REGULATORY: FERC: FERC Issues Show Cause Order Against J.P. Morgan Ventures Energy Corporation

by King & Spalding

[authors:  Neil L. Levy, David G. Tewksbury, Grace Su]

The Federal Energy Regulatory Commission (“FERC”) recently issued an order directing J.P. Morgan Ventures Energy Corporation (“JP Morgan”) to show cause why it should not be found to have violated FERC’s Market Behavior Rules, and why its authorization to sell electric energy, capacity, and ancillary services at market-based rates should not be suspended. In particular, JP Morgan is alleged to have made four separate statements to FERC, the California Independent System Operator Corporation (“CAISO”), and CAISO’s Department of Market Monitoring (the “DMM”) that violate FERC’s Market Behavior Rule 3, which is codified in 18 C.F.R. § 35.41(b) and requires sellers to provide accurate and factual information, and prohibits sellers from submitting false or misleading information or omitting material information, in any communication with FERC, independent system operators, and market monitors.

According to the order, in March 2011, CAISO sent initial data requests to JP Morgan concerning its bidding activities, and in May 2011, CAISO referred the matter to FERC’s Office of Enforcement. Under the CAISO’s tariff, following such a referral, the DMM is prohibited from undertaking further investigative activities “except at the express direction of FERC or FERC Staff.” In communications with CAISO and the DMM, JP Morgan refused to provide complete responses to the data requests from the DMM on the grounds that it was obligated to stop its investigation after the matter was referred to FERC. On three occasions, however, FERC’s Office of Enforcement notified JP Morgan that it had, in fact, expressly directed CAISO and the DMM to continue to seek responses to the outstanding data requests, and/or directed JP Morgan to provide information to CAISO and the DMM. Nonetheless, JP Morgan did not submit the last of its responses until October 18, 2011, causing CAISO to impose a financial penalty of $486,000 for JP Morgan’s six-month delay in responding.

On March 21, 2012, JP Morgan filed a non-public appeal of CAISO’s decision to impose the $486,000 penalty, which FERC rejected as procedurally deficient. On May 21, 2012, JP Morgan filed a complaint against the CAISO challenging the imposition of the penalty on the grounds that, after referring the matter to the Office of Enforcement, CAISO was prohibited under its tariff from taking any further action against JP Morgan except at the express direction of FERC or FERC Staff. JP Morgan further asserted that it had not been informed that the DMM had been authorized by FERC Staff to continue to seek information from JP Morgan. After the Office of Enforcement filed an answer including copies of its prior communications with JP Morgan, JP Morgan moved to withdraw its complaint. On June 22, 2012, JP Morgan also filed an answer acknowledging its factual error and explaining the circumstances that led to the error. The Office of Enforcement submitted additional information regarding the chronology of events in response to JP Morgan’s answer.

In its September 20, 2012 show cause order, FERC found that the following statements by JP Morgan may have been misleading or omitted material information: (1) the October 18, 2011 response to CAISO and the DMM; (2) the March 21, 2012 non-public appeal; (3) the May 21, 2012 complaint; and (4) the June 22, 2012 answer. FERC therefore instituted an investigation to determine whether statements by JP Morgan violated FERC’s Market Behavior Rules, and whether JP Morgan’s market-based rate authority should be suspended. FERC also stated that it would determine whether hearing procedures are necessary after reviewing JP Morgan’s response, as well as any materials submitted by other parties. The order sets a refund effective date as of the date of publication of the notice in the Federal Register, and directs JP Morgan to respond to the order within 21 days of such publication.

In a separate concurrence, Commissioners Moeller and LaFleur emphasized that while misrepresentation to FERC and independent system operators “cannot be tolerated,” FERC “should carefully consider whether opening a proceeding under its ratemaking authority is the most appropriate course of action.” The two Commissioners encouraged FERC to “think carefully about the consequences of unduly blurring the line between enforcement and ratemaking,” and urged the Commission to explore other options, including whether the alleged misrepresentations could be treated as “additional allegations in the underlying investigation” or “as obstruction under the Penalty Guidelines.”

 Neil L. Levy
 Washington, D.C.
 +1 202 626 5452

 View Profile »

 Grace Su
 Washington, D.C.
 +1 202 626 2952

 View Profile »

 David G. Tewksbury
 Washington, D.C.
 +1 202 626 5454

 View Profile »

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.