Under the Settlement Agreements, Twin Cities and the Traders agree to pay collectively $4,228,186 in civil penalties and disgorgement, and to implement various additional compliance measures, including filing semi-annual compliance reports. While Twin Cities admits OE’s alleged violations, the Traders neither admit nor deny the allegations against them.
OE’s investigation focused on Twin Cities’ and the Traders’ physical power flows and their relationship with Twin Cities’ financial positions and determined that, on 144 days during the relevant period, one or more of the Traders scheduled physical power in the direction of Twin Cities’ financial swaps with the intent of affecting prices at the MISO Cinergy Hub to benefit those financial positions. The physical power flows, OE determined, “were not intended to get the best price and were not in response to market fundamentals.” Rather, they were “occasionally profitable, but over time produced significant losses.” Yet, they “consistently resulted in gains to, or avoided losses from, the Traders’ financial swap positions,” representing yet another example of the “tool and target” market manipulation framework that then-OE director and new FERC Commissioner Norman C. Bay described in Senate subcommittee testimony in January 2014. OE determined that, “during the Relevant Period, the Traders’ financial swap positions benefitted by $978,186 from the manipulative scheme.”
FERC notes in the Order that Twin Cities’ acceptance of responsibility for its violations and avoidance of a trial-type hearing factored into its remedy determination and emphasized that “using physical power flows to influence physical prices for the purpose of enhancing the value of financial positions violates [its] Anti-Manipulation Rule.” Commissioner Bay, who was the director of OE during the Relevant Period, did not vote on the Order.
1 MISO Cinergy Hub Transactions, 149 FERC ¶ 61,278 (2014).