J.P. Morgan May Be Fined Hundreds of Millions of Dollars for Energy Price Manipulation

The Federal Energy Regulatory Commission ("FERC") is deep into negotiations with New York bank J.P. Morgan Chase about what would be an enormous fine to settle allegations that J.P. Morgan Chase manipulated electricity markets in California and the Midwest. This comes on the heels of FERC's recently announced $435 million fine to Barclays bank for alleged energy price manipulation. If a settlement is reached, J.P. Morgan Chase's fine is expected to be even larger than the fine levied against Barclays.

Following Enron's infamous collapse, Congress authorized FERC to levy fines of up to $1 million per violation per day, up from $10,000 per violation. The Barclays settlement and the possible settlement with J.P. Morgan Chase is a sign that FERC, a low-profile federal agency that oversees transmission lines, natural-gas pipelines, and power trading markets across the United States, is becoming more and more active in policing the energy markets.

FERC Chairman, Jon Wellinghoff, has said that FERC's goal is to punish alleged market manipulators so much that they don't try to rig the market again. Hopefully FERC's goal is met. With the LIBOR manipulation scandal, the investigation into the manipulation of crude oil prices, and now this, companies have shown a willingness to engage in market manipulation on a massive scale, costing investors and consumers billions of dollars.

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