Warnings to the Unwary: Multi-Jurisdictional Federal Enforcement of Manipulation and Deception in the Energy Markets after the Energy Policy Act of 2005

Abstract

Some energy markets in the United States, notably California’s, have proven to be vulnerable to manipulation. In response, Congress included provisions in the Energy Policy Act of 2005, now implemented by the Federal Energy Regulatory Commission (FERC), that enhanced the power of the FERC to address manipulation and deception that affects transactions within the FERC’s jurisdiction. These far-reaching rules subject transactions and actors who were not previously exposed to FERC jurisdiction to the enforcement powers of that agency, including very substantial penalties. Under the FERC’s new rules, all participants in the organized energy markets, including those who trade in the retail portion, governmental, and certain cooperative utilities, and quite possibly including those who trade in the financial markets with an impact on FERC jurisdictional transactions, have become subject to the FERC’s enforcement jurisdiction. This Article addresses the scope and meaning of the new FERC rules.

Keywords: energy market manipulation, commodity market manipulation, Energy Policy Act of 2005

JEL Classification: K20, K32, K19