JP Morgan agrees $410m settlement over energy market manipulation allegations

JP Morgan Ventures Energy Corporation has agreed with the Federal Energy Regulatory Commission (FERC) to pay ratepayers the sum of $410m (£268m) to settle a US energy probe (release).

JP Morgan neither admits or denies the allegations, which involve market manipulation from the company’s bidding activities in electricity markets in California and the Midwest from September 2010 through November 2012.

Some $285m will be paid as a civil penalty to the US Treasury, $124m to ratepayers in the California ISO (which operates the California electricity market) and the remaining $1m to ratepayers in the Midcontinent ISO.

The settlement follows a fine of $450m levied on Barclays by the FERC earlier this month for similar allegations. JP Morgan’s settlement is a significant reduction on the $1bn price that had previously been discussed.

FERC investigators determined that JPMVEC had engaged in 12 manipulative bidding strategies designed to make profits from power plants that were usually out of the money in the marketplace. In each of them, the company made bids designed to create artificial conditions that forced the ISOs to pay JPMVEC outside the market at premium rates.
FERC investigators further determined that JPMVEC knew that the California ISO and MISO received no benefit from making inflated payments to the company, thereby defrauding the ISOs by obtaining payments for benefits that the company did not deliver beyond the routine provision of energy.

FERC investigators also determined that JPMVEC’s bids displaced other generation and altered day ahead and real-time prices from the prices that would have resulted had the company not submitted the bids.