Dive Brief:
- Coaltrain Energy agreed to pay $4 million to settle allegations that company traders manipulated the PJM Interconnection’s market by making improper “up to congestion” trades, according to a settlement agreement approved last week by the Federal Energy Regulatory Commission.
- FERC agreed to drop all its claims against Coaltrain and five individuals that were pending in a lawsuit — FERC v. Coaltrain Energy — in the U.S. District Court for the Southern District of Ohio, according to the agreement approved Oct. 11. FERC was seeking a total of $42.1 million from the trading firm and the individuals.
- Coaltrain, which didn’t affirm or deny the allegations, agreed to pay PJM in five $800,000 installments, according to the settlement agreement. FERC directed PJM to allocate the funds from Coaltrain to the grid operator’s members in a “reasonable manner.”
Dive Insight:
In 2016, FERC found that Coaltrain and its traders in 2010 manipulated PJM’s market by placing UTC trades for the sole or primary purpose of collecting “marginal loss surplus allocation” payments instead of for the purpose of profiting from price changes.
Also, FERC said, Coaltrain officials made false and misleading statements to the commission’s enforcement office staff about the existence of records created by employee monitoring software.
FERC ordered Coaltrain, owners Peter Jones and Shawn Sheehan, and employees Robert Jones, Jeff Miller and Jack Wells to pay a total of $38 million and to return $4.1 million in unjust profits. FERC asked the federal court in Ohio to affirm the commission’s penalty order.
Up-to-congestion trades are used to hedge against grid congestion by allowing market participants to arbitrage the difference between day-ahead and real-time congestion prices at two different locations, according to FERC.
PJM runs the grid and wholesale power markets in 13 mid-Atlantic and Midwestern states and the District of Columbia.
