The Federal Energy Regulatory Commission has approved a settlement between its Office of Enforcement and Deutsche Bank Energy Trading LLC to resolve an Order to Show Cause proceeding regarding manipulation of California power markets.
Deutsche Bank stipulates to the facts and neither admits nor denies the violations. It agrees to pay a civil penalty of $1.5 million and disgorge unjust profits of $172,645, plus interest, resulting from its trading in California Independent System Operator (California ISO) markets at the Silver Peak intertie. In a September 2012 order, the Commission directed Deutsche Bank to show cause why its conduct did not merit a proposed $1.5 million penalty.
The settlement also requires Deutsche Bank to implement enhanced compliance measures and procedures.
Based on its investigation, Enforcement staff determined that between January 29, 2010, and March 24, 2010, Deutsche Bank violated the Commission’s anti-manipulation rule by engaging in a scheme in which Deutsche Bank entered into physical transactions to benefit its financial position, its Congestion Revenue Rights (CRR) position at the Silver Peak intertie. As stipulated by Deutsche Bank, its “physical exports at Silver Peak raised prices at Silver Peak and caused its CRR position to gain value.” Enforcement concluded that Deutsche Bank’s physical transactions were not consistent with market fundamentals, but instead were undertaken with the intent to change the value of CRRs. Deutsche Bank stipulated that the physical transactions lost money on each day they were traded.
Enforcement concluded that Deutsche Bank’s manipulation hindered the proper functioning of the California ISO’s CRR and physical markets.
The investigation further determined that Deutsche Bank violated Commission regulations requiring companies with market-based rate authority to provide accurate information. A majority of Deutsche Bank’s transactions at the Silver Peak intertie were designated as Wheeling-Through Transactions without meeting California ISO’s tariff requirements for such transactions. Enforcement determined that these false designations violated the Commission’s regulation requiring the submission of information to ISOs.
Within 10 days, Deutsche Bank must pay the civil penalty to the U.S. Treasury and disgorge the unjust profits to California ISO for distribution to market participants harmed by the company’s manipulation.
'We are pleased to have reached a settlement and put this matter behind us', Renee Calabro, a Deutsche Bank spokeswoman in New York, said in a phone interview with Bloomberg.