JP Morgan Ventures Energy Corp., will hand over a $285 million civil penalty plus $125 million in unjust profits the Houston firm raked in while trading electricity in California and the Midwest in 2010-2012, the Federal Energy Regulatory Commission said in a written statement.
The agency said Morgan did not admit any wrongdoing but agreed not to seek any further payments that had been contested by the California Independent System Operator, the quasi-government agency that oversees the wholesale electricity grid in the state.
FERC said Morgan traders were found to have engaged in strategies "to create artificial conditions" that gave the appearance of a tight market, which in turn warranted the ISO's approval to pay higher prices for power in order to avoid a shortage. That enabled Morgan to then deliver megawatt hours of electricity it owned at a higher price to California utilities.
A similar situation existed in the Midwest ISO territory with power delivered into Michigan, FERC said.
Nancy Saracino, counsel for the Cal-ISO, said in a written statement it had alerted FERC to its suspicions about Morgan's trading in 2011 and urged FERC to tighten up the market rules, which was done promptly.
"Our market safeguards are working," Saracino said. "FERC's office of enforcement acted swiftly when we reported the suspicious bidding behaviors, and this historic settlement demonstrates that FERC has delivered on its promise to protect the integrity of wholesale energy markets."