Contract analysis

I. PURPOSE AND SCOPE OF MEMORANDUM This memorandum sets forth the settlement strategy and negotiation framework for resolving the Federal Energy Regulatory Commission ("FERC" or "Commission") Office of Enforcement ("OE") investigation, docketed as FERC Docket No. IN23-7-000, of Dunmore Energy Holdings Ltd. ("DEH") and its wholly owned subsidiary, Dunmore Power Trading LLC ("DPT," and together with DEH, "Dunmore"). Th

II. SUMMARY OF FERC STAFF'S POSITION AND INITIAL DEMAND A. The Alleged Conduct FERC Staff's Preliminary Findings letter, dated September 29, 2023, alleges that Dunmore engaged in a multi-faceted scheme of market manipulation in the Midcontinent Independent System Operator ("MISO") organized wholesale electricity market during a period spanning approximately 14.5 months, from January 3, 2022, through March 17, 2023 (t

III. ASSESSMENT OF DUNMORE'S DEFENSES A. Portfolio Optimization Defense Dunmore's principal defense to the allegation of uneconomic Day-Ahead bidding is that DPT's negative-price offers at the Indiana Hub reflected a legitimate portfolio optimization strategy that was economically rational when viewed in the context of DPT's full generation and trading portfolio. Specifically, DPT's Day-Ahead offers took into account

IV. COMPARABLE FERC ENFORCEMENT SETTLEMENTS — BENCHMARKING ANALYSIS A. Methodology. To establish a credible and defensible settlement target range, C&H has conducted a comprehensive benchmarking analysis of publicly available FERC consent agreements and orders approving settlements in market manipulation cases brought under Section 222 of the Federal Power Act over the past five years (2018-2023). The analysis focuse

V. SETTLEMENT TARGET RANGE AND WALK-AWAY ANALYSIS A. Target Range Based on the analysis of FERC Staff's position (Section II), Dunmore's defenses (Section III), and the comparable settlement data (Section IV), the recommended target settlement range for the Dunmore matter is as follows: Target Penalty Range: $3 million to $5 million in civil penalties. Disgorgement: Zero. The negotiation position should be that disgo

VI. LITIGATION RISK ASSESSMENT — ALJ HEARING ALTERNATIVE A. Procedural Path if Settlement Fails If the parties are unable to reach a mutually acceptable settlement, FERC Staff would be expected to seek Commission authorization to issue an Order to Show Cause ("OTSC") against Dunmore under Section 222 of the Federal Power Act. The OTSC would formally set forth Staff's allegations and the proposed penalties, and would

VII. NEGOTIATION STRATEGY AND TACTICS A. Opening Strategy at First Settlement Conference The first settlement conference with FERC Staff is scheduled for December 4, 2023. The C&H team will include the undersigned (Catherine Bloom), Hannah Brinkley as lead associate, and Patrick Gallagher as working associate. The following outlines the strategic approach to be employed at this initial meeting. The opening presentati

VIII. ROLE OF THE COMPLIANCE PLAN IN SETTLEMENT A. Status of Compliance Plan Development Ridgeway Compliance Solutions LLC was engaged by Dunmore on October 15, 2023, under the direction of Dr. Carolyn Whitford, a recognized expert in energy market compliance with extensive experience designing compliance programs for entities subject to FERC jurisdiction. The engagement is for a flat fee of $385,000 and encompasses