The company Ketchup Caddy LLC, originally founded to sell an in-car ketchup holder, and its CEO are facing $26.5 million in civil penalties after admitting to registering unknowing utility customers as demand response resources and offering their capacity into the Midcontinent ISO's capacity auctions even though it was never available.
"Neither Ketchup Caddy nor [CEO Phil] Mango has offered any defenses to their conduct," Federal Energy Regulatory Commission staff said in a report attached to a notice of proposed penalty (IN23-14) issued by the agency Feb. 21.
Ketchup Caddy, with an address registered in Frisco, Texas, and Mango now have 30 days to show cause as to why they should not be assessed $25 million and $1.5 million in civil penalties, respectively, and why Mango should not disgorge $506,502, plus interest, in unjust profits.
FERC staff launched the enforcement investigation in April 2021 after MISO forwarded an anonymous tip that Ketchup Caddy and another unnamed company were registering Ameren Illinois Co. customers as demand response resources by scraping data from the Ameren Corp. subsidiary's website.
From 2019 to 2021, Ketchup Caddy cleared a total of 886.6 MW of demand response capacity in MISO's 2019, 2020 and 2021 planning resource auctions, according to the staff report. MISO removed the company from its capacity market in October 2021 after it became aware of the fraudulent registrations.
MISO's planning resource auctions are voluntary capacity auctions designed to help market participants satisfy the grid operator's resource adequacy requirements for grid reliability.
The capacity offered by Ketchup Caddy suppressed capacity market clearing prices, depriving market participants of approximately $17.6 million in additional revenue they would have otherwise earned, according to an analysis performed by Potomac Economics, MISO's independent market monitor.
Although MISO did not order any load curtailments between 2019 and 2021, Ketchup Caddy's conduct "potentially risked the reliability of the MISO grid as MISO could not rely on Ketchup Caddy's fraudulent capacity in an emergency," staff said.
Ketchup Caddy functioned as a passthrough entity, with all of its income distributed to Mango and co-owner Todd Meinershagen, according to the report. In December 2022, FERC approved a consent agreement (IN23-4) requiring Meinershagen, a computer programmer, to pay $525,451 for his role in the scheme.
To obtain the customer data, staff explained that Meinershagen created an automated tool "that accessed Ameren's website, bombarded the website with millions of random account numbers until it located a valid customer account, and then downloaded the account data to a spreadsheet."
Mango, who said he met Meinershagen over dinner in 2018, said he initially planned to convince the customers to accept terms with a 100% payout to Ketchup Caddy for their demand response participation and a "zero payment for them," the report said.
"My pitch that I explained to Todd [Meinershagen] and how I was able to do that was by saying that they were participating in getting green credits being sustainable, and he accepted that explanation," Mango told FERC investigators.
The scheme was modeled after Mango's understanding of another entity listed as "Company A," which is still under investigation. "They must have figured out something that I don't, like this is essentially free money, no harm to the customer," Mango told staff.
Mango acknowledged he never actually attempted to contact any customers.
"One, because there was no way we could get a hold of them and get them to agree to take zero percent and us to take 100%," Mango said. "And two, there was no time. We were accepted in late February [2019] and had 48 hours to load customers into the MISO program before it closed."
Mango told staff that his logic at the time "was that if it wasn't too good to be true, that at some point in this year-long process of trying to get into the market, something will stop us, something will trigger, and that will be my — as naive as this sounds — that will be my sign that this is not meant to be."
Mango went on to tell investigators that he planned to continue with the scheme "for just a couple of years, make a bunch of money to put kids through school and do all those things, and no one's hurt."
MISO and Ameren did not immediately respond on Feb. 22 to requests for comment.
The Feb. 21 notice of penalty marks the second time this year that FERC has addressed allegations of illegal activity by demand response resources in MISO.
In January, FERC approved a settlement agreement with retail power supplier Northern Indiana Public Service Co. LLC (NIPSCO) and Linde Inc., the operator of a gas distillation facility in northwest Indiana, to resolve allegations that Linde did not respond to MISO's orders to reduce its energy consumption.
As part of the agreement, Linde agreed to pay a $10.5 million civil penalty and disgorge the $48.5 million it received through its market participation as a demand response resource. NIPSCO, a subsidiary of NiSource Inc., agreed to disgorge $7.7 million and ensure that its customers receive refunds.
