By Mark Perlis
On July 30, 2013, FERC approved an enforcement settlement agreement
with JP Morgan, which requires JP Morgan to pay a civil penalty of $285 million and disgorgement of unjust profits of $125 million in connection with abusive bidding practices in CAISO Day-Ahead and Real Time markets for generating units scheduled by JP Morgan under tolling agreements. JP Morgan admits the bidding practices described in the FERC order and settlement agreement, but does not admit they constituted a violation of the Anti-Manipulation Rule, as found by the Commission and its enforcement staff. The essence of the various bidding practices is that JP Morgan submitted uneconomic bids in the Day Ahead market for high heat rate generating units largely out of the money in expectation of inducing CAISO exceptional dispatch instructions that would qualify the units for make-whole bid cost recovery payments under then-applicable tariff rules.