Washington—Senator Dianne Feinstein (D-Calif.), chairman of the Appropriations Subcommittee on Energy and Water Development, and Senator Ron Wyden (D-Ore.), chairman of the Committee on Energy and Natural Resources, released the following statements after receiving a response from the Federal Energy Regulatory Commission (FERC) to an April 29 letter that urged the Commodity Futures Trading Commission (CFTC) and FERC to work together to provide rigorous oversight of U.S. energy markets.
Senator Feinstein said: “In April we called on the CFTC and FERC to execute memorandums of understanding to ‘ensure complete integration of data and other information used to monitor and investigate natural gas and electricity market trading.’ The response letter we received from FERC indicates the MOU has not been executed and as a result FERC is not able to obtain ‘data that we believe is critical to our surveillance program to detect and deter energy market manipulation.’
“In the Dodd-Frank Act, Congress directed CFTC and FERC to cooperate in order to protect American consumers from manipulation, so it is unconscionable the CFTC would be unwilling to share this essential information with FERC.
“I feel very strongly about this. During the Western energy crisis, Californians learned that energy markets that lack real-time market oversight and effective regulation allow traders to rob Americans, disrupt economic activity and darken cities. The crisis cost consumers an estimated $45 billion in higher electricity rates, lost business due to blackouts, and a slowdown in economic growth. And the repercussions continue to be felt, as federal courts and FERC are still resolving multibillion dollar cases between the buyers and sellers active in the market during the crisis.”
Senator Wyden said: “In the wake of the Enron scandal, Congress took steps in 2005 to strengthen the Federal Energy Regulatory Commission’s authority to police the energy markets. While FERC has already taken major enforcement actions against traders and companies that manipulated energy prices, it appears that their federal counterparts at the CFTC have been working to undermine FERC’s efforts. Chairman Wellinghoff has asked Congress to step in and I will be consulting with our colleagues on Capitol Hill about doing exactly that.”
Using authority to prevent fraud and manipulation in energy markets that Senators Feinstein, Cantwell and Wyden sponsored in 2005, FERC recently reached a $410 million consent agreement with JP Morgan regarding electricity market manipulation in California and the Midwest between 2010 and 2012. In July, FERC ordered Barclays and four of its traders to pay $453 million for allegedly gaming western state power markets between 2006 and 2008.
The response letter from FERC is available here.