FERC signs off on first-ever power market manipulation deal

The Federal Energy Regulatory Commission (FERC) has approved a settlement between its Office of Enforcement and Gila River Power LLC for Gila River’s manipulation of power markets in California.

The settlement marks the first time that a market participant has admitted to a violation of FERC’s anti-manipulation rule in an energy trading case, FERC said in a Nov. 19 statement. It calls for Gila River to pay a fine of $2.5m and disgorge unjust profits of $911,553 plus interest.

Gila River, a subsidiary of Entegra Power Group LLC, admitted to using wheeling-through transactions between July 2009 and October 2010 to manipulate prices in markets operated by the California ISO, and to violating FERC regulations requiring accurate submissions to the California ISO. Gila River sold power generated from its 2,200-MW, gas-fired Gila River power plant located southwest of Phoenix, Ariz., into California ISO markets at the Palo Verde intertie.

“Because congestion at Palo Verde limited the amount of power Gila River could import and lowered the price of those imports, Gila River – in violation of FERC’s anti-manipulation rule – designed its transactions to avoid creating congestion so that it would receive a higher price on a higher quantity of energy imports,” FERC said. “It submitted falsely designated wheeling-through transactions to benefit power imports sourced from its power plant. The company’s trading strategy moved the price of power at import nodes, including Palo Verde.”

Gila River admitted that its wheeling-through transactions violated the California ISO tariff because it was not wheeling power through the region, and that its transactions lacked a resource and a load outside the California markets as required by the tariff, FERC said.

The commission pointed out that Gila River and its employees provided exemplary cooperation to FERC enforcement staff, actions that were considered in approving the settlement agreement. Its employees were candid and forthcoming in testimony and meetings with staff. Further, through its admissions and conduct, Gila River accepted responsibility for its violations, FERC said. FERC said it is directing the California ISO to allocate the disgorged funds and interest to benefit electric ratepayers within the ISO.

The Gila River power plant consists of four 550-MW power blocks. For the period investigated, July 2009 through October 2010, three of those four blocks, or approximately 1,300-1,600 MW, were available for trading and reserve-sharing commitments, FERC noted.

“Gila River sold power generated from its Gila River plant into the CAISO markets,” the settlement agreement said. “Gila River often could obtain a better price for its power in the CAISO markets than in the rest of the western markets. When selling power into the CAISO markets, Gila River preferred to sell the power at the Palo Verde intertie because the cost of transmission from its plant to Palo Verde was less than the cost of transmission to other interties. But, Palo Verde was often congested in the import direction, which limited the amount of power that Gila River could import at Palo Verde and lowered the price for imports there. During the Relevant Period, Gila River imported approximately 350 to 3,000 MWhs per day into the CAISO at the Palo Verde intertie.”

The settlement added: “As admitted by Gila River and described in the Agreement, during the Relevant Period, Gila River engaged in two strategies in the CAISO markets, the ‘Standalone Wheel’ strategy and the ‘Adjustment Wheel’ strategy. To further each strategy, Gila River submitted transactions designated as Wheeling-Through transactions. The use of the Wheeling-Through designation indicates to the CAISO that the Scheduling Coordinator is wheeling power through California from the linked import point to the linked export point. The Tariff required a Wheeling-Through transaction to have a resource outside of CAISO and a Load outside of CAISO. Gila River, however, was not wheeling power and lacked a resource or a Load outside the CAISO with respect to these Wheeling-Through transactions.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.