FERC has given Houston-based Vista Energy Marketing LP (VEM) approval to sell wholesale electricity at market-based rates following the agency’s months-long investigation into past wrongdoing of two key officials.

In March the Federal Energy Regulatory Commission (FERC) asked VEM whether the two men identified in its application for market-based rate authority were the same traders who pleaded guilty in 2006 to conspiracy to manipulate the price of natural gas (see Daily GPI, March 2). The application cited Michael Whalen as a member of Irish Marketing LLC, the sole general partner of VEM, and Paul Atha as director of trading for VEM.

The two men entered guilty pleas in U.S. District Court for the Northern District of California in 2006 (see Daily GPI, June 21, 2006). Whalen, a former Cinergy trader, was sentenced to three years of probation and a $5,000 fine. Atha, a one-time trader with Mirant, was sentenced to three years of probation, six months of home confinement and a $5,000 fine as well.

The two former traders also entered into separate consent orders with the Commodity Futures Trading Commission (CFTC) that permanently enjoined them from applying for registration, engaging in any activity requiring registration, or acting as a principal as defined by the National Futures Association. Whalen and Atha were each required to pay $200,000 in civil penalties (see Daily GPI, Nov. 9, 2007; Nov. 20, 2006).

In its response to FERC, VEM acknowledged that the court order barred Whalen and Atha from engaging in any activity requiring CFTC registration or from acting as a principal in any entity that engaged in such activity.

To address the problem, VEM restructured its operations to conform to the consent orders restricting the market activity of the traders. VEM set up a Texas limited partnership designed to provide it with the ability to operate as a pooled investment vehicle and as such, VEM and its upstream general partner, Irish Marketing, would be exempt from registration as “commodity pool operators” or as “commodity trading advisors.”

Under the FERC order, Atha apparently will continue as director of trading for VEM, and his activities will be monitored by the company’s chief compliance officer. And Whalen, a member/investor in Irish Marketing, will have no ability to exert control over the day-to-day operations of VEM, it noted.

VEM has agreed to a number of commitments to ensure compliance with agency rules. “For as long as the individuals who pled guilty to false price reporting are associated with Vista Marketing, we will monitor Vista Marketing’s compliance with these representations and commitments on a regular basis. Vista Marketing is also subject to audit to ensure its compliance with these representations and commitments,” the order said [ER09-553].

In addition, “we direct Vista Marketing to report to the Commission if the terms of any of the representations and commitments…undergo a change. Such a report should be submitted no later than 30 days of the date of such change,” it said.

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