energy tradingAn electric generation company may have improperly manipulated the Texas energy market for financial gain, according to a federal lawsuit filed in Houston.

GDF Suez, a Houston-based generator with facilities around the state, is accused of intentionally withholding generation to drive up wholesale electric prices.

Aspire Commodities LP and Raiden Commodities LP filed the lawsuit April 22, according to a report in the Fort Worth Star-Telegram. Citing it as a pending legal matter, GDF Suez has declined comment. You can view the lawsuit here.

The litigation contends that GDF Suez North America intentionally withheld electricity during times of tight supply “for reasons not explained by rational notions of supply and demand.

“GDF Suez then dumps its electricity at the artificially high price it created to make excessive, artificial profits,” the lawsuit alleges.

Barry Hammond, a Houston attorney representing Aspire and Raiden, told the Star-Telegram that a hearing in the case has been set for August.

Small Fish Swim Free Rule

However, Suez may be shielded from any sort of enforcement action by the Public Utility Commission for the sorts of activities outlined in the federal lawsuit.

That’s because the PUC has adopted what is known as the “small fish swim free” rule. Under it, companies that control less than 5 percent of the state’s wholesale energy market are deemed too small to possess market power — and so therefore cannot be prosecuted for abusing it. The PUC accepted paperwork from Suez in 2012 and 2013 that establishes the company falls under the 5 percent small-fish threshold.

Raiden Commodities, in an April 21 action that is separate from its federal lawsuit, filed documents at the PUC calling for the agency to rescind its small fish rule. The Platts news service also reported that a number of other market participants likewise support a change.

Last year the independent monitor of the state’s wholesale electricity market found that notwithstanding their size, some “small fish” generators possess the ability to significantly drive up wholesale prices when energy surpluses are running short. “During these times a large ‘small fish’ would be pivotal and able through their offers to increase the market clearing price,” the independent market monitor reported.

This is not the first time that Suez’s trading practices have made headlines. Platts reported in 2013 that the company’s trading practices had become the object of concern among other market participants. In 2008 a controversial trading practice by Suez Energy Marketing was referenced by the Wall Street Journal.

— R.A. Dyer