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JPMorgan to pay $410 million to settle electricity pricing claims

WASHINGTON — JPMorgan Chase & Co. agreed Tuesday to pay $410 million to settle accusations by U.S. energy regulators that it manipulated electricity prices.

The Federal Energy Regulatory Commission said the bank used improper bidding strategies to squeeze excessive payments from the agencies that run the power grids in California and the Midwest.

JPMorgan, the biggest U.S. bank, is paying a civil penalty of $285 million and returning $125 million in allegedly improper profits.

The bank didn't admit or deny any violations.

The FERC said it found improper trading practices were used at Houston-based JPMorgan Ventures Energy Corp., claiming the energy unit used five "manipulative bidding strategies" in California between September 2010 and June 2011, and three in the Midwest from October 2010 to May 2011.

JPMorgan Ventures Energy has contracts with power generating companies to trade their electricity. The FERC said JPMorgan traders offered to sell electricity at artificially low prices in a "day-ahead" market so that companies would put their plants on standby mode to quickly generate energy.

That would allow JPMorgan to earn fees for putting the power plants on standby mode.

Later, the FERC said, the traders would offer to sell electricity from the plants at higher prices in the market for last-minute energy needs.

Wall Street banks are facing increased scrutiny of their involvement in businesses that store and transport commodities such as oil and aluminum. A Senate committee held a hearing last week into whether banks should be allowed to control power plants, warehouses and oil refineries.

JPMorgan to pay $410 million to settle electricity pricing claims 07/30/13 [Last modified: Tuesday, July 30, 2013 7:44pm]
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