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
  • Withholding:

    • Traditional concept of market power; reducing supply to increase price

      • Example: offering a unit above cost to increase LMPs
  • 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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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.