On December 30, 2014, FERC approved four separate Stipulation and Consent Agreements (“Agreements”) between its Office of Enforcement (“Enforcement”) and subsidiaries of Twin Cities Power Holdings – Twin Cities Power-Canada, Ltd., Twin Cities Energy, LLC, and Twin Cities Power, LLC (collectively, “Twin Cities”) – as well as traders Jason Vaccaro, Allan Cho, and Gaurav Sharma (collectively, “Traders”) that resolve allegations of market manipulation in the Midcontinent Independent System Operator, Inc. (“MISO”) from January 2010 through January 2011. Under the terms of the Agreements, Twin Cities agreed to pay a civil penalty of $2,500,000, disgorge $978,186 plus interest, and submit compliance reports for four years. Meanwhile, Jason Vaccaro agreed to a civil penalty of $400,000 and a five-year ban from physical trading, while Allan Cho and Gaurav Sharma agreed to four-year physical trading bans and civil penalties of $275,000 and $75,000, respectively.
According to the Agreements, Enforcement alleged that Twin Cities and the Traders manipulated the MISO market by importing physical power into MISO when they held a short swap position, or exported physical power from MISO when they held a long swap position. Furthermore, Enforcement alleged that the Twin Cities’ and Traders’ physical power flows were not designed to obtain the best price nor in response to market fundamentals, but rather to manipulate prices within MISO to benefit their financial swap positions. As a result, Enforcement determined that Twin Cities and the Traders violated FERC’s anti-manipulation rule by “using physical power flows to influence physical prices for the purpose of enhancing the value of financial positions.”
In consenting to the Agreements, Twin Cities and the Traders stipulated to the facts as recited in the Agreements. Twin Cities also admitted that it violated FERC’s anti-manipulation rule, while the Traders neither admitted nor denied any wrongdoing.
Copies of the Agreements are available here.