The 5 Worst Power Price Manipulators
Oct 25th 2013 11:06AM
Updated Oct 25th 2013 11:08AM
There's a reason your power bill is so high - and it has nothing to do with leaving the refrigerator door open. In less than a decade, energy regulators have slapped more than $1 billion in fines on companies for messing with power markets . Here's who you can blame.
1. Barclays-$470 million
First and foremost, blame the Brits. Barclays PLC has chalked up a whopping $470 million in fines for a "fraudulent scheme to manipulate electricity prices" in California between 2006 and 2008 . While Barclays has promised to defend its position, the Federal Energy Regulatory Commission (FERC) has been gathering dirt on these deals since 2007 . In addition to corporate charges, four of Barclays' traders are also being slapped with $18 million worth of fines .
2. JPMorgan-$410 million
California can't catch a break. JPMorgan Chase & Co agreed in July to cough up $410 million for manipulating power markets in California and the Midwest from 2010 to 2012 . According to the FERC, a division of JPMorgan used 12 unique bidding strategies to push grid operators' payments up tens of millions of dollars . While Barclays remains on the offensive, a JPMorgan spokesman noted that "We're pleased to have this matter behind us ."
3. Constellation Energy-$245 million
While banks may have snagged the two biggest fines, utilities are perfectly capable of fixing power prices on their own. Constellation Energy was fined $245 million in 2012 for messing with New York power markets between 2007 and 2008. While that's significantly smaller than Barclays or JPMorgan, the utility's $14 billion in 2011 sales is a quarter of Barclays' and 15% of JPMorgan's. But Constellation was happy to settle its bill and admit no wrongdoing, two final dealmakers for its $7.9 billion merger with Exelon , which was completed the same day .
4. Energy Transfer Partners-$30 million
Between 2003 and 2005, Energy Transfer Partners, L.P. made Houston a hotter market than it should've been. In 2009, the company paid $30 million in FERC fines for messing with wholesale natural gas prices at Houston Ship Channel, one of the U.S.' busiest seaports and a growing presence in the LNG export market . At the time, it was the largest settlement since FERC's enforcement authority was enhanced in 2005.
But the win was hardly monumental, as FERC had originally hoped to extract as much as $200 million from Energy Transfer Partners . For ETP's part, CEO Kelcy Warren didn't mince words: "I continue to be disgusted by the manner in which the FERC Enforcement Staff administers the FERC's enforcement powers... I believe that the FERC needs to take a long, hard look at how its Enforcement Staff conducts itself to ensure the natural gas industry receives the fairness and due process it rightly deserves ."
5. BP Energy-$29 million
A two-minute phone conversation between a trainee and a senior natural gas trader may ultimately cost BP PLC $29 million in fines. That's an expensive telephone bill. The company was accused in August of manipulating Texas natural gas markets, an accusation spokesman Geoff Morrell says the company will "vigorously defend ." But this isn't the first time BP's been bad. The corporation doled out $303 million in 2007 to clear its name of propane market manipulation in 2003 and 2004 , and forfeited $7 million to FERC in 2007 for another instance of power price manipulation .
Manipulating Money Makers
These five companies aren't the only culprits with their hands in the competitive energy cookie jar. In the past six years alone, FERC has fined over 30 companies more than $1 million each for messing with markets . With new regulatory authority, FERC now has more power to put price manipulators in their place, clearing the way for fairer markets and cheaper power. With any luck, this list will look significantly smaller in the next decade.
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The article The 5 Worst Power Price Manipulators originally appeared on Fool.com.Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo. The Motley Fool recommends Exelon. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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