United States: FERC Issues Order Approving Consent Agreement In City Power Marketing Case

Last Updated: August 31 2017
Article by George D. Billinson and Mark R. Haskell

Most Read Contributor in United States, September 2017

On August 22, 2017, the Federal Energy Regulatory Commission ("FERC" or "Commission") issued an Order Approving Stipulation and Consent Agreement with City Power Marketing, LLC ("City Power") and its owner, K. Stephen Tsingas ("Tsingas").1 This was the first order approving an enforcement settlement issued since the Commission re-established a quorum with the addition of Chairman Chatterjee and Commissioner Powelson.

The Order resolved allegations that City Power and Tsingas had engaged in market manipulation in violation of the Federal Power Act2 and the Commission's Market Manipulation Rule3 by engaging in certain proscribed trading behavior in PJM Interconnection, Inc. ("PJM"), and had violated FERC's regulation applicable to power marketers requiring a duty of candor in communications with, inter alia, the Commission or FERC's Enforcement Staff. 4  City Power and Tsingas stipulated to the facts recited in the Stipulation and Consent Agreement, but neither admitted nor denied that they violated the Federal Power Act or FERC's regulations. 

City Power is a virtual trader that has traded in PJM since 2006, and Tsingas is the company's sole owner. FERC Enforcement Staff conducted an investigation of three types of City Power's Up-To Congestion ("UTC") trades in 2010:

  • So-called "round trip" trades in which a trader would place trades from location A to location B, and simultaneously place offsetting trades from location B to location A, allegedly to eliminate price risk and to collect marginal loss surplus allocations ("MLSA").5
  • Allegedly "uneconomic" trades placed between two pricing nodes that were mathematically equivalent (e., had a spread of zero), allegedly solely to collect MLSA payments.6
  • Allegedly "uneconomic" trades between two nodes with very small price spreads, in which traders allegedly paid transmission charges equal to five times the price spread during the relevant period (even though zero cost transmission service was available) allegedly to collect MLSA payments.7

Following the investigation, the Commission issued an Order to Show Cause why City Power and Tsingas' trading behavior did not constitute market manipulation.8 

The Commission subsequently issued an Order Assessing Civil Penalties, finding that the three types of trades constituted a scheme to engage in fraudulent UTC transactions, thereby violating the prohibitions against market manipulation.9 FERC concluded that City Power and Tsingas had engaged in "round trip" trading for the majority of the relevant period and instituted the second trading strategy for an eight-day period, but abandoned it and replaced it with the third trading strategy when Tsingas' trading partner expressed concern about the former strategy.10 

The Commission also found that, although Tsingas and his trading partner "extensively" used instant messages in connection with the trading strategies, Tsingas misled Enforcement Staff about the existence of these instant messages through testimony and data responses. Further, neither City Power nor Tsingas produced any instant messages during the investigation, but Enforcement Staff subsequently obtained the instant messages.11 The Commission found that this conduct violated the Commission's regulations.12  

The Order required City Power to pay a civil penalty of $14 million and Tsingas to pay a civil penalty of $1 million. The Order also required disgorgement of $1.3 million in unjust profits. The Order further imposed joint and several liability for City Power's civil penalty and the disgorgement amount. 

When City Power and Tsingas failed to make the required payments, FERC filed an action in the U.S. District Court for the District of Columbia. After the court denied defendants' motion to dismiss and FERC's summary judgment motion, the parties engaged in mediation suggested by the court. That effort resulted in the Stipulation and Consent Agreement approved by FERC.

Under the Stipulation and Consent Agreement, the civil penalty amounts and payment obligations differ from those in the Order Assessing Civil Penalties. City Power will pay a $9 million civil penalty (a decrease of $5 million from the original amount) and Tsingas will pay a $1.42 million civil penalty (an increase of $420 thousand from the original amount). Although the disgorgement amount remains the same ($1.3 million), Tsingas, and not City Power, will pay the disgorgement amount. Furthermore, whereas the Order Assessing Civil Penalties imposed joint and several liability for City Power's civil penalty, the Stipulation and Consent Agreement provides:

Solely for the purpose of resolving this matter through settlement, the Commission agrees that it (or any entity assigned to collect) will not now nor in the future assert that Tsingas is personally liable for the penalty against City Power under this Agreement, whether under a theory of joint and several liability or otherwise.13

City Power's civil penalty payment is due within 30 days. Tsingas agreed to a ten-year payment plan pursuant to which he will make an initial payment of $825 thousand within 60 days, annual payments of $50 thousand for the first three years thereafter, annual payments of $175 thousand for the next three years, and annual payments of $305 thousand for the remaining four years. All of Tsingas' payments will be directed to PJM (which is to receive the disgorgement amount for the benefit of PJM ratepayers) until the disgorgement amount has been satisfied, and will thereafter be made to the United States Treasury as a civil penalty. 

Tsingas also agreed to a three-year trading ban for himself, or anyone acting on his behalf, from any transaction within FERC's jurisdiction. The ban, however, does not extend to any business in which Tsingas has an ownership interest as long as he "does not personally engage or participate in, directly or indirectly, or otherwise operate or consult about, any trading transaction within the Commission's jurisdiction. . . ."14 

Footnotes

1   City Power Marketing, LLC, 160 FERC ¶ 61,013 (2017).

2   16 U.S.C. § 824v(a).

3   18 C.F.R. § 1c (2017).

4   Id. at § 35.41(b).

5   City Power Marketing, LLC, Order Assessing Civil Penalties, 152 FERC ¶ 61,012 at PP 45-48 (2015).

6   Id. at PP 49-50.

7   Id. at PP 51-52.

8   City Power Marketing, LLC, Order to Show Cause and Notice of Proposed Penalty, 150 FERC ¶ 61,176 (2015).

9   City Power Marketing, LLC, Order Assessing Civil Penalties, 152 FERC ¶ 61,012 (2015).

10 Id. at PP 4, 47, 50.

11 Id. at PP 53-57.

12 18 C.F.R. § 35.41(b) (2017).

13 Stipulation and Consent Agreement at P 9.

14 Id. at P 15.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.