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FERC's Clark Aims to Prevent 'Wild West' Energy Markets

FERC Commissioner Tony Clark Thursday said he plans to spend much of his first tenure at the Commission focusing on manipulation and abuse in energy markets in order to create a more attractive investment climate for infrastructure developers.

Speaking at the Energy Bar Association Mid-Year conference in Washington, DC, he said monitoring of the market for abuses is critical to attracting much-needed capital for the construction of energy infrastructure. "My goal is to help create a regulatory climate that encourages ample investment," particularly for "affordable, economically efficient energy."

Market manipulation and abuse could thwart investment. "The danger that arises out of these actions is more than just the financial impact that may flow through to particular end-use consumers...An equal danger is the impact that such actions can have on needed future investments in infrastructure," said Clark, former chairman of the North Dakota Public Service Commission.

"If the wide capital markets find that the energy markets are the Wild West frontier -- that games are rampant be they fraudulent, demand-response schemes, phantom wheeling transactions, uneconomic withholding or bidding -- that activity itself chases dollars from the sector that needs and deserves further investment," he told the attorneys and energy executives attending the conference.

"Given all of this, it's fair to say that I plan to spend a good deal of my tenure attempting to ensure the strength of market monitoring by emphasizing the importance of market participants' honest, timely and accurate communications with monitoring units," Clark said.

Clark's remarks followed recent suggestions by Commissioner Phillip Moeller that the Federal Energy Regulatory Commission (FERC) should create a model for cracking down on individual traders who repeatedly manipulate energy markets. Lately, the problems have been on the electric side. The Commission has gone after the trading desks of the large Wall Street banks -- Deutsche Bank, Barclays Bank and an affiliate of JPMorgan Chase for manipulation of the electricity markets (see NGI, Nov. 26).

At its last meeting FERC approved a settlement with Gila River Power LLC in which the company admitted manipulating power prices in trading on the California Independent System Operator market. It agreed to pay a $2.5 million fine and disgorge unjust profits of $911,553, plus interest.

On the natural gas side, FERC has issued a notice of inquiry on whether to require quarterly reporting of FERC-jurisdictional next-day and next-month transactions under the Natural Gas Act in order to increase transparency and FERC's surveillance of the wholesale natural gas market (see NGI, Nov. 19).

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