FERC announced Sept. 20 that it is looking into whether J.P. Morgan Ventures Energy Corp. submitted misleading information and omitted material facts in communications with the Commission, the California ISO (Cal-ISO) and the ISO’s Department of Market Monitoring (DMM) (Docket No. EL-12-103).
The matter centers on J.P. Morgan’s “2010 and 2011 bidding activity,” according to FERC’s order to show cause.
The heart of the pending investigation dates to March 2011, when the Cal-ISO informed J.P. Morgan that it had reviewed J.P. Morgan’s bidding activities in the ISO’s market and intended to refer the matter to FERC’s office of enforcement.
On May 4, the ISO sent J.P. Morgan two data requests which, according to FERC’s order to show cause, J.P. Morgan refused to honor. On May 18, the deadline for responding to the data requests, J.P. Morgan’s outside counsel responded with a letter citing a provision of the Cal-ISO tariff called the “post-referral bar” that prohibits DMM from conducting “any investigative steps regarding the referral except at the express direction of FERC or FERC [s]taff.”
On May 20, the Cal-ISO officially referred J.P. Morgan’s bidding activities to FERC’s Office of Enforcement for further investigation.
According to the order, J.P. Morgan continued to cite the post-referral bar as the reason for not responding, even though FERC’s office of enforcement advised the trader, first on June 24 and several times thereafter, that it had expressly directed the ISO’s DMM to seek information from J.P. Morgan.
J.P. Morgan reportedly provided the Cal-ISO with official economic profit and loss statements for the generating units under investigation on June 17, which the ISO noted was 30 days after its response to the data request was due.
As the two parties continued to dispute the applicability of the post-referral bar through the end of 2011 and into 2012, the Cal-ISO advised J.P. Morgan that additional materials it provided in late October to satisfy the May 4 data request were submitted “162 days after J.P. Morgan’s response to the May 4 data request was due” and fined the trader $486,000 for its non-responsiveness.
J.P. Morgan filed a non-public appeal of ISO’s decision to impose the monetary penalty March 21 (Docket No. IN11-08). It subsequently withdrew that complaint after FERC’s office of enforcement made clear that it had directed and authorized the ISO’s DMM to investigate the matter.
Notably, FERC’s 12-page order does not specify the nature of the market conduct beyond general references to “2010 and 2011 bidding activity” and “generating units under investigation.”
The order “preliminarily finds that J.P. Morgan may have omitted material information or submitted misleading information in communications with the commission, [Cal-ISO] and the DMM” in violation of section 35.41(b) of the commission’s regulations. FERC’s order also directs that, in its answer, J.P. Morgan also show cause why its authority to sell electric energy, capacity, and ancillary services at market-based rates should not be suspended.
J.P. Morgan must respond within 21 days of the show-cause order being published in the Federal Register.
The order is the latest chapter in investigations into J.P. Morgan’s trading practices. On July 2, FERC sued J.P. Morgan to release 25 e-mails in connection with an investigation of possible manipulation of power markets in California and the Midwest.
In the matter before the District Court in Washington, DC (Case No. 12-MC-352), FERC said J.P. Morgan’s bidding techniques resulted in at least $73m in improper payments. The suit accused the company of improperly using attorney-client privilege to withhold or redact numerous e-mails subpoenaed in conjunction with the investigation.
J.P. Morgan Ventures Energy operates as a subsidiary of JPMorgan Chase & Co.