News Flash: FERC approves $410m settlement of JP Morgan market manipulation case

FERC on July 30 approved a stipulation and consent agreement that requires JPMorgan Ventures Energy Corporation to pay $410m in penalties and returned profits amid allegations of market manipulation.

The matter dates to 2010 and stems from the company’s bidding practices in electricity markets in the California ISO (Cal-ISO) and Midcontinent (then Midwest) ISO (MISO) from September 2010 through November 2012.

FERC investigators determined that JPMorgan Ventures engaged in 12 manipulative bidding strategies designed to make profits from power plants that were usually not selected in the marketplace. In each of them, the company made bids designed to create artificial conditions that forced the ISOs to pay JP Morgan Ventures outside the market at premium rates.

Under the agreement, JPMorgan Ventures will pay a civil penalty of $285m to the U.S. Treasury and disgorge $125m in unjust profits. $124m of those profits will be returned to ratepayers in the Cal-ISO, while the remaining $1m will go to ratepayers in MISO. The fact that JPMorgan’s conduct was detected, stopped and punished illustrates the effectiveness of ongoing market oversight, which is essential for healthy competition, Cal-ISO said in a statement.

“Our market safeguards are working,” Nancy Saracino, Cal-ISO’s general counsel, said.

JPMorgan Ventures admitted to the facts set forth in the agreement, but neither admitted nor denied the violations. The company agreed to waive claims for additional payments from the Cal-ISO connected to its challenges of the ISO’s application of its tariff to mitigate high bids submitted by the company.

JPMorgan Ventures also agreed to conduct a comprehensive assessment by outside counsel of its policies and practices in the power business.