On June 12, 2014, the Federal Energy Regulatory Commission (FERC) issued a Staff Notice of Alleged Violations (Preliminary Notice) stating that FERC’s Office of Enforcement has preliminarily determined, in a formal, nonpublic investigation, that Twin Cities Power-Canada, U.L.C. and certain affiliates, including Twin Cities Energy, L.L.C. (TCE) and Twin Cities Power, LLC (TCP), and individuals Allan Cho, Jason F. Vaccaro and Gaurav Sharma (collectively, the “Subjects”) each violated FERC’s prohibition of electric energy market manipulation in 18 C.F.R. § 1c.2.
The Preliminary Notice alleges that the Subjects violated FERC’s anti-manipulation rule “by scheduling and trading physical power” in the Midcontinent Independent System Operator, Inc. (MISO) market “to benefit related swap positions that settle off of real-time MISO prices, including the Cinergy Hub Balance-of-Day Swap traded on IntercontinentalExchange, Inc.” during the period from January 1, 2010 through January 31, 2011. The Preliminary Notice does not provide any additional details regarding the investigation or the alleged manipulation, but Twin Cities Power Holdings, LLC, which owns TCE and TCP and formerly owned Twin Cities Power - Canada, Ltd., which ceased operations in 2012, has been disclosing the existence of the investigation, initiated in October 2011, in Securities and Exchange Commission filings since at least June 2012.
The Preliminary Notice is the first Staff Notice of Alleged Violations of the FERC’s ant-manipulation rule issued since Powhatan Energy Fund LLC (Powhatan) launched its unprecedented and widely publicized website in March 2014 criticizing FERC’s investigation of alleged manipulation by Powhatan and related parties in the PJM Interconnection, L.L.C. market from February to August 2010.