State and federal energy regulators moved on two fronts against the giant investment bank JPMorgan Chase & Co. over its dealings in the California electricity market.
On Wednesday, the Federal Energy Regulatory Commission hit Morgan's electricity-trading unit with one of the most stringent penalties in its arsenal, barring it from selling electricity in California's auction-based market for six months starting in April.
The ruling, which may deprive Morgan of millions of dollars in profits in California, stemmed from FERC's conclusion that JPMorgan Ventures Energy Corp. had misled the agency in its investigation of alleged overcharges to the California Independent System Operator, which runs much of the state's wholesale power grid.
Meanwhile, the ISO moved Thursday to stop Morgan from blocking the upgrade of two Huntington Beach power plants considered key to keeping air conditioners humming next summer in Southern California. Morgan could not be reached for comment.
The operator of California's far-flung power grid filed a petition with federal regulators, accusing Morgan of raising legal obstacles to getting the plants working in time to avoid possible brownouts and rolling blackouts when the temperatures climb.
The shoreline facilities, currently not in use, are needed to help make up for the loss of more than 2,000 megawatts of power caused by the shutdown for safety reasons of both reactors at Southern California Edison's San Onofre Nuclear Generating Station.
Several power plants in Huntington Beach are owned by AES Corp. Two of them currently supply power to Morgan. But it is two other plants there, currently not operating, that the state wants to upgrade.
But the ISO says AES is balking, saying Morgan doesn't want to go along with the upgrade. The state is trying to force Morgan and AES to go ahead.
Grid operators want FERC to rule that JPMorgan's consent is not needed to retrofit the Huntington Beach power plants. The retrofit is essential to maintain sufficiently high voltage in transmission lines to meet peak summertime demand.
"The inability to resolve the consent issue in time to allow construction to commence in early 2013 could leave Southern California exposed to reliance on a widespread load-shedding scheme in the summer of 2013," state officials warned the commission.
The state agency's petition was submitted one day after federal energy regulators suspended JPMorgan Ventures after finding that the energy firm had provided false data and omitted important information during the federal investigation. It is reviewing state allegations that the firm hit utilities with excessive charges of as much as $73 million in 2011 and the beginning of this year.
Of that, the state has recovered about $20 million in overcharges, said Stephanie McCorkle, a spokeswoman for the state power grid operator.
The suspension was ordered to begin April 13 of next year. The delay was aimed at giving the grid managers sufficient time to contract for new power deliveries to ensure the lights stay on across the state.
JPMorgan Ventures is one of several energy-trading firms that buy and sell power nationally and play a key role in delivering electricity to states when demand is high and supplies are short.
The firm fought the suspension and told the commission in October that the company's actions were "inadvertent mistakes" and said that suspending its trading authority would be an "unjustified reaction to unintentional, good-faith mistakes, misunderstandings and miscommunications."