By Steven Mufson
Published: July 29, 2013
The Federal Energy Regulatory Commission unveiled charges against JPMorgan Chase on Monday, accusing the bank of charging California and Midwest electricity grids more than 80 times prevailing power prices through “manipulative bidding strategies.”
FERC said that a JPMorgan subsidiary, J.P. Morgan Ventures Energy Corp., engaged in eight manipulative techniques to take advantage of power market rules to “obtain payments at above-market rates” between September 2010 and June 2011.
JPMorgan did not comment, but a source familiar with negotiations said that a $400 million settlement is imminent.
The schemes were tied to the complicated rules for electricity markets, where regional grid operators buy power according to an hourly and daily bidding system. In certain markets, wind power generators bid minus $29 per megawatt hour — actually paying the regional grid — because if they remained idle, they would lose $30 per megawatt hour worth of federal production tax credits.
In California, JPMorgan allegedly bid minus $30 per megawatt hour in the final hours of a day, then would jack up prices for the first hour or two of the next day to $999 per megawatt hour. The going rate at that time, between midnight and 2 a.m., averaged about $12 a megawatt hour.
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