New US bill would boost FERC power to ban traders that manipulate energy markets

Democratic lawmakers in the US Senate and House of Representatives have introduced legislation that would give the Federal Energy Regulatory Commission new authority to temporarily or permanently ban traders that manipulate power and gas markets.

The bill's sponsors say that the measure is needed to help keep energy prices in check. The measure would "create new tools to prevent bad actors from manipulating energy markets and hiking up prices for consumers and businesses alike," Senator Catherine Cortez Masto, Democrat-Nevada, said in a statement.

FERC Chairman Richard Glick previously has called on Congress to give the commission explicit authority to ban traders from FERC jurisdictional markets.

"Robust and consistent enforcement is a top priority for Chairman Glick, who has repeatedly highlighted the importance of a trader ban as an important enforcement tool," Mary O'Driscoll, a FERC spokesperson, said in a July 29 statement.

The Senate bill (S.4679) was cosponsored by Senator Maria Cantwell, Democrat-Washington. The companion bill in the House (H.R.8578) was introduced July 28 by Representative Jan Schakowsky, Democrat-Illinois, and co-sponsored by Representatives Sean Casten, Democrat-Illinois and Don Beyer, Democrat-Virginia.

Trader ban

The measure would allow FERC to temporarily or permanently ban companies from trading in energy markets if they violated the Federal Power Act by manipulating those markets, or if they file false information regarding natural gas sales or transmission, according to Schakowsky's statement on the bill.

While the current law prohibits market manipulation and false or misleading representations, FERC's current enforcement tools are not enough to keep traders from violating the law, Schakowsky's statement said.

Cantwell noted that the Energy Policy Act of 2005 strengthened FERC's authority to investigate and punish market manipulation in the electricity and gas markets. Since then, FERC has approved 127 settlement agreements, assessing over $790 million in civil penalties and disgorging over $521 million in illegal profits, Cantwell's statement said.

"This legislation will add a key consumer protection arrow to FERC's quiver by blocking market manipulators from repeating their crimes and harming energy consumers," Cantwell said. "The burden of today's elevated energy prices makes the quick passage of this bill more important than ever," she said.

Glick's request

In 2019, Glick asked Congress to provide FERC with explicit authority to prohibit repeat violators from continuing to participate in commission-jurisdictional markets in certain circumstances. Glick was a FERC member, but was not the FERC chairman at that time.

"Although FERC has, in the past, included so-called 'trader bans' as part of several settlements, it is not clear that the commission has the authority to impose such a measure without the trader's consent, even in the face of multiple instances of manipulation," Glick said in a Nov. 4, 2019 letter to Cantwell.

Past trader bans include a 2021 FERC settlement that contained a two-year ban for a trader who allegedly conducted fraudulent up-to congestion trades in PJM Interconnection. In 2017, FERC approved a settlement that included a three-year ban for a trader accused of placing fraudulent financial trades to get improper payments from PJM. And in 2015, FERC approved a settlement with a one-year ban for a trader who allegedly violated anti-manipulation rules for gas trading.