FERC Show Cause Order Seeks $15 Million Penalty Against Power Marketer, Trader

FERC has issued an order to City Power Marketing, LLC and K. Stephen Tsingas directing them to show cause why they should not be found to have violated section 1c.2 of the Commission's regulations and section 222 of the Federal Power Act (FPA) by engaging in fraudulent Up To Congestion (UTC) transactions in PJM Interconnection L.L.C.'s energy markets, and to show cause why it should not be found to have violated 18 C.F.R. § 35.41(b) of the Commission's rules through false and misleading statements and material omissions relating to the existence of instant messages discussing the trading conduct at issue.

FERC directed respondents to show cause why they should not be jointly and severally required to disgorge unjust profits of $1.3 million and severally assessed civil penalties in the following amounts:

City Power: $14,000,000
K. Stephen Tsingas: $1,000,000

As described by FERC's show cause order, A report from Staff of FERC's Office of Enforcement (OE Staff) alleges that, "Tsingas, trading on behalf of City Power, conceived of and implemented a fraudulent scheme in connection with the UTC markets operated by PJM. Specifically, OE staff alleges that Tsingas devised and implemented a manipulative scheme to inflate trade volumes of UTCs through transactions designed to wrongfully collect large amounts of market credits known as Marginal Loss Surplus Allocations (MLSA) based simply on trading volume. For example, the OE Staff Report alleges that Tsingas (for City Power) placed UTC trades in opposite directions on the same paths, in the same volumes, during the same hours for the purpose of creating the illusion of bona fide UTC trading and thereby to capture large amounts of MLSA that PJM distributed at that time to UTC transactions with paid transmission. The Report also alleges that Tsingas (through City Power) engaged in two other types of volume UTC trades to wrongfully collect MLSA."

"The Staff Report also alleges that Tsingas made numerous false statements to Commission staff under oath to try to prevent staff from learning about (and obtaining) important documents, namely instant messages that Tsingas exchanged with his partner during the time they were doing the trades at issue here," FERC said.

Docket IN15-5