FERC amps up enforcement activity with major increase in fiscal year 2021 penalties

The enforcement office within the Federal Energy Regulatory Commission ramped up its pursuit of market manipulators in fiscal year 2021, Chairman Richard Glick said Nov. 18.

FERC's Office of Enforcement settled nine cases, totaling $7.9 million in disgorgement and penalties, in fiscal year 2021 compared to three cases, totaling about $550,000, in fiscal year 2020, Glick said during the commission's meeting. The increase follows a "lull over the last couple of years," he added.

"The message to those seeking to manipulate electric and gas markets or shirk their duties as certificate holders or licensees should be clear: the cop is back on the street, and we will aggressively pursue wrongdoing," Glick said.

February storm inquiry

Following the February winter storm that resulted in high power and gas prices for customers in Texas and surrounding states, FERC's Division of Analytics and Surveillance initiated an evaluation of natural gas and power market activity, according to a report issued by the Office of Enforcement (AD07-13-015).

The division launched 10 natural gas inquiries into the incident, later closing seven of them while investigations into the remaining three market participants continue. On the power side, the division launched four inquiries into electric market participants in the Southwest Power Pool and Midcontinent Independent System Operator. Of those, the division closed three inquiries and continues to examine one SPP market participant's activity, according to the report.

The investigations are ongoing and information about the cases likely will not be made public unless FERC takes action.

During FERC's meeting, Mike DeLiso of the Office of Enforcement's Division of Analytics and Surveillance cited record power prices and gas market prices during the cold snap, with gas trades peaking at $1,250/mmBTU in Oklahoma.

The division's natural gas surveillance program reviews trading data at the market participant level and notes anticompetitive and manipulative behavior, DeLiso said. The division examined participants associated with price runups or classes as well as those with gas market revenues and expenditures, he added.

"During the cold snap we focused on identifying market participants with large market concentrations and unusual buy-side or sell-side losses relative to the index or other market participants," DeLiso said.

The division does not survey for power market manipulation in the Electric Reliability Council of Texas because the grid operator is outside the commission's jurisdiction. Instead, it focused on potential violations in SPP and MISO.

"In particular, we screened for market participants that could be using fiscal or virtual transactions to benefit related financial positions," DeLiso said.

Other divisions' work

Additionally, the office's Division of Investigations launched 12 new inquiries, closed four pending cases and negotiated eight settlements, totaling $6.4 million, during the fiscal year, according to the report. Of that amount, $4.6 million came through civil penalties.

Meanwhile, the Division of Audits and Accounting concluded a dozen audits of public utilities, natural gas and oil companies, according to the report. Those audits yielded 250 recommendations for corrective action and 64 noncompliance findings.

Glick called the report "very illuminating. The work doesn't always get a lot of attention by the public, but by ensuring regulated entities comply with commission requirements and guarding against market manipulation, they have saved consumers hundreds of millions – if not billions – of dollars," he said.

Commissioner Mark Christie called grid operators' markets "administrative constructs" with some market characteristics, making them vulnerable to manipulation. As a result, the commission and market monitors need to pay close attention to trading activity and look for any evidence of market manipulation, he said.