Contract analysis

I. Purpose and Scope of Memorandum The purpose of this memorandum is to summarize the expert economic analysis prepared by Dr. Leonard Whitfield, Principal Expert, Whitfield Economic Advisors LLC ("WEA"), 1700 Pennsylvania Avenue NW, Suite 550, Washington, D.C. 20006, for the benefit of the Calderwood & Harkness LLP ("C&H") case team handling the above-referenced enforcement matter before the Federal Energy Regulator

II. Background: FERC Staff's Allegations and Quantification A. Overview of Staff's Theory FERC Staff alleges that Dunmore Power Trading LLC ("DPT"), the wholly owned power marketing subsidiary of Dunmore Energy Holdings Ltd. ("DEH"), engaged in a course of market manipulation in the Midcontinent Independent System Operator, Inc. ("MISO") Day-Ahead and Real-Time energy markets in violation of Section 222 of the Federa

1. Uneconomic Day-Ahead Bidding. FERC Staff alleges that Kyle Renfro, Senior Trader on DPT's MISO Day-Ahead Desk, submitted Day-Ahead supply offers for Dunmore's gas-fired generation units at prices significantly below marginal cost. According to Staff, these offers ranged from negative $15 per megawatt-hour to negative $40 per megawatt-hour at the Indiana Hub. Staff contends that these below-cost offers were designe

2. Cross-Product Manipulation. FERC Staff further alleges that Anastasia Petrov, a Trader on DPT's MISO Real-Time Desk, executed Real-Time virtual positions — specifically, Increment Offers ("INCs") and Decrement Bids ("DECs") — at the Minnesota Hub that were designed to amplify the congestion differential between the Indiana Hub and the Minnesota Hub. Staff characterizes these virtual transactions as complementary t

3. Physical-Financial Coordination. Finally, FERC Staff alleges that DPT coordinated the timing and volume of natural gas nominations through Dunmore Midstream Partners LP ("DMP") (EIN: 47-8831205), a sister entity within the Dunmore corporate family, to support the uneconomic generation offers described above and to mask DPT's true marginal costs. Specifically, Staff contends that DPT procured gas volumes through DM

III. Dr. Whitfield's Qualifications Dr. Leonard Whitfield holds a Ph.D. in Economics from the Massachusetts Institute of Technology, with a specialization in energy markets and industrial organization. He is the Principal and founder of Whitfield Economic Advisors LLC, a boutique consulting firm focused on the economic analysis of wholesale electricity and natural gas markets. Dr. Whitfield has over twenty-five years

IV. Summary of Dr. Whitfield's Key Findings Dr. Whitfield's Report contains four principal findings, each of which addresses a discrete element of FERC Staff's theory and quantification. The findings are summarized in turn below. A. Finding 1: DPT's Negative Day-Ahead Offers Were Consistent with Portfolio Optimization and Contractual Minimum Generation Obligations Dr. Whitfield conducted a comprehensive analysis of D

V. Assessment of FERC Staff's Methodology and Weaknesses Dr. Whitfield's Report dedicates a substantial section to identifying specific methodological weaknesses in the analysis prepared by Dr. Samuel Breck, Senior Economist, FERC Division of Analytics & Surveillance. These weaknesses, which Dr. Whitfield addresses both individually and in the aggregate, are summarized below.

1. Failure to Control for Transmission Outages. Staff's regression model, which purported to isolate the effect of DPT's bidding on congestion pricing at the Indiana Hub, did not include a variable for known transmission outages. This omission constitutes a textbook example of omitted variable bias — a well-recognized econometric error that arises when a regression model fails to account for a factor that is correlat

2. Overinclusive Profit Calculation. Staff's unjust profits estimate of $12.8 million included all FTR profits and all virtual trading profits at the Minnesota Hub during the Relevant Period, rather than isolating only the incremental profits attributable to the allegedly manipulative bids. This approach is inconsistent with the established legal and economic standard for disgorgement, which requires that only the pr

3. Simplified Marginal Cost Estimation. Staff's determination that DPT's Day-Ahead offers were "below marginal cost" was based on a simplified cost methodology in which Staff multiplied a single heat rate by a daily natural gas price index to arrive at an estimated marginal cost for each of DPT's generation units. This approach did not account for DPT's actual delivered gas costs, which include pipeline transportatio

4. Absence of a Rigorous Counterfactual. Staff's "but-for" analysis assumed that, in the absence of DPT's below-cost offers, no other market participant would have submitted similarly priced offers at the Indiana Hub. Dr. Whitfield found this assumption to be unsupported given the observable competitive bidding patterns at the Indiana Hub during the Relevant Period. As noted in Finding 1, multiple other market partic

VI. Implications for Settlement Strategy Dr. Whitfield's analysis provides a strong foundation for challenging FERC Staff's Preliminary Findings and, in particular, for contesting the $12.8 million disgorgement claim as speculative and unquantifiable with sufficient certainty to support an enforcement action or penalty assessment. The $2.1 million market impact estimate established by Dr. Whitfield provides a defensi

VII. Status of Expert Fees WEA's engagement with C&H provides for compensation at an hourly rate of $475 per hour for Dr. Whitfield's personal time, with staff economist rates as provided in the engagement letter dated July 10, 2023. Through the expected date of matter closure, total WEA fees are estimated at approximately $312,500. Fees accrued to date (as of the date of this memorandum, November 15, 2023) reflect w

VIII. Attachments and Cross-References The following documents are referenced in this memorandum and should be consulted for additional detail:

1. Expert Report of Dr. Leonard Whitfield, Whitfield Economic Advisors LLC — Final report to be submitted to FERC OE on November 20, 2023, as an attachment to C&H's supplemental submission in FERC Docket No. IN23-7-000. The report contains Dr. Whitfield's full analysis, supporting data, regression results, and appendices, including his curriculum vitae.

2. FERC Staff Preliminary Findings Letter, dated October 2, 2023 — Letter from FERC OE to C&H setting forth Staff's preliminary findings, including the factual allegations, legal theories, quantification of unjust profits, and initial penalty demand. This letter is the document to which Dr. Whitfield's report is principally responsive.

3. C&H Response to Preliminary Findings, submitted November 6, 2023 — C&H's written response to the Preliminary Findings Letter, setting forth Dunmore's legal and factual defenses. Dr. Whitfield's expert report supplements and reinforces the arguments presented in this submission.

4. WEA Engagement Letter, dated July 10, 2023 — Engagement letter between Calderwood & Harkness LLP and Dr. Leonard Whitfield, Whitfield Economic Advisors LLC, establishing the terms of Dr. Whitfield's retention, including the hourly rate, scope of engagement, and confidentiality obligations.

5. Velthorn Market Analytics, Inc. Referral Report, dated April 3, 2023 — Report prepared by Velthorn Market Analytics, Inc. (Dr. Patricia Engel, President), in its capacity as the MISO Independent Market Monitor, referring certain trading patterns by DPT to FERC OE for investigation. This referral initiated the investigation that resulted in FERC Docket No. IN23-7-000. PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRO