Feb 7 Louis Dreyfus Energy Services LP on Friday
agreed to pay a civil penalty of $4.1 million and disgorge
another $3.3 million plus interest to settle U.S. allegations of
power market manipulation.
This is the latest instance of the crackdown by the Federal
Energy Regulatory Commission, the U.S. energy regulator, on
power market players accused of manipulating prices.
FERC said the settlement resolves its investigation into
whether Louis Dreyfus Energy manipulated the power market in the
Midcontinent Independent System Operator (MISO) system from
November 2009 through February 2010.
The MISO operates the power grid in 15 U.S. Midwest and Gulf
Coast states and the Canadian province of Manitoba.
At the time, Louis Dreyfus Energy was part of a joint
venture between privately held trader Louis Dreyfus and JPMorgan
Chase & Co hedge fund Highbridge Capital Management LLC.
Highbridge and Dreyfus sold the energy trading firm in 2012
to a group of investors who renamed it Castleton Commodities
Specifically, FERC's enforcement office questioned some of
Louis Dreyfus Energy's virtual trading activities.
Virtual trades are a form of financial transaction in the
cash electricity market that do not involve any actual supply or
purchase of power.
Louis Dreyfus Energy did not admit nor deny the violations,
In addition, one of Louis Dreyfus Energy's traders, Xu
Cheng, will pay a civil penalty of $310,000, FERC said.
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.
FERC has issued more than $1 billion in fines since the
Energy Policy Act of 2005 significantly increased the penalty
the commission can impose, hiking it to $1 million per day per
violation from the prior cap of $10,000 a day.
Over the summer, the agency approved a record $410 million
penalty against JPMorgan in combined civil penalties as well as
the disgorgement of unjust profits for alleged power market
FERC is also poised for a legal battle with Barclays Plc
amid other charges that the UK-based bank denies.
Its enforcement office staff opened 24 investigations in the
2013 fiscal year, up sharply from 16 in fiscal 2012, FERC said
in November. Of the investigations opened in fiscal 2013, the
commission said 11 involve market manipulation or false