The Federal Energy Regulatory Commission has grown adult teeth, finally.
The commission took a bite out of JPMorgan Ventures Energy Corp. last week by suspending it from trading electricity for profit for six months starting in April.
The action came after the trader provided false information as the commission investigated market manipulation charges made by California regulators.
It is the first time that the commission has taken such an aggressive stand against an energy trader not named Enron, the now-defunct Texas energy company that pillaged California's electricity market during the 2001 energy crisis.
The commission, invoking expanded authority granted to it by Congress in 2005, concluded that JPMorgan's Houston-based energy trading arm still can buy and sell electricity in California but cannot charge market-based rates. As reported by The Bee's Dale Kasler, the decision could cost the company millions.
During the summer, the California Independent System Operator, which is responsible for keeping the electric grid operating, accused JPMorgan of overcharging the state by $73 million.
As FERC investigated California's allegation, it concluded that JPMorgan submitted false information, leading to the stunning decision to yank JPMorgan's ticket to trade for profit in California and in other parts of the country where it operates. Barring a successful appeal by JPMorgan, the order will take effect in April, giving parties involved time to prepare.
In its decision, the commission cited "three separate filings containing statements that were premised on what are undeniably falsehoods."
"The ability to charge market-based rates is a privilege, not a right, and in granting that privilege the Commission relies on the truth and veracity of the demonstrations made by companies when they apply for market-based rate authority," the majority opinion says.
The commission's 4-1 decision was hardly made by wild-eyed radicals. Two of the four commissioners who formed the majority are Republicans; the tenure of two members dates to President George W. Bush's administration. The energy trader still could face fines for the underlying complaint that it manipulated the California market.
Californians may recall the energy crisis of a decade ago when energy pirates caused shortages, ran up prices and disrupted commerce and politics. The federal commission at the time was in the thrall of free-market advocates who promoted energy deregulation, while Bush and Vice President Dick Cheney and their patrons at Enron were happy to let California and then-Gov. Gray Davis squirm.
Once again, California faces an uncertain situation as Southern California Edison and regulators grapple with whether the utility can safely restart the San Onofre nuclear power plant.
The California Independent System Operator last week alleged that JPMorgan is complicating the state's energy situation by standing in the way of a plan to overhaul a pair of generating units in Huntington Beach. As a result, "the reliability of service in Southern California is in great jeopardy," the ISO said in a filing with FERC.
FERC's decision to bare its fangs now is welcome, if overdue by about a decade. Its action ought to serve as a warning to energy merchants who may be tempted to make undue profits at the expense of California electricity customers.
The Bee's past stands
If energy prices are to be disciplined by markets instead of regulations, the nation must have a market cop prepared to police those markets and well enough armed with penalties to make wrongdoers pay dearly for their abuses.
– June 22, 2002