JPMorgan Chase & Co. has settled with the federal government for $410 million for charges that it manipulated energy markets in California and Michigan between 2010 and 2011.
Of the $410 million, the state of California will get $124 million, and the rest will go to the US Treasury.
Ratepayers in the Midcontinent Independent System Operator will receive $1 million to settle charges JPMorgan also manipulated the power market in the Midwest.
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The banking giant was accused of manipulating energy prices in Michigan and California to make money-losing power plants appear more profitable to investors-and now it faces penalties from the Federal Energy Regulatory Commission (FERC), which regulates the sale of electricity. The two states paid an estimated $83 million more than they would have without the manipulation.
JPMorgan continues to deny any wrongdoing.
The scandal heated up in November, when FERC imposed a temporary, 6-month ban on JPMorgan's ability to trade physical power at market-based rates, beginning in April this year. The reason: The bank failed to disclose information to FERC and the California authorities during the market manipulation investigation. JPMorgan blew off the ban with a shrug.
This is the second house to go down (not literally, of course because they can handle the fines) for energy price manipulation. Earlier this month, Barclays (LON:BARC) was fined $453 million and four of the bank's traders were separately fined $18 million for energy price rigging in the Western US between 2006 and 2008.
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The Barclay's fine was a record fine levied by the US Federal Energy Regulatory Commission (FERC) for energy market manipulation. Trader Scott Connelly was fined $15 million, while Karen Levine, Ryan Smith and Daniel Brin were fined $1 million each. The four traders have now left Barclays.
FERC has also ordered Barclays to give up $34.9 million in profits to dole out to programs that assist low-income homeowners to pay their energy bills in the states of California, Arizona, Oregon and Washington-where energy markets were manipulated.
Barclays continues to deny the allegations. Last year, Barclays was fined £290 million by UK and US regulators for attempting to rig the interbank lending interest rate, LIBOR.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com More