June 10 (Reuters) – JPMorgan Chase and Co Inc and other power traders that benefited from a flaw in the California
electricity market rules from 2009 through 2011 will need to reimburse $52 million in excess profits, U.S. regulators said last week.
The ruling from the Federal Energy Regulatory Commission (FERC) marks a victory for the Californian grid operator, and comes as
JPMorgan may face more serious charges related to power market manipulation in California and Michigan.
The California Independent System Operator (ISO), which operates the state’s power system, changed its market rules in 2011 to cut off the loophole that the grid operator said the bank used to disrupt the power market.
June 2013 – FERC approves California ISO request to force power sellers, including JPMorgan, to reimburse $16.7 million to California electricity distributors for disruptive bidding practices between April 2009 and March 2011. FERC also signed-off on the $35.3 million reimbursement the ISO already forced the sellers to pay in April 2011. See FERC Nixes JPMorgan Challenge To Grid Operator Clawback
May 2013 – JPMorgan reduces presence in California power market, selling the right to market electricity from three power plants.
May 2013 – JPMorgan tells shareholders FERC may take action against bank for certain power market bidding activities.
May 2013 – An internal FERC document leaked to the New York Times says the regulator may charge JPMorgan with power market manipulation. The document also says JPMorgan’s commodities chief, Blythe Masters, may have made “false and misleading statements,” to the regulator under oath.
April 2013 – JPMorgan six-month ban on selling power at market based rates starts.
Jan 2013 – FERC appeals magistrate’s November 2012 ruling blocking FERC from seeing JPMorgan emails.
Nov 2012 – Federal magistrate rules that JPMorgan does not need to hand over emails FERC sought in July 2012 as part of the
regulator’s power market manipulation investigation.
Nov 2012 – FERC suspends JPMorgan’s authority to sell power at market based rates for six months for making factual misrepresentations during an investigation into market manipulation. The ban is to start in April 2013. See Bloomberg News, 11/15/2012
Sep 2012 – FERC directs JPMorgan to show why regulators should not suspend its authority to sell power at market rates, after it says the bank submitted misleading information to the Commission during the market manipulation investigation.
July 2012 – FERC subpoenas JPMorgan in federal court to provide emails as part of its investigation into market manipulation in
California and the Midwest. This is when JPMorgan is publicly named as the party that allegedly manipulated the California market.
June 2012 – California ISO asks FERC to approve its plan to force power sellers to reimburse money earned from exploitive bidding practices to electricity distributors from April 2009 to March 2011. The ISO had already forced power sellers to reimburse $35.3 million in April 2011 for the period between August 2010 and March 2011.
Feb-June 2012 – California ISO imposes a non-public $486,000 penalty against JPMorgan in February for failing to submit all information the grid operator sought as part of its investigation. JPMorgan appeals the penalty in March and FERC in April rejected the bank’s appeal.
JPMorgan filed a complaint with FERC in May that the fine was unjust, but withdrew its complaint in June after the FERC Office of Enforcement said the bank and its lawyers were not adequately responding to numerous requests for information from the ISO and FERC.
May 2011 – FERC approves California ISO’s request to fix flaw in the bidding mechanism, effective March 26, 2011.
April 2011 – California ISO forces power sellers to reimburse $35.3 million to electricity distributors from trades executed from August 2010 to March 2011 due to effect of exploitive bidding practices.
March 2011 – California ISO informs JPMorgan the grid operator reviewed the bank’s bidding activities and intends to refer the
matter to the FERC Office of Enforcement, which was the start of FERC’s non-public investigation.
March 2011 – California ISO files with FERC to fix a loophole in the power market bidding mechanism after a party’s behavior
“aggravated the market impact of the flaw.” That party was later identified as JPMorgan.
2005 – FERC authorizes JPMorgan to sell power at market based rates.