JPMorgan to pay $410m to settle claim

JPMorgan Chase is to pay $410 million (€309 million) to settle allegations from the US Federal Energy Regulatory Commission (Ferc) that it manipulated power markets in California and the midwest.

Ferc, which regulates gas, electricity and oil networks, said JPMorgan would pay $285 million in a civil penalty to the US treasury and give up $125 million of “unjust profits”, with the bulk of the latter going to Californian electricity consumers.

The bank also agreed to waive almost $227 million it had sought through a challenge to new market rules and gave up rights to $35 million that grid manager California Independent System Operator said it overpaid the bank.

Ferc said JPMorgan used “manipulative bidding strategies” to make tens of millions of dollars out of uneconomic power plants. The bank started 10 of the 12 strategies even after an investigation began.

“We’re pleased that this matter is behind us,” said JPMorgan. “Due to reserves previously set aside, this settlement will have no material impact on earnings.”

The settlement does not carry punishment for individual traders or Blythe Masters, the bank's head of commodities.

In a settlement term that has been criticised by some US judges, the bank “neither admits nor denies the violations”.

Different path
By agreeing the settlement, JPMorgan is taking a different path to Barclays, which plans to contest in court a $470 million fine from Ferc over alleged California power market manipulation.

JPMorgan does not dispute the facts as laid out by Ferc, but argued that it did not break the rules by exploiting loopholes in power markets.

The bank is hurrying out of several commodities businesses, which are coming under pressure from regulators and Congress. – (Copyright The Financial Times Limited 2013)