JPMorgan settles energy market rigging case for $410 million

JPMorgan settles energy market rigging case for $410 million
Regulators didn’t even get JPMorgan to admit that it had done anything wrong.
(Spencer Platt, Getty Images)

NEW YORK — California electricity customers will share $124 million of a federal settlement with JPMorgan Chase & Co. over allegations it manipulated the state’s energy market.

JPMorgan, the nation’s largest bank, agreed to pay a total of $410 million to settle allegations by the Federal Energy Regulatory Commission. The deal, which was announced Tuesday, also includes $285 million in civil penalties the bank will pay to the U.S. Treasury.


Ratepayers in the Midcontinent Independent System Operator will receive $1 million to settle charges JPMorgan also manipulated the power market in the Midwest.

Officials with the California Independent System Operator, which runs the state’s electricity grid, praised the FERC settlement as a strong deterrent to any firm looking to rig the state’s power market.


“Both the ISO and the FERC were on the beat for this conduct, and it worked extremely well for California ratepayers,” said Nancy Saracino, the ISO’s general counsel.

Saracino said the grid operator would return the $124 million in unjust profits to ratepayers as soon as possible.

“We’ve gotten every penny back and will be sending it back as soon as it hits our account,” she said in a teleconference from the ISO’s headquarters in Folsom, near Sacramento.

The settlement contained no admission or denial of wrongdoing by JPMorgan, nor did it name any executives. FERC said the New York company would conduct a “comprehensive assessment” of its policies and practices in the power business.


“We are pleased to put this matter behind us,” a JPMorgan spokesman said in a statement. The settlement wouldn’t have a “material impact” on earnings because the company previously had set aside reserves to cover the costs, the spokesman added.

FERC’s investigation found that JPMorgan manipulated energy markets from September 2010 through November 2012.

The regulator found that JPMorgan engaged in 12 manipulative bidding strategies, which forced grid operators to pay unjust premiums.

California consumer advocates, however, questioned whether JPMorgan had been punished enough. The $410 million “really seems like a very small fine,” said Mark Toney, executive director of the Utility Reform Network, a San Francisco group that monitors energy regulation and legislation. “It almost feels like the cost of doing business” for JPMorgan.


But ISO officials called the fine historic in size and scope.

“I wouldn’t dismiss the size of the penalty at all,” said Eric Hildebrandt, the director of market monitoring.

This month, the energy commission ordered the British bank Barclays, along with four of its traders, to shell out $453 million over allegations they manipulated energy markets, including California’s, from 2006 to 2008. Barclays has vowed to fight the order.

FERC Commissioner Tony Clark on Tuesday said the JPMorgan settlement was an “eye-opener” highlighting challenges to regulators.

“In this investigation and others, it has become too common for subjects of an investigation to take steps to obfuscate the true intent of their business strategies as a litigation posture for dealing with their regulators,” Clark said in a statement.

Twitter: @andrewtangel @marclifsher

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