UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Docket No. IN23-7-000
STIPULATION AND CONSENT AGREEMENT
Execution Version January 31, 2024
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I. PREAMBLE AND PARTIES
This Stipulation and Consent Agreement ("Agreement") is entered into by and between the following parties:
1. Commission Staff. The Staff of the Office of Enforcement ("Enforcement Staff" or "Staff") of the Federal Energy Regulatory Commission ("Commission" or "FERC"), located at 888 First Street NE, Washington, D.C. 20426.
2. Respondent Dunmore Energy Holdings Ltd. ("DEH"), an exempted company incorporated under the laws of the Cayman Islands, with its registered office at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, KY1-1002, Cayman Islands, and its principal U.S. office at 2200 Post Oak Boulevard, Suite 3100, Houston, TX 77056. Employer Identification Number: 98-1347562.
3. Respondent Dunmore Power Trading LLC ("DPT"), a Delaware limited liability company, with its principal office at 2200 Post Oak Boulevard, Suite 3100, Houston, TX 77056. DPT's registered agent is Capitol Registered Agents Inc., 1209 Orange Street, Wilmington, DE 19801. Employer Identification Number: 82-4519763.
DEH and DPT are collectively referred to herein as "Respondents" or "Dunmore." Enforcement Staff and Respondents are collectively referred to herein as "the Parties."
Respondents are represented in this matter by counsel at Calderwood & Harkness LLP, 1001 Fannin Street, Suite 4200, Houston, TX 77002 (Catherine Bloom, Responsible Partner).
II. RECITALS
A. Background on Respondents
DEH is a privately held, vertically integrated energy holding company with diversified operations spanning upstream oil and gas production, midstream pipeline assets, and a portfolio of wind and solar generation facilities located across the U.S. Midwest and Gulf Coast regions. DEH's consolidated revenue for fiscal year 2022 was approximately $3.82 billion, with earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $891 million. DEH's U.S. net generation capacity totals approximately 4,280 megawatts ("MW"), comprising approximately 2,650 MW of natural gas-fired generation, approximately 1,130 MW of wind generation, and approximately 500 MW of solar generation.
DPT is a wholly owned subsidiary of DEH. DPT holds market-based rate authority from the Commission pursuant to an authorization granted under Docket No. ER05-1128-000. In reliance on that authorization, DPT conducts wholesale electricity trading in the Midcontinent Independent System Operator ("MISO") and Southwest Power Pool ("SPP") organized wholesale electricity markets. DPT's revenue for fiscal year 2022 was approximately $614 million. During calendar year 2022, DPT's trading volume in the MISO markets was approximately 18.4 million megawatt-hours ("MWh"). During the Relevant Period (as defined below), DPT's MISO trading desk employed fourteen (14) traders.
Dunmore Midstream Partners LP ("DMP"), a Delaware limited partnership (Employer Identification Number: 47-8831205), is an affiliated entity of DEH and DPT. DMP operates natural gas gathering and pipeline infrastructure that supplies natural gas to several of Dunmore's gas-fired generation plants. DMP's operations are relevant to the conduct investigated in this matter because of the interrelationship between gas nominations made through DMP's pipeline systems and generation offers submitted by DPT in the MISO wholesale electricity markets.
B. Relevant Statutory and Regulatory Authority
Section 222 of the Federal Power Act ("FPA"), 16 U.S.C. § 824v, prohibits the use or employment of any manipulative or deceptive device or contrivance in connection with the purchase or sale of electric energy or the purchase or sale of transmission services subject to the jurisdiction of the Commission. The Commission promulgated 18 C.F.R. § 1c.2 to implement Section 222 of the FPA. That regulation prohibits any entity from, directly or indirectly, in connection with the purchase or sale of electric energy or the purchase or sale of transmission services subject to the Commission's jurisdiction, using or employing any device, scheme, or artifice to defraud; making any untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or engaging in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any entity.
Section 316A of the FPA, 16 U.S.C. § 825o-1, authorizes the Commission to assess civil penalties for violations of Part II of the FPA, or any rule or order thereunder, in an amount the Commission determines to be appropriate, subject to certain procedural requirements. The Commission's regulations at 18 C.F.R. Part 1b govern non-public investigations conducted by the Office of Enforcement, including the issuance of subpoenas, the taking of testimony, and the production of documents.
C. The Investigation
On April 3, 2023, Velthorn Market Analytics, Inc., serving as the MISO Independent Market Monitor ("IMM"), submitted a referral letter to the Commission's Office of Enforcement identifying anomalous bidding patterns in the MISO Day-Ahead and Real-Time energy markets. The referral letter described bidding behavior by DPT that the IMM believed warranted further investigation by the Commission.
On May 22, 2023, the Commission's Office of Enforcement issued a preliminary inquiry letter to Dunmore, requesting information regarding DPT's trading activities in the MISO markets during the period identified in the IMM referral.
On June 12, 2023, the Commission issued a formal non-public order of investigation in Docket No. IN23-7-000, authorizing the Division of Investigations within the Office of Enforcement to conduct an investigation pursuant to 18 C.F.R. Part 1b. The order authorized Staff to use all investigative tools available under the Commission's regulations, including the issuance of data requests, the taking of testimony, and the production of documents.
The investigation focused on DPT's bidding behavior at the Indiana Hub and the Minnesota Hub pricing nodes in the MISO Day-Ahead and Real-Time energy markets during the period from January 3, 2022 through March 17, 2023 (the "Relevant Period"). The investigation examined whether DPT's trading activities at those pricing nodes constituted market manipulation in violation of Section 222 of the FPA and 18 C.F.R. § 1c.2.
D. Enforcement Staff's Allegations
Based on its investigation, Staff alleged that DPT, acting through its traders, engaged in a manipulative trading strategy in violation of Section 222 of the FPA, 16 U.S.C. § 824v, and 18 C.F.R. § 1c.2. Staff's allegations described a scheme consisting of three interrelated elements:
1. Uneconomic Day-Ahead Bidding. Staff alleged that DPT's Senior Trader Kyle Renfro submitted Day-Ahead energy offers for Dunmore's gas-fired generation units at prices significantly below the estimated marginal cost of production — at levels as low as negative fifteen dollars per megawatt-hour (-$15/MWh) to negative forty dollars per megawatt-hour (-$40/MWh) — at the Indiana Hub pricing node. Staff alleged that these below-cost offers were designed to create artificial congestion patterns in the MISO Day-Ahead market, and that DPT simultaneously held Financial Transmission Rights ("FTRs") whose value would increase as a direct result of the congestion induced by the uneconomic generation offers. Over the course of the Relevant Period, Staff estimated that the total volume of uneconomic Day-Ahead generation offers submitted by DPT at the Indiana Hub was approximately 2,840 gigawatt-hours ("GWh"). During the same period, DPT maintained FTR positions with a notional value of approximately $47.3 million that would benefit from the resulting congestion patterns.
2. Cross-Product Manipulation. Staff alleged that DPT Trader Anastasia Petrov took Real-Time virtual positions — consisting of Increment Offers ("INCs") and Decrement Bids ("DECs") — at the Minnesota Hub pricing node. Staff alleged that these virtual transactions were designed to amplify the congestion differential created by the uneconomic Day-Ahead bids submitted at the Indiana Hub, thereby magnifying the profitability of DPT's FTR portfolio. Over the Relevant Period, Staff estimated that DPT's total virtual transaction volume at the Minnesota Hub was approximately 1,620 GWh.
3. Physical-Financial Coordination. Staff further alleged that DPT coordinated the timing and volume of natural gas nominations submitted through DMP's pipeline infrastructure to support the uneconomic generation offers at the Indiana Hub. Staff alleged that this coordination between gas nominations and electricity market offers served to mask the true marginal cost of Dunmore's gas-fired generation units, thereby concealing the uneconomic nature of the Day-Ahead offers.
Staff estimated that the total unjust profits attributable to the alleged manipulative scheme were approximately $12.8 million over the Relevant Period.
E. Respondents' Position
Respondents neither admit nor deny Staff's allegations as set forth herein. In the course of the investigation, Respondents maintained that DPT's Day-Ahead generation offers were consistent with a legitimate portfolio optimization strategy. Respondents asserted that the offers reflected opportunity costs and contractual commitments for minimum generation levels at Dunmore's gas-fired plants, rather than any intent to suppress prices artificially or create unwarranted congestion in the MISO markets.
Respondents further asserted that DPT's FTR positions were acquired in MISO's annual and monthly FTR auctions several months before the commencement of the Relevant Period as part of a routine hedging strategy designed to manage congestion risk associated with DPT's generation portfolio. Respondents maintained that the FTR positions were not acquired with the intent to profit from any artificially created congestion.
In support of their position, Respondents retained Whitfield Economic Advisors LLC to conduct an independent economic analysis of the market impact of DPT's trading activities during the Relevant Period. Dr. Leonard Whitfield, the firm's principal expert, submitted a report estimating that the actual market impact attributable to DPT's bidding activity was no more than $2.1 million. Dr. Whitfield's analysis concluded that the congestion patterns observed at the Indiana Hub during the Relevant Period were primarily attributable to transmission outage events and other exogenous factors, rather than to DPT's generation offers or virtual trading.
Respondents also note that DEH appointed Jennifer Caulfield as Chief Compliance Officer on February 6, 2023, prior to the commencement of the formal investigation, demonstrating Respondents' good-faith commitment to regulatory compliance and their proactive approach to compliance enhancement.
F. Course of the Investigation
The investigation in Docket No. IN23-7-000 was conducted by the Division of Investigations within the Office of Enforcement over a period of approximately eight months, during which the following principal investigative activities took place:
Enforcement Staff served a first data request on Respondents on June 26, 2023, comprising forty-one (41) interrogatories and twenty-three (23) document requests. Staff served a supplemental second data request on August 7, 2023, comprising eighteen (18) additional interrogatories directed at specific trading strategies, internal communications, and gas nomination coordination practices.
Respondents produced a total of approximately 187,000 documents, comprising approximately 1.24 million pages, from eleven (11) custodians. The documents were produced in three rolling productions: 48,200 documents on July 24, 2023; 63,400 documents on August 21, 2023; and 75,400 documents on October 30, 2023. The document productions included trading records, internal communications (including instant messages and electronic mail), risk management reports, FTR transaction records, gas nomination data, and internal compliance reports.
Enforcement Staff conducted testimony under oath pursuant to 18 C.F.R. § 1b.12 of the following DPT personnel: Kyle Renfro, Senior Trader, on September 5, 2023; Anastasia Petrov, Trader, on September 12, 2023; and Derek Sung, Senior Vice President, Power Marketing & Trading, on September 19, 2023. Staff also conducted testimony of three additional DPT personnel during the same period.
On October 2, 2023, Staff issued a Preliminary Findings letter to Respondents setting forth Staff's factual findings, legal analysis, and an initial demand for resolution of the matter. The initial demand totaled $30.8 million, consisting of an $18 million civil penalty and $12.8 million in disgorgement of alleged unjust profits.
On November 6, 2023, Respondents submitted a written Response to Preliminary Findings, in which Respondents set forth their factual and legal defenses and objected to both the factual basis and the amount of Staff's demand.
On November 20, 2023, Respondents submitted the expert report of Dr. Leonard Whitfield of Whitfield Economic Advisors LLC, together with supporting data and analyses, challenging Staff's quantification of market impact and unjust profits.
The Parties engaged in settlement conferences on December 4, 2023 and January 17, 2024, during which the Parties exchanged settlement proposals and negotiated the terms of a potential resolution. On January 24, 2024, the Parties reached agreement on the material terms set forth in this Stipulation and Consent Agreement.
G. Purpose of Agreement
The Parties enter into this Agreement to resolve all issues arising from the investigation in Docket No. IN23-7-000 without the necessity of further proceedings before an Administrative Law Judge or the Commission. The Parties recognize that resolution of this matter through a negotiated settlement, rather than through contested administrative litigation, serves the interests of all parties and the public by conserving public and private resources, by providing a prompt and certain resolution, and by implementing prospective compliance measures designed to prevent the recurrence of the conduct at issue.
This Agreement is entered into for the purpose of resolving the matters discussed herein and does not constitute an admission by Respondents of any violation of the FPA, the Commission's regulations, or any other federal or state law, rule, or regulation. Nothing in this Agreement shall be construed as a finding or determination by the Commission that any violation has occurred.
III. TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
A. Civil Penalty
1. Amount. Respondents shall pay a civil penalty in the aggregate amount of Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000) to the United States Treasury. This civil penalty is being assessed pursuant to Section 316A of the FPA, 16 U.S.C. § 825o-1, and represents the total monetary penalty imposed under this Agreement. DEH and DPT shall be jointly and severally liable for payment of the civil penalty.
2. Payment Schedule. The civil penalty shall be payable in two (2) equal installments as follows:
(a) First Installment. Two Million Three Hundred Seventy-Five Thousand Dollars ($2,375,000) shall be due and payable within thirty (30) calendar days of the date of the Commission order approving this Agreement. Based on the anticipated Commission order date of February 9, 2024, the first installment shall be due no later than March 10, 2024.
(b) Second Installment. Two Million Three Hundred Seventy-Five Thousand Dollars ($2,375,000) shall be due and payable within one hundred eighty (180) calendar days of the date of the Commission order approving this Agreement. Based on the anticipated Commission order date of February 9, 2024, the second installment shall be due no later than August 7, 2024.
3. Payment Method. All payments required under this Section III.A shall be made by wire transfer or electronic funds transfer to the United States Treasury in accordance with payment instructions to be provided by the Commission's Office of the Secretary. Respondents shall provide written confirmation of each payment to the Director of the Office of Enforcement within five (5) business days of the date on which each payment is made. Written confirmation shall include the wire transfer confirmation number, the date and amount of the payment, and the identity of the sending financial institution.
4. Late Payment. In the event that any payment required under this Section III.A is not received by the United States Treasury by the applicable due date, interest shall accrue on the unpaid balance from the due date at the rate established by the Secretary of the Treasury pursuant to 26 U.S.C. § 6621(a)(2), compounded daily. The accrual of interest under this provision shall be in addition to, and shall not limit, any other remedies available to Staff or the Commission for Respondents' failure to make timely payments.
B. Disgorgement. The Parties agree that no disgorgement of profits shall be required under this Agreement. Staff's acceptance of this term is based on the Parties' agreement, reached during settlement negotiations, that the quantification of any unjust profits attributable to the conduct at issue during the Relevant Period is speculative and cannot be determined with sufficient certainty to support a specific disgorgement amount. The Parties acknowledge that Staff's estimated unjust profits of $12.8 million and Respondents' expert's estimate of $2.1 million in market impact reflect substantially divergent methodological approaches and assumptions, and that resolution of this disagreement through contested proceedings would require extensive additional time and resources without a clear prospect of a determinate outcome. Accordingly, the Parties have agreed that the civil penalty amount set forth in Section III.A, together with the Enhanced Compliance Plan and other remedial measures described herein, appropriately resolves the matters at issue in this investigation.
C. Neither Admit Nor Deny
By entering into this Agreement, Respondents neither admit nor deny the allegations, findings, and factual statements described in the Recitals to this Agreement and in Enforcement Staff's Preliminary Findings letter dated October 2, 2023. Respondents consent to the Commission's use of the factual recitations set forth in this Agreement in any proceeding to enforce its terms, including any proceeding brought pursuant to Section III.H of this Agreement.
Respondents agree not to make any public statement, directly or through agents, representatives, or attorneys, that contradicts, denies, or is inconsistent with the terms of this Agreement. This provision does not preclude Respondents from taking legal or factual positions in defense of any proceedings not covered by this Agreement, or from making statements required by law, regulation, or legal process.
This Agreement shall not be construed as an admission by Respondents that any provision of the FPA, the Commission's regulations, or any other federal or state law, rule, or regulation was violated. Nor shall this Agreement be construed as a finding by the Commission that any such violation occurred.
D. Enhanced Compliance Plan
1. General Obligation. Respondents shall implement and maintain the Enhanced Compliance Plan attached hereto as Appendix A (the "Compliance Plan") for a period of thirty-six (36) months commencing on the date of the Commission order approving this Agreement (the "Compliance Monitoring Period"). Based on the anticipated Commission order date of February 9, 2024, the Compliance Monitoring Period shall terminate on February 9, 2027. The Compliance Plan is incorporated herein by reference and constitutes an integral part of this Agreement.
2. Key Elements of the Compliance Plan. The Compliance Plan, the full terms of which are set forth in Appendix A, includes the following key elements:
(a) Chief Compliance Officer. Jennifer Caulfield shall continue to serve as Chief Compliance Officer of DEH, reporting directly to the Board of Directors of DEH. The CCO shall have authority over all compliance matters related to DPT's wholesale electricity trading activities, including the authority to investigate potential compliance issues, recommend disciplinary action, and implement remedial measures. The CCO shall have direct access to DEH's Chairman and Chief Executive Officer, Gavin Harcourt, and DEH's President and Chief Operating Officer, Elena Mirova, on all compliance matters.
(b) Annual Compliance Training. All DPT trading personnel shall complete a minimum of sixteen (16) hours per year of compliance training. Training shall cover the Commission's anti-manipulation rules under Section 222 of the FPA and 18 C.F.R. § 1c.2, market rules applicable to the MISO and SPP organized wholesale electricity markets, and DPT's internal trading policies and procedures. Training records shall be maintained and made available to the Office of Enforcement upon request.
(c) Quarterly Compliance Audits. An independent compliance monitor, Ridgeway Compliance Solutions LLC (Dr. Carolyn Whitford, Founder and Managing Director), located at 3000 Richmond Avenue, Suite 800, Houston, TX 77098, shall conduct quarterly compliance audits of DPT's trading operations during the Compliance Monitoring Period. The quarterly audits shall review DPT's trading activity for potential uneconomic bidding, cross-product trading anomalies, and coordinated physical-financial transactions, and shall assess the adequacy of DPT's internal controls and compliance policies. The monitor's quarterly audit reports shall be submitted to the CCO and to the Director, Division of Investigations, Office of Enforcement.
(d) Automated Trade Surveillance Systems. Respondents shall design, procure, and implement automated trade surveillance systems capable of detecting potential market manipulation patterns, including but not limited to uneconomic bidding, cross-product trading anomalies, and coordinated physical-financial transactions. The automated surveillance systems shall generate alerts for review by the CCO and compliance staff and shall be operational no later than six (6) months following the effective date of this Agreement.
(e) Quarterly Reporting to FERC OE. Respondents shall submit quarterly compliance reports to the Director, Division of Investigations, Office of Enforcement, within thirty (30) days after the end of each calendar quarter during the Compliance Monitoring Period. The reports shall include a summary of compliance activities, a summary of the independent monitor's audit findings, a description of any compliance incidents or concerns identified, the status of the automated surveillance system, and training completion records.
(f) Annual Compliance Certification. The Chief Executive Officer of DEH, Gavin Harcourt, and the Chief Compliance Officer, Jennifer Caulfield, shall each provide an annual written certification to the Commission's Office of Enforcement attesting to Respondents' compliance with the terms of this Agreement and the Compliance Plan. The annual certifications shall be submitted no later than sixty (60) days after the end of each calendar year during the Compliance Monitoring Period.
(g) Policies and Procedures. Respondents shall maintain and update comprehensive written policies and procedures governing trading desk oversight, FTR position monitoring, and cross-product transaction review. The policies and procedures shall be reviewed and updated at least annually during the Compliance Monitoring Period.
3. Modification of Compliance Plan. Any material modification to the Compliance Plan during the Compliance Monitoring Period shall require the prior written approval of the Director, Office of Enforcement. A request for modification shall be submitted in writing to the Director and shall describe the proposed modification, the reasons therefor, and the anticipated impact on the effectiveness of the Compliance Plan. The Director shall respond to any such request within thirty (30) days of receipt.
E. Cooperation. 1. Continuing Cooperation Commitment. Respondents agree to cooperate fully with the Commission and its Staff in connection with any related investigation, enforcement action, or proceeding, whether arising from the conduct at issue in this Agreement or otherwise related thereto. Cooperation shall include, but not be limited to:
(a) making employees, officers, and agents of DEH, DPT, and DMP available for interviews, testimony, and other investigative activities at reasonable times and locations;
(b) producing documents, data, and information upon request by Staff in a timely and complete manner;
(c) providing truthful and complete responses to written and oral inquiries from Staff;
(d) not destroying, altering, or concealing any documents, communications, or records relevant to any ongoing or future investigation or proceeding;
(e) providing prompt notice to Staff of any material developments that may affect Respondents' ability to comply with the terms of this Agreement; and
(f) identifying and making available witnesses with knowledge of relevant facts.
2. Duration. The cooperation commitment set forth in this Section III.E shall remain in effect for the duration of the Compliance Monitoring Period and for an additional twelve (12) months following the expiration of the Compliance Monitoring Period — that is, through February 9, 2028, based on the anticipated Commission order date of February 9, 2024.
F. Waivers. 1. Respondents' Waivers. Respondents hereby waive the following rights:
(a) Any claim of double jeopardy or collateral estoppel based on this Agreement with respect to any proceeding brought by the Commission related to facts other than those specifically addressed herein;
(b) Any right to seek rehearing of the Commission order approving this Agreement pursuant to Section 313(a) of the FPA, 16 U.S.C. § 825l(a), or judicial review of such order pursuant to Section 313(b) of the FPA, 16 U.S.C. § 825l(b), or any other provision of law;
(c) Any right to contest the civil penalty amount set forth in Section III.A of this Agreement in any future administrative, judicial, or other proceeding; and
(d) Any right to assert that the Commission lacks jurisdiction over the Respondents or the subject matter of this Agreement.
2. Staff's Reservation. Nothing in this Agreement shall preclude Enforcement Staff from investigating or bringing enforcement actions against Respondents for conduct not specifically covered by this Agreement, including but not limited to conduct occurring after the Relevant Period. This Agreement resolves only those matters arising from the investigation in Docket No. IN23-7-000 that are described in the Recitals hereto.
G. Representations and Warranties
1. Authority. Each Party represents and warrants that it has full power and authority to enter into this Agreement and to perform its obligations hereunder. Martin Llewellyn, General Counsel of DEH, represents and warrants that he is duly authorized to execute this Agreement on behalf of both DEH and DPT, and that all necessary corporate and organizational approvals have been obtained. Christine Pham, Senior Attorney, Division of Investigations, Office of Enforcement, represents and warrants that she is duly authorized to execute this Agreement on behalf of Enforcement Staff, subject to approval by the Commission.
2. No Other Agreements. The Parties represent and warrant that there are no other agreements, understandings, promises, or arrangements between them relating to the subject matter of this Agreement other than those expressly set forth herein or in the appendices attached hereto. No oral representations or inducements have been made to any Party that are not contained in this Agreement.
3. Voluntary Agreement. Respondents represent and warrant that they are entering into this Agreement voluntarily, with full knowledge of its terms and consequences, and upon the advice of their legal counsel, Calderwood & Harkness LLP. Respondents acknowledge that they have had a full and fair opportunity to negotiate the terms of this Agreement and that the terms set forth herein represent a fair and reasonable resolution of the matters investigated in Docket No. IN23-7-000.
H. Breach and Remedies
1. Notice of Breach. In the event that Staff believes that Respondents have breached any term or condition of this Agreement, including any provision of the Compliance Plan set forth in Appendix A, Staff shall provide written notice to Respondents specifying the nature of the alleged breach in reasonable detail. Written notice shall be sent to Respondents' counsel of record, Catherine Bloom, Calderwood & Harkness LLP, 1001 Fannin Street, Suite 4200, Houston, TX 77002, and to Martin Llewellyn, General Counsel, Dunmore Energy Holdings Ltd., 2200 Post Oak Boulevard, Suite 3100, Houston, TX 77056. Respondents shall have thirty (30) calendar days from receipt of such notice to cure the alleged breach or to provide a written response to Staff demonstrating that no breach has occurred.
2. Consequences of Breach. If Respondents fail to cure an alleged breach within the thirty (30) day cure period, or fail to demonstrate to Staff's reasonable satisfaction that no breach has occurred, Staff may seek such additional remedies as are available under the FPA and the Commission's regulations. Such remedies may include, but are not limited to:
(a) assessment of additional civil penalties pursuant to Section 316A of the FPA, 16 U.S.C. § 825o-1;
(b) revocation or suspension of DPT's market-based rate authorization granted under Docket No. ER05-1128-000;
(c) disgorgement of any unjust profits identified in connection with the breach;
(d) extension of the Compliance Monitoring Period; or
(e) such other appropriate relief as the Commission may determine to be in the public interest.
Nothing in this Section III.H shall limit the Commission's authority to take any action that is otherwise within its jurisdiction.
I. Binding Effect and Successors
This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. In the event of any corporate restructuring, merger, acquisition, change of control, or other transaction affecting the organizational structure or ownership of DEH or DPT, the obligations imposed under this Agreement — including the civil penalty obligations, the Compliance Plan requirements, and the cooperation commitment — shall transfer to and be binding upon the successor entity or entities. Respondents shall provide written notice to the Director, Office of Enforcement, no later than thirty (30) days prior to the consummation of any such transaction, describing the transaction and identifying the successor entity that will assume the obligations under this Agreement.
J. Governing Law
This Agreement shall be governed by and construed in accordance with the Federal Power Act, 16 U.S.C. §§ 791a et seq., the Commission's regulations, and applicable federal law. To the extent that any provision of this Agreement is inconsistent with applicable law, the applicable law shall control.
K. Entire Agreement
This Agreement, including Appendix A (Enhanced Compliance Plan), constitutes the entire agreement between the Parties with respect to the matters addressed herein and supersedes all prior negotiations, representations, discussions, and agreements, whether written or oral, relating to the subject matter hereof. No amendment, modification, or waiver of any provision of this Agreement shall be effective unless made in writing and signed by all Parties.
L. Severability. If any provision of this Agreement is held by a court of competent jurisdiction or by the Commission to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect the validity, legality, or enforceability of the remaining provisions of this Agreement. The remaining provisions shall continue in full force and effect, and the Parties shall negotiate in good faith to replace any invalid, illegal, or unenforceable provision with a provision that is valid, legal, and enforceable and that, to the greatest extent possible, achieves the intended purpose of the original provision.
M. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument. Facsimile and electronic signatures shall be deemed to have the same legal effect as original signatures.
N. Effective Date
This Agreement shall become effective upon the date of the Commission order approving this Agreement. Until such order is issued, this Agreement shall have no force or effect, and neither the filing nor the existence of this Agreement shall be construed as an admission by any Party of any fact, violation, or liability.
IV. SUBMISSION TO THE COMMISSION
The Parties respectfully request that the Commission issue an order approving this Stipulation and Consent Agreement in its entirety, without modification or condition. The Parties represent to the Commission that this Agreement represents a fair, reasonable, and appropriate resolution of the matters investigated in Docket No. IN23-7-000.
The Parties agree that this Agreement is in the public interest because it resolves the matters investigated in Docket No. IN23-7-000 through a combination of an appropriate civil penalty, a comprehensive thirty-six (36) month enhanced compliance plan designed to detect and prevent future violations of the Commission's anti-manipulation rules, and a continuing cooperation commitment — all without the expenditure of further public and private resources on contested administrative litigation or judicial proceedings. The Parties further agree that the prospective compliance measures set forth in the Compliance Plan will benefit the wholesale electricity markets by strengthening the internal controls and oversight mechanisms applicable to DPT's trading operations in the MISO and SPP organized markets.
The Parties submit that the civil penalty amount of $4,750,000 is appropriate in light of the totality of the circumstances, including the nature and seriousness of the alleged conduct, the uncertainty regarding the quantification of unjust profits, Respondents' cooperation during the investigation, Respondents' proactive appointment of a Chief Compliance Officer prior to the formal commencement of the investigation, and the comprehensive remedial compliance measures to which Respondents have committed.
V. SIGNATURES
IN WITNESS WHEREOF, the Parties have executed this Stipulation and Consent Agreement as of the date first written above.
For Enforcement Staff:
OFFICE OF ENFORCEMENT FEDERAL ENERGY REGULATORY COMMISSION
By: ________
Name: Christine Pham
Title: Senior Attorney, Division of Investigations
Office of Enforcement Federal Energy Regulatory Commission 888 First Street NE Washington, D.C. 20426
Date: January 31, 2024
For Dunmore Energy Holdings Ltd.:
DUNMORE ENERGY HOLDINGS LTD.
By: ________
Name: Martin Llewellyn
Title: General Counsel
Dunmore Energy Holdings Ltd. 2200 Post Oak Boulevard, Suite 3100 Houston, TX 77056
Date: January 31, 2024
For Dunmore Power Trading LLC:
DUNMORE POWER TRADING LLC
By: ________
Name: Martin Llewellyn
Title: Authorized Representative
(In his capacity as authorized representative of DPT) Dunmore Power Trading LLC 2200 Post Oak Boulevard, Suite 3100 Houston, TX 77056
Date: January 31, 2024
Approved as to Form — Counsel for Respondents:
CALDERWOOD & HARKNESS LLP
By: ________
Name: Catherine Bloom
Title: Responsible Partner
Calderwood & Harkness LLP 1001 Fannin Street, Suite 4200 Houston, TX 77002
Date: January 31, 2024
APPENDIX A
ENHANCED COMPLIANCE PLAN
This Enhanced Compliance Plan ("Compliance Plan") is attached to and incorporated by reference in the Stipulation and Consent Agreement dated January 31, 2024, entered into by and between the Staff of the Office of Enforcement of the Federal Energy Regulatory Commission ("Enforcement Staff" or "Staff") and Dunmore Energy Holdings Ltd. ("DEH") and Dunmore Power Trading LLC ("DPT") (collectively, "Respondents" or "Dunmore") in Docket No. IN23-7-000 (the "Agreement"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.
1. Purpose and Scope
Purpose. The purpose of this Compliance Plan is to ensure DPT's compliance with Section 222 of the Federal Power Act ("FPA"), 16 U.S.C. § 824v, the Commission's anti-manipulation regulation at 18 C.F.R. § 1c.2, MISO market rules, and all other applicable Commission regulations governing wholesale electricity trading. This Compliance Plan is designed to establish and maintain a robust compliance infrastructure that will detect, prevent, and deter conduct that could constitute market manipulation or other violations of the Commission's rules and regulations.
Scope. This Compliance Plan applies to all employees, officers, and agents of DEH, DPT, and Dunmore Midstream Partners LP ("DMP") who are involved in or provide oversight of: (a) wholesale electricity trading in the MISO and SPP organized wholesale electricity markets; (b) natural gas nominations and scheduling through DMP's pipeline infrastructure that support gas-fired generation assets; and (c) Financial Transmission Rights ("FTR") or virtual trading activities in the MISO and SPP markets. The obligations of this Compliance Plan shall apply equally to any future hires, contractors, or consultants who perform functions within the scope described above during the Compliance Monitoring Period.
2. Chief Compliance Officer
Jennifer Caulfield shall serve as Chief Compliance Officer ("CCO") of DEH throughout the Compliance Monitoring Period. The CCO shall report directly to the Board of Directors of DEH and shall have independent authority to investigate potential compliance issues, recommend disciplinary action against any employee or officer of DEH, DPT, or DMP, and implement remedial measures as she deems necessary and appropriate to ensure compliance with applicable law and this Compliance Plan.
The CCO shall have direct and unfettered access to Gavin Harcourt, Chairman and Chief Executive Officer of DEH, and Elena Mirova, President and Chief Operating Officer of DEH, on all compliance matters. The CCO shall have unrestricted access to all trading data, electronic and voice communications, risk management reports, gas nomination records, and any other documents or information maintained by DEH, DPT, or DMP that are relevant to the CCO's compliance oversight responsibilities.
The CCO shall not be subject to retaliation or adverse employment action for actions taken in the good-faith performance of her compliance responsibilities. Removal or replacement of the CCO during the Compliance Monitoring Period shall require prior written notice to the Director, Office of Enforcement, no less than thirty (30) days in advance of any such removal or replacement. Such notice shall identify the proposed successor CCO and describe the successor's qualifications and relevant experience.
3. Compliance Training
All DPT trading personnel — currently consisting of fourteen (14) traders, including any future hires or replacements during the Compliance Monitoring Period — shall complete a minimum of sixteen (16) hours of compliance training per calendar year during the Compliance Monitoring Period.
The compliance training program shall cover the following subject areas:
(a) The anti-manipulation provisions of the Federal Power Act, including Section 222, 16 U.S.C. § 824v, and the Commission's implementing regulation at 18 C.F.R. § 1c.2, with emphasis on the elements of market manipulation, the scienter requirement, and the types of conduct that the Commission has found to constitute violations;
(b) The MISO Tariff provisions and market rules governing Day-Ahead and Real-Time energy market participation, including bidding rules, virtual trading rules, FTR market rules, and market participant conduct obligations;
(c) DPT's internal trading policies and procedures, including the policies and procedures developed pursuant to Section 6 of this Compliance Plan;
(d) Identification and reporting of potential compliance violations, including the procedures for escalating compliance concerns to the CCO and for reporting suspected violations to the Commission's Office of Enforcement; and
(e) Case studies of prior Commission enforcement actions involving market manipulation in wholesale electricity markets, including discussion of the factual circumstances, legal analysis, and remedial outcomes of such cases.
Training shall be conducted by qualified personnel, including the CCO, outside compliance consultants, or legal counsel with expertise in energy market regulation. New hires assigned to the DPT trading desk shall complete the required compliance training within sixty (60) days of their start date.
All training records — including attendance records, course materials, completion certificates, and assessment results — shall be maintained by the CCO and made available to the Office of Enforcement upon request.
4. Independent Compliance Monitor
Ridgeway Compliance Solutions LLC ("Ridgeway"), whose principal is Dr. Carolyn Whitford, Founder and Managing Director, located at 3000 Richmond Avenue, Suite 800, Houston, TX 77098, shall serve as the independent compliance monitor for the purposes of this Compliance Plan.
The independent compliance monitor shall conduct quarterly compliance audits of DPT's trading operations. Each quarterly audit shall encompass the following areas of review:
(a) Review of DPT's trading activity for potential uneconomic bidding, including analysis of Day-Ahead generation offers relative to estimated marginal costs and comparison of offer prices to prevailing fuel costs, heat rates, and other relevant economic fundamentals;
(b) Review of cross-product trading activity for anomalous patterns, including analysis of the relationship between DPT's Day-Ahead generation offers, Real-Time virtual positions, and FTR holdings;
(c) Review of coordination between DPT's physical gas operations (including gas nominations submitted through DMP) and DPT's financial trading positions, to identify any patterns of coordination that could mask true marginal costs or facilitate market manipulation; and
(d) Assessment of the adequacy of DPT's internal controls, compliance policies, and procedures, including evaluation of the effectiveness of the automated trade surveillance systems described in Section 5 of this Compliance Plan.
The independent compliance monitor's quarterly audit reports shall be submitted to the CCO and to the Director, Division of Investigations, Office of Enforcement, within thirty (30) days after the conclusion of each quarterly audit period.
Ridgeway's initial engagement is for a period of twelve (12) months from the effective date of this Agreement. Respondents shall ensure continuous independent monitoring throughout the entire thirty-six (36) month Compliance Monitoring Period. In the event that Ridgeway's engagement terminates or is not renewed, Respondents shall engage a successor independent compliance monitor with equivalent qualifications. Any successor monitor shall be identified to the Director, Office of Enforcement, in advance of engagement, and the Director shall have the right to object to the selection of a proposed successor monitor within fifteen (15) days of receipt of notice.
The independent compliance monitor shall have access to all trading data, risk reports, communications, and other records maintained by DPT and DMP that are reasonably necessary for the conduct of the quarterly audits. DPT trading personnel and management shall cooperate fully with the independent compliance monitor and shall make themselves available for interviews and discussions as reasonably requested.
5. Automated Trade Surveillance Systems
Respondents shall design, procure, and implement automated trade surveillance systems ("Surveillance Systems") capable of detecting:
(a) Bidding patterns that are inconsistent with economic fundamentals, including Day-Ahead generation offers that are priced below estimated marginal cost by a threshold amount to be determined by the CCO in consultation with the independent compliance monitor;
(b) Coordinated trading activity across Day-Ahead, Real-Time, virtual, and FTR markets that could indicate cross-product manipulation, including the identification of positions that would profit from congestion created by uneconomic generation offers or virtual trades; and
(c) Anomalous correlations between physical gas nominations made through DMP and electricity market positions held by DPT, including timing patterns and volume correlations that could indicate coordination between gas scheduling and electricity trading.
The Surveillance Systems shall be configured to generate automated alerts when potential anomalies or suspicious patterns are detected. All alerts shall be routed to the CCO and designated compliance staff for prompt review and investigation. The CCO shall maintain a log of all alerts generated by the Surveillance Systems, together with a record of the review and disposition of each alert.
The Surveillance Systems shall be operational no later than six (6) months following the effective date of this Agreement — that is, no later than August 9, 2024, based on the anticipated Commission order date of February 9, 2024. Respondents shall provide written notice to the Director, Division of Investigations, Office of Enforcement, confirming that the Surveillance Systems are operational.
The Surveillance Systems shall be tested and validated upon implementation, and shall be reviewed and updated at least annually during the Compliance Monitoring Period to ensure that they remain effective in light of changes in market conditions, trading strategies, and regulatory requirements.
6. Policies and Procedures
Respondents shall develop and maintain comprehensive written policies and procedures governing the following areas:
(a) Day-Ahead and Real-Time Bidding for Generation Assets. Policies shall establish guidelines for the formulation of generation offers, including requirements for documentation of marginal cost calculations, opportunity cost analyses, and the basis for any offers priced below estimated marginal cost.
(b) FTR Acquisition and Position Management. Policies shall establish protocols for the acquisition, management, and monitoring of FTR positions, including requirements for documentation of the hedging rationale for FTR acquisitions and limitations on the size and concentration of FTR positions.
(c) Virtual Trading at MISO Pricing Nodes. Policies shall establish guidelines for virtual trading activity, including Increment Offers and Decrement Bids, and shall require documentation of the economic rationale for virtual trades, with particular attention to the relationship between virtual positions and other DPT trading positions.
(d) Coordination Between Electricity Trading and Gas Scheduling Through DMP. Policies shall establish protocols governing communication and coordination between DPT's electricity trading desk and DMP's gas scheduling and nomination personnel, including requirements for documentation of gas nomination decisions and restrictions on the sharing of non-public market-sensitive information between DPT traders and DMP schedulers.
(e) Trader Communication Protocols. Policies shall establish requirements for the recording and retention of trader communications, including electronic mail, instant messages, voice communications, and personal device usage, consistent with the Commission's recordkeeping requirements.
(f) Escalation and Reporting of Potential Compliance Concerns. Policies shall establish a clear escalation pathway for reporting potential compliance concerns, from the individual trader level through the trading desk supervisor, the CCO, and, where appropriate, the Board of Directors. The policies shall include protections against retaliation for good-faith reporting of compliance concerns.
All policies and procedures shall be reviewed and updated at least annually during the Compliance Monitoring Period. Updated policies shall be distributed to all covered personnel, and acknowledgment of receipt shall be documented and retained.
7. Quarterly Reporting to FERC OE
Respondents shall submit quarterly compliance reports to the Director, Division of Investigations, Office of Enforcement, within thirty (30) days after the end of each calendar quarter during the thirty-six (36) month Compliance Monitoring Period. The first quarterly report shall cover the period from the effective date of this Agreement through March 31, 2024, and shall be due no later than April 30, 2024.
Each quarterly compliance report shall include the following:
(a) A summary of compliance activities undertaken during the quarter, including training sessions conducted, policies updated, and other compliance initiatives;
(b) A summary of the independent compliance monitor's audit findings for the quarter, including identification of any areas of concern and recommendations for improvement;
(c) A description of any compliance incidents, concerns, or potential violations identified during the quarter, together with a description of the actions taken in response;
(d) A status report on the implementation and operation of the automated trade surveillance systems, including the number of alerts generated, the results of alert reviews, and any system modifications or enhancements;