On July 31, 2013, United States Senators Elizabeth Warren and Edward J. Markey submitted a letter to Federal Energy Regulatory Commission (“FERC”) Chairman Jon Wellinghoff, expressing serious concern over the apparent increasing frequency of manipulation in electricity markets. Senators Warren and Markey stated that a recent settlement agreement, pursuant to which FERC ordered JPMorgan Chase to disgorge unjust profits of $125 million and to pay civil penalties of $285 million, for total damages of $410 million, may not be adequate to refund defrauded ratepayers, nor does it punish individual executives who sought to impede FERC’s investigation. The Senators posed a series of seven questions seeking information from FERC regarding the JPMorgan settlement and FERC’s enforcement practices, with the general goal that government settlements provide appropriate relief for consumers and deter future market manipulation:
1) What analysis did FERC conduct to evaluate harms to consumers? Did FERC’s analysis take into account the ripple effect of manipulations and indirect costs to authorities and ratepayers? If so, please make that analysis available to our offices. Does the Commission believe that the $125 million in disgorged unjust profits is sufficient to make ratepayers whole?
2) Do you believe it to be the case that JPMorgan granted its trading rights to two independent firms during the six-month suspension period to evade FERC’s penalties? If so, does FERC consider the six-month suspension to have been an effective penalty? And, if it was not an effective penalty, what other penalties could FERC impose to better deter improper conduct?
3) Is the Commission concerned, based on the high and increasing number of recent FERC enforcement actions, about an increase in market manipulation?
4) Does the Commission believe it has the necessary jurisdiction over related financial markets to make certain that energy consumers are protected? Specifically, what is the status of the Memorandum of Understanding required under the Dodd-Frank Wall Street Reform Act to clarify how FERC and the CFTC plan to address information flow and prevent market manipulators from exploiting gaps in regulatory oversight?
5) Will the Commission release the full FERC Enforcement Staff report of JPMorgan’s conduct in this case?
6) Why did the Commission decide to take no action against JPMorgan executives who planned and executed market manipulations or who impeded the Commission’s investigations? Is the Commission concerned that these executives will continue to engage in illicit activities at other institutions?
7) Why was JPMorgan permitted to avoid an admission of guilt in this case? Under what circumstances would FERC determine that requiring an admission of guilt is a precondition for settlement?
In a separate letter submitted on August 2, 2013, Senator John McCain and Senator Carl Levin informed Chairman Wellinghoff of a review by the U.S. Senate Permanent Subcommittee on Investigations on matters relating to the physical commodity interests held by financial holding companies. The Subcommittee requested that FERC provide key documents collected in connection with its investigation of and settlement with JPMorgan and its affiliates.