The California ISO filed its answer to the JP Morgan complaint in October, requesting the commission reject the complaint as premature. The California ISO said that in addition to the 18 exceptional dispatches that occurred during the second quarter, JP Morgan has also disputed 115 exceptional dispatches that took place on 35 different dates in July and August 2012. The California ISO said it was reviewing the JP Morgan dispute and that the bank's complaint before the ISO completed its review was improperly interfering with the grid operator's settlement dispute process. The ISO said it designated this dispute as complex and therefore has 15 months after the applicable trading day to resolve the dispute. FERC agreed with the California ISO and dismissed JP Morgan's complaint, without prejudice, as premature because the bank has not exhausted the settlement dispute review process at the ISO.