Another class action lawsuit has been filed against KeySpan Corporation (KeySpan) and Morgan Stanley Capital Group Inc. (Morgan Stanley), claiming damages for antitrust violations resulting from an allegedly illegal swap agreement that allowed KeySpan to manipulate energy prices in the New York City electric generating capacity market (NYC Capacity Market), see Konefsky et al. v. KeySpan Corp., et al., Case No. 1:12-cv-00017. The complaint was filed on January 6, 2012 in the U.S. District Court for the Western District of New York on behalf of electric customers of National Grid, which purchased electric energy and capacity in the NYC Capacity Market from 2006 through 2009. The plaintiffs, two law professors, are seeking on behalf of the class millions in damages and disgorgement of unlawfully obtained profits for alleged violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act, as well as analogous New York state laws.
As described in previous blog entries in February 2010 and February 2011, the underlying actions that led to this complaint involve a 2006 financial swap agreement between KeySpan and Morgan Stanley, which gave KeySpan an indirect financial interest in the sale of generating capacity by its largest competitor, Astoria Generating Company, in the NYC Capacity Market. At that time, approximately 1000 MW of new generation was poised to come online in that market. Previously, due to tight supply conditions, KeySpan, as the largest seller of installed capacity in the market, had been able to bid at or near the applicable bid cap without risking loss of sales. The anticipated addition of new generating capacity threatened to upset the status quo and put downward pressure on prices.
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