PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Catherine Bloom, Responsible Partner; Hannah Brinkley, Lead Associate
FROM: Patrick Gallagher, Working Associate
DATE: August 10, 2023
RE: Analysis of FERC Office of Enforcement Supplemental Second Data Request — Docket No. IN23-7-000
C&H Matter Number: 1016-00004
Billing Code: 71420.00001
CLIENT: Dunmore Energy Holdings Ltd. / Dunmore Power Trading LLC
I. Executive Summary
On August 7, 2023, the Federal Energy Regulatory Commission's Office of Enforcement ("FERC OE"), Division of Investigations, served a supplemental second data request (the "Second Data Request") on our clients Dunmore Energy Holdings Ltd. ("DEH") and Dunmore Power Trading LLC ("DPT," and together with DEH, "Dunmore" or the "Company") in connection with FERC's non-public investigation designated as Docket No. IN23-7-000.
The Second Data Request comprises eighteen (18) interrogatories. Unlike the first data request, it does not include any additional document requests beyond those contained in the first data request served on June 26, 2023, which encompassed forty-one (41) interrogatories and twenty-three (23) document requests covering the full breadth of DPT's trading activity in the Midcontinent Independent System Operator ("MISO") energy markets during the Relevant Period (January 3, 2022 through March 17, 2023). The absence of new document requests is notable and suggests that FERC Staff believes it has defined the documentary universe sufficiently through the first data request and is now seeking targeted narrative explanations to contextualize the documents it has received or expects to receive.
The Second Data Request is narrowly focused on three subject areas:
1. Gas Nomination Practices Through Dunmore Midstream Partners LP ("DMP") — Interrogatories 1 through 7 request detailed information regarding the organizational relationship between DPT and DMP, the procedures by which natural gas nominations were made through DMP's pipeline infrastructure to supply DPT's gas-fired generation units, the coordination (if any) between gas nominations and Day-Ahead offer submissions, intra-day nomination changes, gas cost accounting for marginal cost determinations, contractual minimum generation obligations, and pipeline capacity constraints.
2. Trader Compensation Structures and Incentive Arrangements at DPT — Interrogatories 8 through 12 request information regarding the compensation structure for all DPT trading desk personnel, performance metrics used to determine incentive compensation, specific compensation details for two individually identified traders (Kyle Renfro and Anastasia Petrov), and any changes to compensation structures during the Relevant Period.
3. Internal Communications Regarding Day-Ahead and Real-Time Bidding Strategy at the Indiana Hub and Minnesota Hub Pricing Nodes — Interrogatories 13 through 18 request information regarding the bidding strategy approval process, communications between and among specific traders and supervisory personnel, the rationale for FTR position acquisitions, trading desk meetings and strategy sessions, and the nature and scope of compliance oversight of DPT's trading activity.
The Second Data Request was served by Thomas Adebayo, Lead Investigator, FERC Division of Investigations, and specifies a response deadline of twenty-one (21) calendar days from the date of service, which establishes a formal response deadline of August 28, 2023.
This memorandum: (a) categorizes each of the eighteen interrogatories within the three identified subject areas; (b) identifies potential privilege concerns, confidentiality issues, and burden objections; (c) recommends specific objections to be asserted; and (d) proposes a response timeline coordinated with our second document production, which is targeted for delivery to FERC OE on August 21, 2023 and will encompass approximately 63,400 documents bearing Bates numbers DUNMORE-048201 through DUNMORE-111600. As discussed further in Section VII below, I recommend targeting submission of narrative interrogatory responses for August 18, 2023 — three days ahead of the second document production — in order to frame the factual narrative before FERC Staff begins its review of the underlying documents.
II. Background and Context
A. Procedural Posture
The following summarizes the procedural history of this matter as it bears on the Second Data Request:
• May 22, 2023: FERC OE issued a preliminary inquiry letter to DEH and DPT requesting voluntary production of certain trading records and related documentation concerning DPT's activities in the MISO Day-Ahead and Real-Time energy markets.
• May 24, 2023: Calderwood & Harkness LLP was engaged by Dunmore to represent DEH and DPT in connection with the inquiry. The engagement letter was executed on this date by Martin Llewellyn, General Counsel of DEH, on behalf of both entities. A retainer of $250,000 was received on May 30, 2023.
• June 5, 2023: Calderwood & Harkness filed a notice of appearance on behalf of DEH and DPT with FERC OE, designating Catherine Bloom as lead counsel and Hannah Brinkley as associate counsel.
• June 12, 2023: FERC issued a formal non-public order of investigation in Docket No. IN23-7-000, authorizing FERC OE to conduct an investigation into possible violations of Section 222 of the Federal Power Act ("FPA"), 16 U.S.C. § 824v, and the Commission's Anti-Manipulation Rule, 18 C.F.R. § 1c.2, in connection with DPT's trading activities in the MISO energy markets during the Relevant Period. The order delegated subpoena authority to FERC OE staff.
• June 26, 2023: FERC OE served the first data request on DEH and DPT, consisting of forty-one (41) interrogatories and twenty-three (23) document requests. The first data request covered the full breadth of DPT's MISO trading activity, including physical generation offers, virtual transactions (Increment Offers and Decrement Bids), Financial Transmission Rights ("FTR") positions, internal policies and procedures, organizational structure, and risk management practices.
• July 17, 2023: Calderwood & Harkness submitted objections and responses to the first data request on behalf of DEH and DPT. The response included general objections (overbreadth, undue burden, relevance, proportionality, privilege) and specific objections to certain interrogatories and document requests. Substantive narrative responses were provided to all interrogatories, subject to stated objections.
• July 24, 2023: Calderwood & Harkness delivered the first document production to FERC OE, consisting of 48,200 documents bearing Bates numbers DUNMORE-000001 through DUNMORE-048200. The production was processed and hosted by our e-discovery vendor, Crestline Document Solutions LLC ("Crestline"), and was delivered in FERC OE's specified format (load files, native format for spreadsheets, single-page TIFF images with extracted text for all other documents). The production included documents from ten (10) custodians, as identified in response to Document Request No. 1 of the first data request.
• August 7, 2023: FERC OE served the Second Data Request at issue in this memorandum.
B. Substantive Focus of the Investigation
FERC Staff is investigating alleged market manipulation in the MISO Day-Ahead and Real-Time energy markets under Section 222 of the Federal Power Act, 16 U.S.C. § 824v, and the Commission's Anti-Manipulation Rule, 18 C.F.R. § 1c.2. The investigation covers the Relevant Period of January 3, 2022 through March 17, 2023, and centers on three prongs of alleged misconduct:
First, FERC Staff alleges that DPT engaged in uneconomic Day-Ahead bidding at the Indiana Hub pricing node. Specifically, Staff contends that DPT submitted generation offers at prices significantly below marginal cost — as low as negative $15/MWh to negative $40/MWh — for DPT's gas-fired generation units in the MISO Day-Ahead energy market. Staff's preliminary analysis, as reflected in communications from Thomas Adebayo, suggests that these offers totaled approximately 2,840 GWh over the Relevant Period and were designed to suppress Day-Ahead Locational Marginal Prices ("LMPs") at the Indiana Hub, rather than to reflect legitimate economic considerations.
Second, FERC Staff alleges cross-product manipulation through virtual transactions at the Minnesota Hub pricing node. Staff contends that DPT submitted approximately 1,620 GWh of Increment Offers ("INCs") and Decrement Bids ("DECs") in the MISO Day-Ahead and Real-Time markets at or near the Minnesota Hub, and that these virtual positions were designed to profit from artificial price differentials created by DPT's allegedly uneconomic physical offers at the Indiana Hub. The precise mechanism of the alleged cross-product manipulation — the relationship between Indiana Hub physical offers and Minnesota Hub virtual positions — has not been fully articulated by Staff, although Staff's preliminary analysis appears to focus on congestion patterns along constrained transmission interfaces connecting the two pricing nodes.
Third, FERC Staff alleges physical-financial coordination involving DPT's FTR positions and gas nominations through DMP. Staff contends that DPT held a portfolio of FTR positions with an aggregate notional value of approximately $47.3 million during the Relevant Period, and that these positions were designed to benefit from the congestion patterns and price differentials allegedly caused by DPT's uneconomic physical offers and virtual transactions. Staff further contends that DPT's gas nominations through its affiliated midstream entity, DMP, were coordinated with the alleged manipulative bidding strategy to ensure that DPT's gas-fired generation units were dispatched in a manner that furthered the scheme.
The investigation originated from a referral. On April 3, 2023, Velthorn Market Analytics, Inc. ("Velthorn"), the MISO Independent Market Monitor ("IMM"), submitted a referral letter to FERC OE identifying DPT's trading patterns as potentially manipulative. The referral letter was signed by Dr. Patricia Engel, President of Velthorn Market Analytics, and was accompanied by a preliminary statistical analysis of DPT's bidding behavior relative to estimated marginal costs and an analysis of correlations between DPT's physical, virtual, and FTR positions. We have not received a copy of the Velthorn referral letter or accompanying analysis, and our requests for production of these materials from FERC OE remain pending.
C. Significance of the Second Data Request's Focus Areas
The three subject areas targeted by the Second Data Request are revealing with respect to FERC Staff's evolving investigative theory, and each warrants careful attention.
Gas Nomination Practices (Interrogatories 1–7). The Second Data Request's pronounced emphasis on gas nomination practices through DMP strongly suggests that FERC Staff is actively developing the third prong of its alleged manipulation scheme — the physical-financial coordination theory. This focus is consistent with an analytical framework that seeks to link DPT's physical generation offers to operational decisions made at the affiliated midstream entity, thereby establishing a coordinated strategy spanning both the physical gas and electric power markets. We believe this line of inquiry is likely informed by analysis performed by Dr. Samuel Breck, Senior Economist in FERC OE's Division of Analytics and Surveillance, who has been identified in prior communications from Thomas Adebayo as a member of the investigative team. Dr. Breck has published extensively on cross-market manipulation schemes involving coordinated physical and financial positions, and his involvement suggests that Staff is paying particular attention to the timing and magnitude of DMP's gas nominations relative to DPT's Day-Ahead offer submissions.
Trader Compensation Structures (Interrogatories 8–12). The inquiry into trader compensation structures suggests that Staff is looking for evidence that DPT's trader incentive arrangements created a financial motivation to engage in the allegedly manipulative strategy. Under the market manipulation standard established by the Commission in Order No. 670 and applied in enforcement proceedings such as Camberwell Bancorp, 144 FERC ¶ 61,041 (2013), scienter — the intent to manipulate — is a necessary element of a manipulation claim. Evidence that trader bonuses were tied to profits from the specific trading books or product lines associated with the alleged manipulation (e.g., FTR positions, virtual transaction P&L, or cross-product portfolio performance) could be used by Staff to establish that individual traders had a personal financial incentive to pursue the alleged scheme. This line of inquiry is therefore directed squarely at the scienter and intent elements of the manipulation standard.
Internal Communications Regarding Bidding Strategy (Interrogatories 13–18). The focus on internal communications regarding Day-Ahead and Real-Time bidding strategy at the Indiana Hub and Minnesota Hub pricing nodes appears aimed at establishing that the allegedly manipulative bidding strategies were discussed, coordinated, and approved among specific individuals — principally Kyle Renfro (Senior Trader, MISO Day-Ahead Desk), Anastasia Petrov (Trader, MISO Real-Time Desk), and Derek Sung (Senior Vice President, Power Marketing & Trading). By seeking to establish a pattern of communications connecting Day-Ahead physical offer decisions, Real-Time virtual transaction decisions, and gas scheduling decisions, Staff appears to be constructing a narrative in which these three individuals (and potentially others) acted in concert to implement the alleged manipulative scheme. This focus may also be intended to connect the three prongs of the alleged misconduct — showing that the same individuals who made Day-Ahead offer pricing decisions also discussed virtual transaction strategy, FTR positioning, and gas nominations through DMP.
Taken together, these three focus areas suggest that FERC Staff has moved beyond the broad information-gathering phase reflected in the first data request and is now pursuing a more targeted investigative strategy aimed at building the evidentiary foundation for potential enforcement action. The Second Data Request should accordingly be treated with a heightened degree of strategic care, and our responses should be crafted not only to satisfy our discovery obligations but also to lay the groundwork for our defense on the merits.
III. Detailed Analysis of the 18 Interrogatories
A. Category 1: Gas Nomination Practices Through Dunmore Midstream Partners LP (Interrogatories 1–7)
Interrogatory 1 — Organizational Relationship Between DPT and DMP
Summary of Request. Interrogatory 1 requests a detailed description of the corporate and operational relationship between DPT and DMP, including: (a) the ownership and corporate structure connecting the two entities; (b) reporting lines and management hierarchy; (c) identification of any personnel who hold positions at both DPT and DMP or who are shared between the two entities; (d) shared office space or facilities; and (e) any joint management committees, coordination committees, or other governance bodies that include representatives of both entities.
Analysis and Observations. DMP (EIN 47-8831205) is a Delaware limited partnership organized in 2016 with its principal office at 2200 Post Oak Boulevard, Suite 3100, Houston, Texas 77056. This is the same address as DPT's and DEH's principal offices. DMP is wholly owned within the DEH corporate structure — specifically, DMP's general partner is Dunmore Midstream GP LLC, a wholly owned subsidiary of DEH, and DMP's limited partnership interests are held by DEH and certain of its subsidiaries. The shared address and common corporate parentage are standard features of an integrated energy holding company structure and, standing alone, do not imply improper coordination between the trading and midstream operations.
That said, we should anticipate that FERC Staff will use the organizational proximity between DPT and DMP as circumstantial evidence supporting the physical-financial coordination theory. Our response should provide accurate corporate structure information while framing the organizational relationship as typical for companies in the energy sector. We should note that DPT and DMP maintain separate management structures, separate books and records, and separate functional roles within the DEH enterprise, consistent with sound corporate governance and FERC's Standards of Conduct requirements applicable to affiliated entities.
Recommended Approach. Provide accurate and complete information regarding the corporate structure, reporting lines, and shared resources. Emphasize the functional separation between DPT's trading operations and DMP's midstream operations, including any information barriers, separate reporting structures, or other governance mechanisms in place during the Relevant Period.
Interrogatory 2 — Gas Nomination Procedures
Summary of Request. Interrogatory 2 requests a step-by-step description of how natural gas nominations were made through DMP's pipeline infrastructure to supply DPT's gas-fired generation units during the Relevant Period. The interrogatory further requests identification of all individuals involved in gas nomination decisions at both DPT and DMP, including the specific roles and responsibilities of each individual in the nomination process.
Analysis and Observations. DPT's gas-fired generation capacity during the Relevant Period totaled approximately 2,650 MW, comprising a portion of DEH's 4,280 MW of total U.S. net generation capacity (2,650 MW natural gas, 1,130 MW wind, 500 MW solar). The gas-fired fleet consists of four combined-cycle gas turbine ("CCGT") units and two simple-cycle peaking units, all located in the MISO footprint and interconnected with DMP's pipeline system. Gas nominations for these units are made through DMP's intrastate and interstate pipeline facilities, which provide firm and interruptible transportation services under DMP's FERC-approved tariffs and state-jurisdictional tariffs.
The gas nomination process involves coordination between DPT's generation scheduling personnel and DMP's pipeline operations personnel, following industry-standard nomination timelines established by the North American Energy Standards Board ("NAESB") and individual pipeline tariff provisions. This process is inherently operational in nature — gas must be nominated and scheduled in advance to ensure that generation units have adequate fuel supply when they are dispatched by MISO. The nomination timeline includes the Timely Nomination Cycle (typically with a nomination deadline of 11:30 a.m. Central for next-day gas), the Evening Nomination Cycle, and intra-day nomination cycles that permit adjustments to gas volumes during the operating day.
Our response should describe this process in straightforward operational terms, identifying the relevant personnel and their roles without characterizing the process in a manner that could be interpreted as suggesting improper coordination between gas scheduling and bidding decisions. We should be prepared to identify the specific individuals at DPT and DMP who were involved in gas nomination decisions during the Relevant Period, including any generation scheduling coordinators, gas supply managers, and pipeline operations personnel.
Recommended Approach. Provide a comprehensive step-by-step description of the nomination process, emphasizing its operational and contractual basis. Identify all relevant personnel with their titles and specific responsibilities in the nomination workflow. Describe the NAESB nomination timelines and pipeline tariff requirements that governed the timing and mechanics of nominations.
Interrogatory 3 — Coordination Between Gas Nominations and Day-Ahead Offers
Summary of Request. Interrogatory 3 asks whether and how gas nomination volumes and timing were coordinated with Day-Ahead offer submissions at the Indiana Hub pricing node. The interrogatory further requests identification of any written policies, procedures, protocols, or guidelines governing any such coordination.
Analysis and Observations. This is one of the most critical interrogatories in the Second Data Request. It directly implicates the physical-financial coordination allegation that lies at the heart of FERC Staff's third prong of alleged misconduct. The interrogatory is carefully drafted to elicit an admission (or denial) that gas nominations were coordinated with Day-Ahead bidding decisions, and if so, to identify the mechanisms and individuals involved in that coordination.
Our response must be crafted with particular care. On one hand, it is a fact that gas nominations and Day-Ahead offers are inherently interrelated — a generator must nominate gas to fuel its units when it expects those units to be dispatched, and Day-Ahead offers determine (in part) whether and at what level units will be dispatched in the Day-Ahead market. On the other hand, the characterization of this relationship is critically important. We must distinguish between legitimate operational coordination (ensuring that gas is available to fuel units that are expected to be dispatched based on bona fide offers reflecting marginal cost) and the manipulative coordination alleged by Staff (adjusting gas nominations and offer prices as part of a scheme to manipulate market prices and benefit FTR and virtual transaction positions).
Our response should emphasize that gas nominations followed standard operational practices driven by plant dispatch needs, contractual obligations (including minimum generation requirements, firm transportation commitments, and take-or-pay provisions), and prevailing market conditions — not by any desire to influence Day-Ahead LMPs at the Indiana Hub or any other pricing node. We should identify any written policies, procedures, or protocols governing the relationship between gas scheduling and generation dispatch, including any guidance from DPT's risk management or compliance functions. If no formal written policies existed during the Relevant Period (which may be the case, particularly prior to Jennifer Caulfield's appointment as CCO on February 6, 2023), we should acknowledge that fact while describing the informal practices and business judgment exercised by operational personnel.
Recommended Approach. Provide a factual response describing the operational relationship between gas nominations and Day-Ahead offers. Emphasize that nominations were driven by operational and contractual requirements, not trading strategy. Identify any applicable policies or procedures, and if none existed in formal written form, describe the informal operational practices that governed the relationship. Exercise care in framing language to avoid any characterization that could be interpreted as an admission of manipulative coordination.
Interrogatory 4 — Gas Scheduling Changes During Relevant Period
Summary of Request. Interrogatory 4 requests identification of all instances during the Relevant Period where gas nominations through DMP were changed, revised, or adjusted intra-day, together with the reasons for each such change.
Analysis and Observations. This interrogatory is potentially burdensome. Over the fourteen-and-a-half-month Relevant Period (January 3, 2022 through March 17, 2023), DPT's gas-fired generation fleet of 2,650 MW operated continuously (subject to planned and forced outages), and intra-day gas nomination changes are a routine and frequent occurrence driven by changes in unit dispatch, weather conditions, pipeline operating conditions, unplanned outages, and MISO Real-Time dispatch instructions. Depending on the frequency of intra-day changes, the total number of individual nomination modifications could number in the thousands or even tens of thousands.
We should assess the actual volume of intra-day nomination changes by consulting with DMP's pipeline operations team and DPT's generation scheduling personnel, and if the volume is substantial (as we expect it to be), we should object on burden grounds while proposing a reasonable alternative approach. Options include: (a) providing a representative sample of intra-day nomination changes with detailed explanations for a defined subset of the Relevant Period (e.g., specific months or weeks identified by FERC Staff); (b) providing a summary or statistical analysis of the frequency, magnitude, and reasons for intra-day nomination changes over the full Relevant Period; or (c) offering to meet and confer with FERC Staff to narrow the scope of this interrogatory to specific time periods or operational circumstances of particular interest.
Recommended Approach. Quantify the volume of intra-day nomination changes during the Relevant Period. Object on grounds of undue burden and proportionality. Propose a representative sample or summary approach and offer to meet and confer with Staff to identify a mutually acceptable scope.
Interrogatory 5 — Gas Cost Accounting
Summary of Request. Interrogatory 5 requests an explanation of how DPT accounted for gas costs in determining the marginal cost of generation for the purpose of Day-Ahead offer pricing. The interrogatory specifically asks whether gas costs reflected in DPT's marginal cost calculations were based on: (a) actual tariff rates charged by DMP for transportation services; (b) market-based pricing (e.g., prevailing index prices at relevant trading hubs); or (c) intercompany transfer pricing established between DPT and DMP.
Analysis and Observations. This interrogatory is central to Dunmore's defense that DPT's negative Day-Ahead offers at the Indiana Hub reflected legitimate opportunity costs and contractual minimum generation commitments, not artificial price suppression. If DPT can demonstrate that its marginal cost calculations were based on bona fide gas costs — including not only commodity costs but also transportation charges, demand charges, reservation fees, and the opportunity costs associated with contractual minimum generation and take-or-pay obligations — then DPT's negative offers may be explained as economically rational decisions to minimize losses under binding contractual commitments rather than as manipulative conduct.
The response to this interrogatory requires close coordination with DPT's commercial and finance teams, as well as with DMP's tariff and accounting personnel. We need to understand precisely how gas costs were allocated to DPT's generation units, whether intercompany transfer pricing was used, and if so, whether such transfer pricing was established on an arm's-length basis consistent with applicable tax and regulatory requirements. If intercompany transfer pricing was used, we should be prepared to explain the methodology and demonstrate that it did not artificially reduce or inflate the gas costs used in marginal cost calculations.
Additionally, this interrogatory may intersect with Dr. Leonard Whitfield's economic analysis. Dr. Whitfield should be provided with the gas cost accounting data responsive to this interrogatory to incorporate into his market impact analysis and his assessment of whether DPT's Day-Ahead offer prices reflected legitimate opportunity costs versus artificial suppression.
Recommended Approach. Provide a thorough and accurate explanation of DPT's gas cost accounting methodology for marginal cost determinations. Identify the specific cost components included in marginal cost calculations (commodity cost, transportation charges, demand charges, variable O&M, etc.). If intercompany transfer pricing was used, explain the methodology and basis. Coordinate the response with Dr. Whitfield's economic analysis to ensure consistency.
Interrogatory 6 — Minimum Generation Obligations
Summary of Request. Interrogatory 6 requests production and explanation of any contractual minimum generation obligations, must-run commitments, reliability-must-run arrangements, or similar requirements that required DPT to operate its gas-fired generation units regardless of economic conditions during the Relevant Period.
Analysis and Observations. This interrogatory directly supports Dunmore's principal defense argument — that DPT's negative Day-Ahead offers were economically rational responses to binding contractual obligations that required DPT to operate certain gas-fired units at minimum generation levels irrespective of prevailing market prices. If DPT was contractually obligated to generate at minimum levels (whether through MISO must-offer requirements, interconnection agreements, gas supply or transportation contracts with minimum volume commitments, or power purchase agreements with must-run provisions), then negative offers may reflect a rational economic decision to clear the Day-Ahead market at any price rather than incur contractual penalties for failure to operate.
We should compile all relevant contractual documents, including: (a) MISO Generator Interconnection Agreements and associated must-offer obligations; (b) gas supply contracts and transportation agreements with minimum volume or minimum take provisions; (c) any power purchase agreements with must-run or minimum delivery provisions; (d) any reliability-must-run agreements with MISO or applicable transmission owners; and (e) any internal DPT policies or operating procedures implementing these contractual requirements. We should provide a comprehensive narrative response identifying each applicable contractual obligation, the generation units to which it applies, the minimum generation levels required, and the economic consequences of non-compliance.
Recommended Approach. Provide a comprehensive response supported by relevant contractual documentation. This interrogatory represents an affirmative opportunity to build our defense record, and the response should be treated as a priority. Identify all applicable minimum generation obligations, the contractual basis for each, and the financial consequences of non-compliance.
Interrogatory 7 — Pipeline Capacity and Scheduling Constraints
Summary of Request. Interrogatory 7 requests a description of any pipeline capacity constraints, firm transportation agreements, or take-or-pay obligations through DMP that may have influenced generation dispatch decisions during the Relevant Period.
Analysis and Observations. This interrogatory is related to both the defense narrative (explaining that negative offers reflected contractual costs and obligations associated with pipeline capacity commitments) and FERC Staff's physical-financial coordination theory (exploring whether pipeline capacity arrangements were used as a mechanism to coordinate gas flows with allegedly manipulative bidding). The response should describe the specific firm transportation agreements between DPT and DMP (or between DMP and upstream pipeline systems), including the contracted capacity volumes, demand charges, and any take-or-pay provisions that created obligations for DPT to utilize pipeline capacity regardless of generation economics.
If DPT held firm transportation capacity with demand charges that constituted sunk costs during the Relevant Period, then the marginal cost of gas delivery was effectively reduced by the amount of those sunk demand charges — which could explain why DPT's generation dispatch decisions and Day-Ahead offers reflected costs below what might be expected based solely on commodity prices and variable transportation charges.
Recommended Approach. Provide a factual description of applicable pipeline capacity arrangements, firm transportation agreements, and take-or-pay obligations. Quantify the financial impact of these obligations on DPT's generation dispatch economics. Coordinate with the response to Interrogatory 5 (gas cost accounting) to ensure consistency in the treatment of transportation costs.
B. Category 2: Trader Compensation Structures (Interrogatories 8–12)
Interrogatory 8 — Compensation Structure Overview
Summary of Request. Interrogatory 8 requests a description of the compensation structure for all DPT trading desk personnel during the Relevant Period, including base salary ranges, bonus structures, and any performance-based incentive compensation components. The interrogatory requests that the description cover all categories of trading desk personnel, including traders, trading support staff, and supervisory personnel.
Analysis and Observations. DPT's trading desk comprised fourteen (14) traders during the Relevant Period, all of whom reported to Derek Sung in his capacity as Senior Vice President, Power Marketing & Trading. The trading desk was organized into functional teams covering Day-Ahead physical offers, Real-Time operations, virtual transactions (INCs and DECs), and FTR origination and management. In addition to the fourteen traders, the desk was supported by trading support staff (analysts, risk management personnel) and administrative personnel.
Our response should describe the general compensation framework applicable to trading desk personnel, including the structure of base salary, annual discretionary bonuses, and any formulaic or metrics-based incentive compensation plans. The critical issue — discussed further in connection with Interrogatory 9 — is whether and how incentive compensation was tied to specific trading books, product lines, or portfolio-level performance. We should provide sufficient detail to give a fair and accurate picture of the compensation structure without unnecessarily disclosing proprietary compensation information for individuals not specifically identified by FERC Staff.
Recommended Approach. Provide a general description of the compensation structure applicable to DPT trading desk personnel, covering base salary ranges (in bands rather than individual figures, except as specifically requested for Renfro and Petrov), bonus structure, and incentive compensation mechanics. Assert that compensation details constitute proprietary and confidential business information and request appropriate confidentiality treatment.
Interrogatory 9 — Performance Metrics for Incentive Compensation
Summary of Request. Interrogatory 9 asks what specific performance metrics, benchmarks, or profit-and-loss targets were used to determine incentive compensation for DPT traders during the Relevant Period. The interrogatory specifically asks whether compensation was tied to: (a) individual trader performance; (b) specific trading books or product lines (e.g., Day-Ahead physical, FTRs, virtual transactions); (c) aggregate desk performance; or (d) some combination of the foregoing.
Analysis and Observations. This is the most critical interrogatory in the compensation category because it directly implicates the scienter element of FERC Staff's manipulation theory. If FERC Staff can establish that individual traders — particularly Kyle Renfro and Anastasia Petrov — received bonus compensation tied to the profitability of specific trading books or product lines that benefited from the alleged manipulation, Staff will argue that the traders had a direct personal financial incentive to engage in the manipulative scheme. For example, if Renfro's bonus was tied in part to the profitability of DPT's FTR portfolio, and if the FTR portfolio benefited from the congestion patterns allegedly caused by Renfro's uneconomic Day-Ahead offers, Staff would argue that this compensation structure provided a motive for Renfro to submit manipulative bids.
Conversely, if trader compensation was based on aggregate desk performance, overall company profitability, or qualitative assessments (e.g., risk management adherence, compliance with trading policies, team contribution), the link between individual trader incentives and the alleged manipulation would be more attenuated.
We need to obtain a detailed understanding of DPT's actual compensation practices from DPT's Human Resources and Finance departments. If the compensation structure was in fact based on aggregate desk performance with appropriate risk controls and compliance-related qualitative factors, our response should emphasize those features. If, however, compensation was tied to individual trading book P&L — which is common in the energy trading industry — we should frame the response to emphasize that such structures are industry-standard and do not, standing alone, indicate an incentive to manipulate.
Recommended Approach. Provide an accurate description of the performance metrics used to determine incentive compensation. To the extent compensation was based on aggregate desk performance or included qualitative factors, emphasize those features. If individual trading book P&L was a factor, acknowledge this while noting that such structures are industry-standard and are subject to risk management controls and compliance oversight. Request confidentiality treatment for all compensation-related information.
Interrogatory 10 — Kyle Renfro Compensation
Summary of Request. Interrogatory 10 requests specific compensation details for Kyle Renfro (Senior Trader, MISO Day-Ahead Desk) for calendar years 2021, 2022, and 2023 (through March 17, 2023), including base salary, bonus amounts (broken down by component if applicable), and the specific basis on which bonus amounts were calculated.
Analysis and Observations. This interrogatory seeks granular, individual-specific compensation information for the trader at the center of the Day-Ahead bidding conduct that forms the first prong of FERC Staff's alleged manipulation scheme. Renfro was responsible for submitting Day-Ahead offers at the Indiana Hub and had primary responsibility for the physical generation offer book. His compensation details are therefore directly relevant to Staff's inquiry into whether his financial incentives were aligned with the allegedly manipulative strategy.
We recommend providing the requested factual information, as there is no viable basis for substantive withholding — FERC OE has broad investigative authority under the FPA, and compensation data is plainly relevant to the investigation. However, we should assert that this information constitutes proprietary and confidential personnel records and request heightened confidentiality treatment under 18 C.F.R. § 388.112, including designation as "non-public" and restrictions on disclosure beyond FERC Staff members with a need to know in connection with the investigation.
The request for 2021 compensation data — which predates the Relevant Period by one year — may be objectionable on relevance grounds, but I recommend against pressing this objection given its marginal burden and the risk that it could be perceived as obstructionist. Providing 2021 data may in fact be helpful to our defense if it shows that Renfro's compensation structure and level were consistent before and during the Relevant Period, undermining any inference that compensation incentives were altered to facilitate the alleged scheme.
Recommended Approach. Provide the requested compensation data for all three years. Assert proprietary/confidential treatment and request enhanced confidentiality protections under 18 C.F.R. § 388.112.
Interrogatory 11 — Anastasia Petrov Compensation
Summary of Request. Interrogatory 11 makes the same request as Interrogatory 10, but for Anastasia Petrov (Trader, MISO Real-Time Desk), for calendar years 2021, 2022, and 2023 (through March 17, 2023).
Analysis and Observations. Petrov was responsible for DPT's Real-Time virtual transaction activity, including the Increment Offers and Decrement Bids at the Minnesota Hub that form the second prong of FERC Staff's alleged manipulation scheme. As with Renfro, Staff is seeking to establish whether Petrov's compensation incentives were aligned with the allegedly manipulative strategy.
The same considerations discussed in connection with Interrogatory 10 apply here. We should provide the requested factual information with the same confidentiality protections.
Recommended Approach. Same as Interrogatory 10. Provide the requested compensation data and request enhanced confidentiality treatment under 18 C.F.R. § 388.112.
Interrogatory 12 — Changes to Compensation During Relevant Period
Summary of Request. Interrogatory 12 asks whether any changes were made to trader compensation structures, incentive plans, or performance metrics during the Relevant Period, and if so, requests identification of: (a) the nature of each change; (b) the date of implementation; and (c) the reasons for the change.
Analysis and Observations. This interrogatory is designed to detect any mid-period modifications to compensation structures that could be interpreted as evidence of adaptation or refinement of the alleged manipulative scheme. For example, if DPT modified its bonus structure during the Relevant Period to increase the weighting of FTR profitability in trader bonuses, Staff could argue that this change was motivated by a desire to incentivize traders to pursue the cross-product manipulation strategy more aggressively.
Conversely, if no changes were made during the Relevant Period, this would tend to undermine any inference that compensation structures were tailored to the alleged scheme. And if changes were made for legitimate business reasons unrelated to the trading conduct at issue (e.g., company-wide compensation restructuring, changes resulting from Jennifer Caulfield's appointment as CCO, or adjustments to comply with Dodd-Frank Act clawback requirements), the response should clearly identify those reasons.
Recommended Approach. Provide accurate information regarding any changes to compensation structures during the Relevant Period, including dates and reasons. If changes were made for legitimate business reasons, document those reasons clearly. If no material changes were made, state this affirmatively.
C. Category 3: Internal Communications Regarding Bidding Strategy (Interrogatories 13–18)
Interrogatory 13 — Bidding Strategy Approval Process
Summary of Request. Interrogatory 13 requests a description of the process by which Day-Ahead bidding strategies at the Indiana Hub pricing node were developed, reviewed, and approved during the Relevant Period. The interrogatory specifically asks: (a) who was responsible for developing offer prices; (b) who had authority to approve offer prices, including negative-price offers; (c) what parameters, guidelines, or trading limits governed offer pricing; and (d) whether any special approval was required for offers at or below specified price thresholds.
Analysis and Observations. This interrogatory goes to the governance and control framework surrounding the conduct at issue. Our response should identify Derek Sung's supervisory authority over the MISO trading desk and describe any risk management framework, trading limits, or escalation procedures that governed Day-Ahead offer pricing. If DPT had established price floors, maximum loss limits, or escalation thresholds that required managerial or risk management approval for offers below certain price levels, these should be identified and described.
The response should also identify any involvement by DPT's risk management function, compliance function, or senior management in the review or approval of Day-Ahead offer strategies. If the evidence shows that negative-price offers were reviewed and approved through appropriate governance channels — rather than being made unilaterally by Renfro without oversight — this would support the defense argument that the offers reflected considered business judgment rather than rogue trading activity.
However, we should be cautious about the possibility that the evidence may show inadequate oversight of negative-price offers, particularly during the period before Jennifer Caulfield's appointment as CCO on February 6, 2023. If DPT lacked formal policies or approval procedures for negative-price offers during the early portion of the Relevant Period, we should acknowledge this while emphasizing the remedial steps taken after Caulfield's appointment.
Recommended Approach. Provide a comprehensive description of the bidding strategy approval process, including Derek Sung's supervisory role, applicable trading limits and risk parameters, and any escalation or approval procedures. Identify any formal policies or informal practices governing negative-price offers. If governance was strengthened during the Relevant Period (e.g., after Caulfield's appointment), describe the evolution of oversight.
Interrogatory 14 — Communications Between Renfro and Petrov
Summary of Request. Interrogatory 14 requests identification and description of all communications between Kyle Renfro and Anastasia Petrov during the Relevant Period concerning: (a) Day-Ahead offer pricing at the Indiana Hub; (b) Real-Time virtual positions at the Minnesota Hub; and (c) any relationship between Day-Ahead physical positions and Real-Time virtual positions.
Analysis and Observations. This interrogatory is designed to elicit evidence that Renfro and Petrov — who managed the Day-Ahead physical offer book and the Real-Time virtual transaction book, respectively — were communicating about the relationship between their respective trading activities, which would support Staff's theory that the Day-Ahead and virtual transaction strategies were coordinated elements of a single manipulative scheme.
From a practical standpoint, responsive documents — including emails, instant messages, text messages, and Westmark Services Inc. chat transcripts — should largely be captured in our document productions, particularly the second production batch targeted for August 21, which includes documents from both the Renfro and Petrov custodial collections. The narrative response to this interrogatory should describe the general nature and frequency of communications between Renfro and Petrov without providing a document-by-document recitation, which would be unduly burdensome and is more appropriately addressed through the document production itself.
There is a significant privilege concern associated with this interrogatory. If any communications between Renfro and Petrov during the Relevant Period included in-house counsel Martin Llewellyn (or his predecessor, if applicable) or compliance personnel such as Jennifer Caulfield, those communications may be protected by the attorney-client privilege or may require privilege assessment on a document-by-document basis. Communications that were forwarded to or from Llewellyn in his capacity as General Counsel for legal advice regarding trading practices or regulatory compliance are likely privileged and should be logged on the privilege log rather than described in the narrative response. We should flag this issue for Hannah Brinkley's review.
Recommended Approach. Object to the extent the interrogatory seeks information protected by the attorney-client privilege, the work product doctrine, or other applicable privileges. Object to the extent the interrogatory seeks a document-by-document recitation of communications that have been or will be produced in the document productions. Subject to these objections, provide a narrative description of the general nature, frequency, and subject matter of communications between Renfro and Petrov during the Relevant Period, without waiving any privilege.
Interrogatory 15 — Communications Between Renfro/Petrov and Sung
Summary of Request. Interrogatory 15 requests identification and description of all communications between Derek Sung and Kyle Renfro and/or Anastasia Petrov during the Relevant Period concerning bidding strategy, offer pricing, virtual transaction strategy, and FTR positions.
Analysis and Observations. This interrogatory extends the communications inquiry to include Derek Sung, who as SVP of Power Marketing & Trading supervised both Renfro and Petrov and had overall responsibility for DPT's MISO trading strategy. Staff is seeking to establish that Sung was aware of, directed, or approved the allegedly coordinated trading strategy, which would expand the potential circle of individuals subject to personal liability and would support the theory that the alleged manipulation was a desk-level strategy rather than the unauthorized activity of individual traders.
The same privilege and burden concerns identified in connection with Interrogatory 14 apply here, with the additional consideration that Sung, as a senior officer of DPT, may have been in regular communication with Martin Llewellyn on a range of business and legal matters. Any communications between Sung and Llewellyn that touched on trading strategy, market conduct, or regulatory compliance during the Relevant Period should be carefully reviewed for privilege before being described or produced.
Recommended Approach. Assert the same objections as Interrogatory 14. Provide a narrative description of the general nature and frequency of communications between Sung and Renfro/Petrov regarding the identified subject matters, subject to applicable privilege protections.
Interrogatory 16 — FTR Acquisition Rationale
Summary of Request. Interrogatory 16 requests an explanation of the rationale, analysis, and approval process for DPT's acquisition of the FTR positions that FERC Staff has identified as potentially benefiting from the alleged manipulation, which had an aggregate notional value of approximately $47.3 million during the Relevant Period. The interrogatory specifically asks when these FTR positions were acquired relative to the Relevant Period and what economic analysis or modeling was performed to support the acquisition decisions.
Analysis and Observations. This interrogatory is significant for Dunmore's defense. A key element of our defense theory is that DPT's FTR positions were acquired well in advance of the Relevant Period as part of DPT's routine hedging program, rather than being acquired concurrently with or in anticipation of the allegedly manipulative bidding strategy. If we can demonstrate that the FTR positions were established months before the Relevant Period began on January 3, 2022 — for example, in MISO's annual FTR auction conducted in the fall of 2021 or in prior years' auctions — this would significantly undermine Staff's theory that the FTR positions were acquired as part of a coordinated scheme to profit from artificially suppressed Day-Ahead prices.
Our response should provide a clear chronological account of when each of the identified FTR positions was acquired, through what mechanism (annual auction, monthly auction, bilateral transaction), and for what stated purpose. We should identify the internal analysis and approval process that preceded each acquisition, including any portfolio optimization models, risk assessments, or hedging studies that supported the decision to acquire FTR positions along the relevant transmission paths.
We should also emphasize that FTR acquisition is a routine and widely practiced hedging strategy in organized wholesale electricity markets, and that DPT's FTR portfolio was consistent with the size and geographic scope of its generation fleet and load-serving activities. Any economic modeling or analysis prepared by DPT's risk management team to support FTR acquisition decisions should be identified and produced (to the extent not already produced in the first document production).
Recommended Approach. Provide a comprehensive narrative response identifying the timing, mechanism, rationale, and approval process for each FTR acquisition. Emphasize the temporal separation between FTR acquisition and the Relevant Period. Describe FTR positions as routine hedging instruments consistent with industry practice. Coordinate with Dr. Whitfield on the economic characterization of the FTR portfolio.
Interrogatory 17 — Trading Desk Meetings and Strategy Sessions
Summary of Request. Interrogatory 17 requests identification of all regular and ad hoc trading desk meetings, strategy sessions, and portfolio review meetings held during the Relevant Period at which DPT's MISO trading activities were discussed, including: (a) the dates of each meeting; (b) the attendees; (c) the agenda or topics discussed; and (d) any minutes, notes, or other written records of the meetings.
Analysis and Observations. This interrogatory is potentially burdensome and may be impossible to fully comply with as drafted. Trading desks at energy companies such as DPT engage in continuous informal communication throughout the trading day. Traders sit in close proximity on an open trading floor and engage in frequent verbal discussions about market conditions, offer strategy, position management, and operational issues. These informal trading floor discussions are typically not documented in formal minutes or notes. Requiring identification of "all" meetings and strategy sessions, including informal discussions, over a fourteen-and-a-half-month period is unreasonably broad and burdensome.
We should object on burden grounds while offering to produce all available written records — including formal meeting agendas, minutes, notes, presentation materials, and any other written documentation of scheduled trading desk meetings, strategy sessions, and portfolio review meetings. We should note that informal trading floor discussions are not typically documented and that DPT cannot reasonably reconstruct a complete record of every such discussion over the Relevant Period.
Available written records may include: (a) weekly or monthly trading desk meeting agendas and minutes; (b) portfolio review presentations prepared by risk management; (c) strategy memoranda or position papers circulated to trading desk personnel; and (d) email communications scheduling or summarizing meetings. These records should be captured in the document productions, and the narrative response should provide context regarding the regular cadence and typical content of formal meetings.
Recommended Approach. Object on burden grounds regarding the identification of all informal or undocumented discussions. Offer to produce available written records (agendas, minutes, notes, presentations) for all regularly scheduled and documented meetings. Describe the general cadence and content of regular trading desk meetings and portfolio review sessions.
Interrogatory 18 — Compliance Oversight of Trading Activity
Summary of Request. Interrogatory 18 requests a description of any compliance oversight, review, or monitoring of DPT's trading activity during the Relevant Period. The interrogatory specifically asks for: (a) a description of any compliance program, policies, or monitoring systems in place prior to Jennifer Caulfield's appointment as Chief Compliance Officer on February 6, 2023; (b) a description of any compliance reviews or investigations conducted during the Relevant Period; (c) identification of any compliance concerns raised regarding DPT's trading activity; and (d) a description of any changes to the compliance program implemented after Caulfield's appointment.
Analysis and Observations. This interrogatory directly implicates the adequacy of Dunmore's compliance program — an area that presents both vulnerabilities and opportunities for our defense.
On the vulnerability side, the evidence is likely to show that DPT's compliance program was inadequate prior to Caulfield's appointment. Based on our preliminary review, DPT did not have a dedicated compliance officer for its trading operations during the period from January 3, 2022 through February 5, 2023 — compliance oversight during this period appears to have been handled on an ad hoc basis by Martin Llewellyn in his capacity as General Counsel and by various members of the risk management team, none of whom had specialized training or experience in energy market manipulation surveillance. There were no systematic trade surveillance systems in place, no regular compliance audits of trading activity, and no formal policies specifically addressing the submission of negative-price offers or the management of cross-product positions.
On the opportunity side, Dunmore's decision to hire Jennifer Caulfield as CCO — which occurred on February 6, 2023, approximately two months before the Velthorn referral letter (April 3, 2023) and more than three months before the FERC preliminary inquiry letter (May 22, 2023) — demonstrates proactive remediation that predated the investigation. If we can demonstrate that Caulfield's hire was motivated by Dunmore's own recognition that its compliance program needed strengthening (rather than by any awareness of the impending investigation), this would be a significant mitigating factor in any enforcement proceeding. Caulfield's post-appointment activities — including any compliance reviews, policy changes, trade surveillance implementations, or training programs she initiated — should be highlighted as evidence of good faith and remediation.
Our response should be candid about the limitations of the pre-Caulfield compliance program while emphasizing the proactive steps taken to remedy those limitations. Attempting to overstate the adequacy of the prior compliance program would be counterproductive, as FERC Staff will likely be able to assess the program's adequacy through documentary evidence and witness testimony. A forthright acknowledgment of past limitations, coupled with a strong narrative of proactive remediation, is more credible and more likely to be viewed favorably in any potential settlement discussions or penalty assessment under the Commission's Revised Policy Statement on Penalty Guidelines.
Recommended Approach. Provide a candid response describing the compliance oversight that existed during the Relevant Period, both before and after Caulfield's appointment. Acknowledge limitations of the pre-Caulfield program while emphasizing the proactive nature of the Caulfield hire and the remedial steps taken after her appointment. Identify specific compliance enhancements implemented by Caulfield, including any new policies, surveillance systems, training programs, or organizational changes.
IV. Privilege and Confidentiality Issues
A. Attorney-Client Privilege Concerns
Several of the interrogatories in the Second Data Request — particularly Interrogatories 13 through 18 dealing with internal communications, bidding strategy, and compliance oversight — may call for information communicated to or from counsel during the Relevant Period. Two sets of privilege holders are implicated:
In-House Counsel. Martin Llewellyn has served as General Counsel of DEH throughout the Relevant Period and, in that capacity, has provided legal advice to both DEH and DPT on a range of matters, including regulatory compliance, trading policies, and risk management. To the extent that Llewellyn received trading updates, strategy memoranda, or position reports in his capacity as legal advisor — rather than as a business participant in trading decisions — communications to and from Llewellyn may be protected by the attorney-client privilege. However, the dual-hat challenge is significant: Llewellyn's involvement in business decisions (e.g., participating in management meetings where trading strategy was discussed in his capacity as a member of senior management) may blur the line between legal advice and business advice. Each communication involving Llewellyn should be assessed individually to determine whether the communication was made for the purpose of seeking or providing legal advice, as opposed to business advice or operational updates.
External Counsel — Aldercroft & Beane LLP. Prior to Calderwood & Harkness's engagement, Aldercroft & Beane LLP ("A&B"), through its partner Warren Aldercroft, handled DPT's FERC market-based ra