Court Throws Out Petulant Lawsuit Against GDF Suez's PUCT-Sanctioned ERCOT Behavior

A federal court has dismissed with prejudice a lawsuit filed by two power traders against GDF Suez Energy North America, Inc., finding that GDF Suez's behavior is exempted from the Commodities Exchange Act

As previously reported, the suit, alleging market manipulation, amounted to a collateral attack on Texas' energy-only market and small-fish-swim-free rule by power traders Aspire Commodities L.P. and Raiden Commodities L.P. The traders have unsuccessfully sought to eliminate the rule at the Public Utility Commission of Texas, and to limit certain generator behavior via the ERCOT stakeholder process.

The traders filed suit against GDF Suez under the Commodities Exchange Act (CEA), alleging, among other things, that GDF Suez's behavior impacted ICE prices.

However, the Court found that GDF Suez's behavior is exempted from the Commodities Exchange Act, noting that the CFTC on April 2, 2013 issued a Final Order generally exempting certain transactions in the energy market from the provisions of the CEA and CFTA regulations.

"The exempted transactions include 'energy transactions,' which are defined as transactions in a day-ahead or real time market for the purchase or sale of electricity, such as the transactions at issue in this case, and the parties to the contract must be persons who 'actively participate[] in the generation, transmission, or distribution of electric energy, such as GDF," the Court said.

"Furthermore, in the case of transactions on ERCOT, the agreement, contract or transaction must be offered or sold pursuant to a tariff, rate schedule, or protocol approved or permitted by the PUCT, as were the transactions in this case," the Court noted.

"The Final Order exempts these transactions 'from all provisions of the CEA,' which includes 7 U.S.C. § 25 upon which Plaintiffs rely as the basis for their private cause of action," the Court said.

Though the traders alleged that GDF influenced ICE prices, the Court said that, "even assuming arguendo that GDF intended to influence the ICE market, all of the conduct that Plaintiffs challenge took place entirely within the ERCOT market."

"Indeed, although Plaintiffs' 95-pages First Amended Complaint details numerous transactions within ERCOT, it does not identify a single ICE transaction in which GDF or any other Defendant engaged. Because GDF's allegedly improper conduct consisted solely of transactions within ERCOT that are covered by the CFTC's Final Order and thus are exempted from the CEA, the private right of action in 7 U.S.C. § 25 of the CEA is unavailable to Plaintiffs, and their cause of action under the CEA is dismissed," the Court said.

Case 4:14-cv-01111