The Federal Energy Regulatory Commission — that is, the federal counterpart to our own Public Utility Commission — has assessed a penalty dwarfing anything like it levied in Texas.
All told, Constellation Energy Group will pay $235 million for actions the feds describe as improper manipulation of the wholesale energy market, according to a FERC announcement. The company’s alleged gaming occurred in New York between September 2007 and December 2008.
“That’s nothing to sneeze at; it’s a really big number,” said energy analyst Paul Patterson, speaking to the Reuters news service.
By contrast, the largest such settlement in Texas was just $15 million — or less than one-tenth the FERC settlement. That 2008 Texas penalty was against Luminant for alleged gaming activities between June and September 2005. Like the Constellation case, Luminant never admitted wrongdoing.
The Luminant settlement fell short of the more than $210 million the PUC staff initially wanted to assess, short of the $57 million in damages allegedly caused by the company, and even short of its $19 million in profits the company racked up from its questionable activities.
The PUC said it was powerless to seek more because of limitations in state law. That is, the PUC can assess fines of $25,000 per day, per violation, and at the time of the Luminant case it also lacked authority to order companies to disgorge unjust profits. By contrast, the Federal Energy Regulatory Commission can assess fines of up to $1 million per day, per violation, and can order companies to disgorge unjust profits.
The Texas Coalition for Affordable Power has consistently called for giving the PUC more tools to protect the state’s competitive market. In 2011, for instance, TCAP supported House Bill 2133, by state Rep. Burt Solomons, allowing the PUC to seek disgorgement of unjust profits in market manipulation cases. The governor signed HB 2133 into law last June.
TCAP also has supported increasing the penalty cap for market manipulation. Increasing that cap has taken on even greater importance now that policymakers are contemplating new rules that would allow generators to seek significantly higher prices for their energy. These changes are intended to address reliability issues, but also could provide greater incentives for improper market gaming.
You can read more the Luminant case, House Bill 2133 and the history of the state’s electricity market in a new report from TCAP. Here’s the link.