Presented to: Energy Bar Association
Midwest Chapter Annual Meeting
Objectives
This discussion should show us how to:
- Recognize the trading behavior related to FTRs and virtual bids that can trigger a FERC investigation
- Understand the economics behind the potential manipulation of FTRs with virtual bids
- Identify effective compliance policy regarding FTRs and virtual bids
Agenda
Behavior that can be Viewed as Manipulation
Economics of FTRs and Virtual Bids
Three types of behavior can trigger a manipulation
- Outright fraud:
- Informational Fraud: lying to the market
- Example: submitting a false report
- Fictitious Transactions: selling "snake oil"
- Example: circular scheduling to increase congestion
- Informational Fraud: lying to the market
- Withholding:
- Traditional concept of market power; reducing supply to
increase price
- Example: offering a unit above cost to increase LMPs
- Traditional concept of market power; reducing supply to
increase price
- Uneconomic behavior:
- Intentionally "losing money" on a trade or position to realize a gain on a benefiting position
- "Losing money" in the economic sense, not accounting sense
- Trades lose money all the time; proving intent poses challenges
- Example: loss-making virtual bids that benefit an FTR position
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