Sens. Elizabeth Warren and Edward Markey (D-Mass.) asked Federal Energy Regulatory Commission Chairman Jon Wellinghoff in a Wednesday letter about the commission’s handling of a case against JPMorgan Chase, in which the bank was accused of manipulating electricity markets.
JPMorgan agreed on Tuesday to pay a $410 million penalty to settle allegations of market manipulation related to the company’s bidding in electricity markets in the Midwest and California from 2010 to 2012.
Warren and Markey asked FERC, however, how the commission determined the financial punishment.
“While this fine is large in absolute terms, the total penalties are equal to roughly 1.3 percent of JPMorgan’s 2012 profits,” the lawmakers said. “We are concerned about whether the settlement includes adequate refunds to defrauded ratepayers and also concerned that the individual executives who sought to impede the Commission’s investigation will not be punished. It is critical that government settlements provide appropriate relief for consumers and deter future law-breaking.”
FERC determined that the JPMorgan engaged in multiple manipulative bidding strategies designed to draw profit from power plants that were generally out of the money in the marketplace.
The company made bids designed to establish artificial conditions that forced the California Independent System Operator and Midcontinent Independent System Operator to pay outside the market at premium rates, knowing that ISO and MISO received no benefit from the payments.
Warren and Markey requested further information from the committee on whether it plans to release the full staff report on JPMorgan’s conduct, whether the commission is concerned about an increase in market manipulation and the kind of analysis used by the commission to evaluate harm to consumers.
“We appreciate your efforts to hold accountable those who break the law, and there is no question that your efforts shed light on JPMorgan’s efforts to impede the Commission’s investigation and to engage in conduct that violated FERC’s Anti-Manipulation Rule and that ‘operate[d] as a fraud on electricity market participants,” the senators said. “However, we believe that it is critical that FERC and other agencies be as transparent as possible about its settlements—both to Congress and the public. Such transparency is needed to build confidence that the government is developing and using its leverage effectively, and that it is taking necessary steps to obtain maximum relief for consumers and deter future illicit activity.”