On March 6, 2015, the Federal Energy Regulatory Commission (FERC) issued an Order to Show Cause and Notice of Proposed Penalty (Order) to City Power Marketing, LLC and K. Stephen Tsingas (jointly, Respondents). The Order requires the Respondents to show cause why they should not be found to have violated the Federal Power Act and the Commission’s regulations prohibiting market manipulation by engaging in fraudulent Up To Congestion (UTC) transactions in PJM Interconnection L.L.C.’s (PJM) energy markets. The Order also requires City Power to show cause why it should not be found to have violated the Commission’s rules by making false statements and material omissions related to the existence of instant messages between partners in City Power discussing the alleged fraudulent conduct.

The Order directs the Respondent show cause why they should not be required to disgorge profits and be assessed civil penalties in the following amounts:

  • City Power and Mr. Tsingas: Jointly and severally disgorge unjust profits of $1,278,358
  • City Power: $14,000,000 civil penalty
  • Tsingas: $1,000,000 civil penalty


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Clarification: This blog post has been updated to reflect the fact that the Respondents have made an election to pursue this matter, on a de novo basis, in federal district court.

On February 2, 2015, Powhatan Energy Fund, LLC, HEEP Fund, Inc., CU Fund Inc., and Houlian (Alan) Chen (jointly Respondents) filed answers to the December 17, 2014, Order to Show Cause and Notice of Proposed Penalty (Order) issued by the Federal Energy Regulatory Commission (FERC). FERC required Respondents to show cause why they should not be found to have violated section 1c.2 of the Commission’s regulations and section 222 of the Federal Power Act (FPA) by engaging in fraudulent Up To Congestion (UTC) transactions in PJM Interconnection L.L.C.’s energy markets. The Order also directed the Respondent show cause why they should not be required to disgorge profits and be assessed civil penalties in the following amounts:
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On August 5, 2014, FERC’s Office of Enforcement (OE) issued a Notice of Alleged Violations (NAV) asserting that Powhatan Energy Fund, LLC, HEEP Fund, Inc., CU Fund Inc., and Houlian (Alan) Chen (jointly Powhatan) engaged in improper and manipulative Up to Congestion (UTC) trading in PJM markets.   The NAV alleges that, between June 1, 2010 and August 3, 2010, Powhatan engaged in UTC transactions “designed to falsely appear to be spread trades, as a vehicle for collecting certain payments (called Marginal Loss Surplus Allocation or MLSA) from PJM.”  In addition, the NAV claims that Powhatan’s strategy involved the use of wash trades – or offsetting – for the same number of MWh at the same trading points in order to cancel out the financial effects of these trades while continuing to capture MLSA payments.  FERC has long prohibited wash trades.
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