First Ever Admission of Violation in FERC Manipulation Action

On November 19, 2012, FERC approved a settlement agreement between its Office of Enforcement and Gila River Power LLC (“Gila River”) addressing market manipulation claims related to activity in California.  As part of the settlement agreement, Gila River admits to violating both FERC’s anti-manipulation rule, as well as FERC’s regulations against providing inaccurate information.  This is the first case in which a market participant has admitted to violating FERC’s anti-manipulation rule in an energy trading case.  In prior FERC enforcement cases resulting in settlement, market participants have neither admitted nor denied the alleged violations.

The Office of Enforcement alleges that Gila River designed transactions to benefit electricity sales in California from its 2,200 MW power plant located in Arizona.  Under the terms of the settlement agreement, Gila River will pay a civil penalty of $2.5 million and disgorge profits of $911,553 plus interest.

FERC’s decision potentially marks a new course by which FERC will seek to extract “admissions” in order to settle ongoing enforcement actions.  If true, this move will likely result in more litigation and fewer settlements – partly due to the potential collateral consequences that can result from admissions – even in the absence of a private right of action under FERC’s anti-manipulation rule.

View the FERC order here.

Please contact any of the following Cadwalader attorneys if you have any questions.

Kenneth W. Irvin +1 202 862 2315
Gregory K. Lawrence +1 212 504 6171
Terence T. Healey +1 202 862 2335
Paul J. Pantano, Jr. +1 202 862 2410
Doron Ezickson +1 202 862 2430

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