Truthful . . . but Not Forthcoming? FERC Staff Takes Aggressive View of Material Omissions as Basis for Intent in Maxim Power

By Gregory Lawrence, Thomas Millar and Mary Treanor

Recent positions taken by FERC’s Enforcement Staff in the Maxim Power show cause proceeding add to the uncertainty regarding what information market participants must volunteer when communicating with the Commission, ISOs/RTOs, market monitors and others. We have recently written about Maxim Power. As a refresher, Staff alleged in its Order to Show Cause that Maxim Power Corporation and its named subsidiaries (“Maxim”), as well as its executive, Kyle Mitton (together, the “Respondents”) engaged in a supposed “offer oil, burn gas” scheme “for the purpose of obtaining inflated make-whole payments at high fuel oil prices when Maxim[’s Pittsfield] plant was dispatched for reliability, even though the plant was actually burning much less expensive natural gas.” Importantly, Respondents purportedly engaged in “misleading” communications with ISO-NE and the market monitor in an effort to retain the make-whole payments in violation of the Market Behavior and Anti-Manipulation rules (discussed below). For these alleged violations, Staff seeks civil penalties of $5 million against Maxim and $50,000 against Mitton, but not disgorgement of profits because the overpayments were returned through ISO-NE tariff processes.  read more

Posted in Enforcement and Investigations, FERC, Oil & Gas, Power, Regulation

Court Finds CFTC RTO/ISO Exemptive Order Bars CEA § 22 Private Right of Action, but More to Come from the CFTC

By Gregory Lawrence, Christopher Polito, and Lamiya Rahma

Can private litigants bring claims under the Commodity Exchange Act alleging manipulation in ERCOT’s energy markets?  On February 3, the U.S. District Court for the Southern District of Texas answered “no,” granting defendants’ motion to dismiss in Aspire Commodities v. GDF Suez Energy North America.

In Aspire v. GDF Suez, plaintiffs accused GDF Suez of violating the CEA’s anti-manipulation provisions, and six other electricity generators of aiding and abetting GDF Suez. Specifically, plaintiffs alleged that GDF Suez intentionally withheld electricity generation during times of tight supply to drive up Real-Time prices in the ERCOT market.  While not challenging the ERCOT LMP prices themselves as being “unlawful, wrong or too high,” plaintiffs claimed that, by manipulating the ERCOT LMP, GDF Suez consequently created “artificial and unpredictable” prices in derivatives markets, such as ICE. read more

Posted in Cases, ERCOT, Oil & Gas, Power, Regulation

Unregistered CTA Summit Energy Services: Choose Your Words Wisely

By Athena Eastwood, Gregory Lawrence, Andrew Greenberg, and Neal Kumar

A recent case highlights the importance of periodically reviewing an energy company’s marketing materials and related activities (including statements made on websites) to ensure that the company is not holding itself out — without CFTC registration — as a CTA (commodity trading advisor).  A number of exclusions and exemptions may apply to such activity, including exemptions for providing advice to fewer than 15 persons and for advice that is solely incidental to a cash market business.  However, these exemptions are narrowly construed and governed by older no-action relief rather than the rule itself.

Market participants need to be mindful of the possibility of triggering CTA status and need to monitor whether employees are providing advice regarding CFTC-jurisdictional products, even in connection with the sale of physical energy or commodities to customers.  read more

Posted in Cases, CFTC, Commodity Trading, Mining/Metals, Oil & Gas, Power, Regulation

New Exchange Rules on Disruptive Trading Practices Summary Chart

By Athena Eastwood, Anthony Mansfield, Gregory Mocek, Paul Pantano, Sohair Aguirre, Isabelle Corbett, Jonathan Flynn, Neal Kumar

On January 14, 2015, the Intercontinental Exchange (“ICE”) rule prohibiting disruptive trading practices (ICE Rule 4.02) became effective.  The ICE Rule is substantively the same as Rule 575 passed by the Chicago Mercantile Exchange Inc., the Board of Trade of the City of Chicago, the New York Mercantile Exchange, Inc., and the Commodity Exchange, Inc. (collectively, the “CME”), which became effective September 15, 2014.  The CME issued Market Regulation Advisory Notice RA1405-5 (“CME MRAN”) which, with new Rule 575, provided regulatory guidance on various types of prohibited disruptive order entry and trading practices.  On September 11, 2014, the Futures Industry Association (“FIA”) hosted a webinar with staff from the CME to discuss new Rule 575 and the CME MRAN.  read more

Posted in CME, Commodity Trading, ICE, Mining/Metals, Oil & Gas, Power, Regulation

FERC Issues Order to Show Cause to Maxim Power

By Gregory Lawrence, Terence Healey, Thomas Millar, Natalie Mitchell, and Christopher Polito

On February 2, 2015, FERC issued an Order to Show Cause and Notice of Proposed Penalty to Maxim Power Corporation and its named subsidiaries (“Maxim”),1 jointly and severally, as well as executive, Kyle Mitton (the “Order”).2 The Commission ordered Maxim and Mitton (together, the “Respondents”) to show cause why they should not be assessed civil penalties of $5 million3 and $50,000, respectively. Respondents must answer the Order by Wednesday, March 4, 2015 and may elect in their answer to: (1) proceed via a hearing before an Administrative Law Judge; or (2) receive an immediate penalty assessment if FERC finds that a violation occurred, the payment of which the Commission may pursue in federal district court via a trial de novo if such penalty is not paid within 60 days. The Commission does not seek disgorgement because ISO-New England already recovered the alleged overpayments.  read more

Posted in FERC, Power, Regulation

The Fate of Demand Response Hangs in the Balance

By Gregory Lawrence, Sohair Aguirre, Natalie Mitchell and Lamiya Rahman

The Justices of the United States Supreme Court are not strangers to the retail versus wholesale distinction that often plagues FERC’s regulations.  Indeed, on January 12, 2015 they heard arguments in Oneok v. Learjet regarding this very question.  Three days later, on January 15, 2015, the Solicitor General, on behalf of FERC, filed a petition for a writ of certiorari in FERC v. EPSA regarding FERC’s jurisdiction to regulate ISO/RTO demand response programs.  Will the Justices take FERC up on its request to argue the wholesale versus retail distinction in the context of demand response?  As the Magic 8 Ball® counsels “reply hazy, try again.”  read more

Posted in Cases, Commodity Trading, FERC, Oil & Gas, Power, Regulation, Supreme Court

REMIT: The Countdown to Full Implementation Begins as Final Data Reporting Rules Are Published

By Doron Ezickson and Adam Topping

The REMIT Implementing Acts on data reporting obligations entered into force on 7 January 2015. This document is the final guidance setting out the rules for reporting wholesale energy products and fundamental data in the EU as required pursuant to Articles 8(2) and 8(6) of the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT).  REMIT is an EU regulation enacted to harmonise the European energy markets and protect them from market manipulation and abuse.

The entry into force of the REMIT Implementing Acts also triggers the three month timeframe within which market participants are required to register with their national regulatory authority.  Set out below are key take-aways from the final Implementing Acts.  read more

Posted in Uncategorized

Does the Natural Gas Act Preempt State-Law Antitrust Lawsuits? – Supreme Court Arguments

By Terence Healey, Natalie Mitchell, Christopher Polito and Mary Treanor

On July 1, 2014, the U.S. Supreme Court granted a petition to hear an appeal by several companies contending that state-law antitrust claims were precluded by the federal Natural Gas Act and, therefore, fell under the exclusive jurisdiction of the federal government, including the Federal Energy Regulatory Commission.  These state-law claims alleged manipulation of gas prices, as provided on published indices, during the western energy crisis from 2000 to 2002.  The underlying Ninth Circuit decision was said to conflict with settled law, and the Supreme Court heard oral arguments on Monday, January 12, 2015.  This case raises an intriguing question about what the Justices aim to achieve given the intervening expansion of FERC’s anti-manipulation authority in the 2005 Energy Policy Act – a point stressed by FERC and the Solicitor General in their brief opposing cert.  read more

Posted in Antitrust, Cases, FERC, Oil & Gas, Power, Supreme Court

U.S. Department of Commerce Finds ‘Dumping’ and Unlawful Subsidization of Solar Product Imports

By Greg Kusel, and Natalie Mitchell

On December 16, 2014, the U.S. Department of Commerce announced its affirmative final determinations regarding imports of certain crystalline silicon photovoltaic products used for solar generation. The Department determined that China and Taiwan violated antidumping duty law by selling solar products in the U.S. at significantly less than fair value.  Additionally, it determined that China violated countervailing duty law by providing subsidies to Chinese solar manufacturers. read more

Posted in Energy Infrastructure, Finance, Power, Renewables

2014 FERC Enforcement Report Emphasizes Internal Compliance Procedures, Self-Reporting, and Importance of Cooperation

By Doron Ezickson, Gregory Lawrence, Greg Kusel and Christopher Polito

The Federal Energy Regulatory Commission’s (FERC) Office of Enforcement (Enforcement) 2014 Report on Enforcement (Report), issued on November 20, 2014, provides an overview of and statistics regarding FERC’s enforcement activities during the fiscal year 2014 within Enforcement’s four divisions: Investigations, Audits and Accounting, Energy Market Oversight, and Analytics and Surveillance.  The Report provides information regarding Enforcement’s non-public activities and priorities during the fiscal year 2014.  The 2014 Report emphasizes the value FERC Enforcement places on self-reporting and internal compliance procedures.  read more

Posted in Enforcement and Investigations, FERC, Oil & Gas, Power, Regulation