FERC Issues Show Cause Order to Deutsche Bank Energy Trading, LLC Regarding Alleged Manipulation

FERC yesterday directed Deutsche Bank Energy Trading, LLC to show cause why it should not be assessed a civil penalty in the amount of $1.5 million for alleged violation of the Commission's anti-manipulation rules.

Specifically, FERC directed Deutsche Bank Energy Trading, LLC to show cause: (i) why it should not be found to have violated the Anti-Manipulation Rule, section 1c.2 of the Commission's regulations and section 222 of the Federal Power Act and the parallel provision in the Californian ISO Tariff, section 37.7; (ii) why it should not be found to have violated the accuracy requirements of the Commission's regulations, section 35.41(b) and the parallel provision in the CAISO Tariff, section 37.5, in connection with its physical energy trades and financial positions in the CAISO markets.

The Commission further directed Deutsche Bank Energy Trading, LLC to show cause why it should not be assessed a civil penalty in the amount of $1,500,000 or a modification of that amount consistent with section 31(d)(4) of the Federal Power Act, and disgorge $123,198 of unjust profits plus interest as a result of its energy and Congestion Revenue Rights (CRR) transactions at Silver Peak.

Deutsche Bank Energy Trading, LLC is alleged to have engaged in manipulation and submitted false information in connection with its trading related to the 17 MW Silver Peak intertie in CAISO during the period from January 29, 2010 through March 24, 2010.

In a report, FERC Enforcement staff, "alleges that employees of Deutsche Bank, including senior level employees, conceived and executed a fraudulent scheme of scheduling physical transactions to benefit Deutsche Bank's financial CRR position."

"Specifically, Enforcement staff alleges that Deutsche Bank scheduled exports from CAISO at Silver Peak with the intent to eliminate import congestion and, thereby, benefit its CRR position at Silver Peak. Enforcement staff also alleges that Deutsche Bank falsely designated certain imports and exports as Wheeling-Through transactions, even though Deutsche Bank was not wheeling power and those schedules did not meet the tariff requirements for Wheeling-Through Transactions," FERC said.