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Jen Alic

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JPMorgan Settles Energy Price Fix for $410M

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.

Related article: Why Oil is Good for Real Estate

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.

Related article: Why Oil is Good for Real Estate

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. Jen Alic of Oilprice.com




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