December 5, 2012 / 7:00 PM / 5 years ago

UPDATE 1-US FERC dismisses JP Morgan complaint against California ISO

* 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
    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
    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
    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.
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