On August 22, 2017, the Federal Energy Regulatory Commission ("FERC") issued an Order Approving Stipulation and Consent Agreement with City Power Marketing, LLC ("City Power") and its owner, K. Stephen Tsingas. As detailed in a Cadwalader memorandum, the Consent Order was "the first order approving an enforcement settlement issued since the Commission re-established a quorum with the addition of [Chair] Chatterjee and Commissioner Powelson."
The Order settled FERC claims that City Power violated (i) section 222 of the Federal Power Act, (ii) the FERC Anti-Manipulation Rule, and (iii) the FERC rule requiring truthful communications with the agency. City Power allegedly committed the violations by executing a "scheme to engage in fraudulent Up-To Congestion" ("UTC") transactions in the energy markets of PJM Interconnection, L.L.C. ("PJM") in order to "garner excessive amounts of certain credit payments to transmission customers." In addition, the FERC claimed that City Power made false or misleading statements and omitted material information in connection with the FERC investigation. The parties agreed to the facts, but neither admitted nor denied any statutory or regulatory violation.
City Power allegedly employed three separate proscribed trading strategies as part of a plan to engage in fraudulent UTC transactions. With regard to the fraudulent information, Mr. Tsingas allegedly misled investigators concerning the existence of instant messages that discussed the trading strategies at issue. While City Power and Mr. Tsingas were originally ordered to pay penalties of $14 million and $1 million, respectively, both parties failed to make the mandated payments, and FERC instituted a collection action in federal district court. The Consent Agreement represents the result of mediation proceedings: City Power agreed to pay a $9 million penalty, and Mr. Tsingas agreed to pay $1.42 million in addition to a three-year trading ban. The Consent Agreement also requires the disgorgement of $1.3 million, which will be paid to PJM for the benefit of PJM ratepayers.
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