CONFIDENTIAL — NON-PUBLIC — SUBJECT TO 18 C.F.R. PART 1b
CALDERWOOD & HARKNESS LLP 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Telephone: (713) 555-9200 Facsimile: (713) 555-9201 www.calderwoodharkness.com
Catherine Bloom Partner Direct: (713) 555-9217 cbloom@calderwoodharkness.com
August 18, 2023
VIA ELECTRONIC SUBMISSION AND Sundial Data Systems
Thomas Adebayo, Esq. Lead Investigator Division of Investigations Office of Enforcement Federal Energy Regulatory Commission 888 First Street NE Washington, D.C. 20426
Re: Docket No. IN23-7-000 — Dunmore Energy Holdings Ltd. and Dunmore Power Trading LLC — Objections and Responses to Second Data Request
C&H Matter Number: 1016-00004
Dear Mr. Adebayo:
I. Introduction
This firm represents Dunmore Energy Holdings Ltd. ("DEH" or "Dunmore") and Dunmore Power Trading LLC ("DPT") (collectively, "Respondents") in the above-referenced non-public investigation conducted by the Office of Enforcement ("OE" or "Staff") of the Federal Energy Regulatory Commission ("FERC" or the "Commission"). I write on behalf of Respondents in my capacity as responsible partner for this matter at Calderwood & Harkness LLP.
This letter sets forth Respondents' objections and responses to OE's Second Data Request (Supplemental), which was served upon undersigned counsel by electronic mail on August 7, 2023 (the "Second Data Request"). The Second Data Request consists of eighteen (18) supplemental interrogatories (Interrogatory Nos. S-1 through S-18) seeking additional information regarding DPT's trading activities, internal policies, personnel compensation, and related matters.
This submission is made in connection with the non-public investigation initiated by the Commission's formal order of investigation dated June 12, 2023, and is governed by the non-public, confidential procedures set forth in 18 C.F.R. Part 1b. Respondents understand and acknowledge that all materials submitted in connection with this investigation are treated as non-public and confidential, and Respondents expect that Staff will continue to maintain the confidentiality of all information and documents provided herein, consistent with the Commission's regulations and applicable law.
Respondents wish to reaffirm their commitment to cooperating fully with Staff's investigation. This commitment was initially communicated in Calderwood & Harkness's response to the preliminary inquiry letter dated May 22, 2023, and was further confirmed in the notice of appearance filed on behalf of Respondents on June 5, 2023. Respondents have endeavored to provide complete and responsive answers to Staff's inquiries in a timely manner, and they intend to continue doing so throughout the course of this investigation.
By way of background, Respondents previously responded to the First Data Request, which consisted of forty-one (41) interrogatories and twenty-three (23) document requests, on July 17, 2023. In connection with that response, Respondents produced 48,200 documents (Bates-numbered DUNMORE-000001 through DUNMORE-048200) to Staff on July 24, 2023. That initial production encompassed a broad range of materials, including trading records, internal communications, risk management reports, and corporate documents responsive to the First Data Request.
In addition to the responses set forth in this letter, Respondents are producing a second set of documents contemporaneously herewith. This second document production consists of approximately 63,400 documents (Bates-numbered DUNMORE-048201 through DUNMORE-111600), which are being transmitted to Staff under a separate cover letter dated August 21, 2023. The second production includes documents responsive to both the First Data Request and the Second Data Request, and encompasses additional custodial files, trading system data exports, internal communications, and corporate records identified through ongoing document collection and review efforts.
Respondents' specific objections and responses to each of the eighteen supplemental interrogatories are set forth below, following a statement of Respondents' general objections, which are incorporated by reference into each individual response.
II. General Objections
Respondents assert the following general objections, each of which is incorporated by reference into every individual interrogatory response set forth in Section III below. The assertion of a general objection does not constitute a waiver of any specific objection, and the assertion of a specific objection in any individual response does not constitute a waiver of any general objection. Notwithstanding these objections, Respondents have endeavored to provide substantive responses to the extent practicable and appropriate.
General Objection No. 1 — Scope and Relevance. Respondents object to the Second Data Request to the extent that any interrogatory seeks information beyond the period of January 3, 2022 through March 17, 2023 (the "Relevant Period"), as identified in Staff's formal order of investigation and the First Data Request, or beyond DPT's trading activity in the Midcontinent Independent System Operator, Inc. ("MISO") Day-Ahead Energy Market and Real-Time Energy Market at the Indiana Hub and Minnesota Hub pricing nodes. Information falling outside the Relevant Period or pertaining to markets, products, or pricing nodes other than those specifically identified in the investigation is beyond the scope of this investigation and is not reasonably calculated to lead to the discovery of relevant information. Notwithstanding this objection, and in the spirit of cooperation, Respondents will provide responsive information for reasonable periods preceding the Relevant Period where such information provides necessary context for understanding the matters under investigation.
General Objection No. 2 — Burden and Proportionality. Respondents object to any interrogatory in the Second Data Request that is unduly burdensome, overly broad, or disproportionate to the needs of the investigation. Respondents specifically object to interrogatories that require the compilation, aggregation, or re-creation of data or information that has already been provided to Staff in Respondents' prior responses to the First Data Request or in the documents produced in the first and second document productions. To the extent that responsive information is contained in documents already produced or being produced, Respondents will endeavor to identify the relevant Bates-numbered documents or production categories rather than duplicating the information in narrative form. Respondents reserve the right to assert specific burden objections to individual interrogatories as warranted.
General Objection No. 3 — Attorney-Client Privilege and Work Product Doctrine. Respondents object to any interrogatory to the extent it calls for information or communications protected by the attorney-client privilege, the work product doctrine, or any other applicable privilege, immunity, or protection recognized under federal or state law. No responsive information subject to such protections is being provided, and the withholding of any such information shall not be construed as an acknowledgment that responsive, non-privileged information does or does not exist. To the extent that documents are withheld or redacted on the basis of privilege or work product protection, such documents will be identified on the master privilege log maintained by Respondents' counsel in connection with this investigation. Respondents note that the assertion of privilege herein is without prejudice to the assertion of any additional privileges or protections that may be identified as the document review process continues.
General Objection No. 4 — Confidential Commercial Information. Respondents object to the Second Data Request to the extent that certain interrogatories seek confidential, proprietary, or commercially sensitive business information, the disclosure of which could cause competitive harm to Respondents or their affiliates. Such information includes, but is not limited to, trading strategies, position data, proprietary models, compensation information, and the terms of intercompany and third-party commercial agreements. Respondents request that all responses, documents, and information provided in connection with this investigation be treated as confidential and not be disclosed publicly or to any third party, consistent with the non-public nature of this investigation under 18 C.F.R. Part 1b. In the event that Staff seeks to disclose any information provided by Respondents in a public filing, enforcement action, or other proceeding, Respondents request prior notice and an opportunity to seek appropriate protective treatment.
General Objection No. 5 — Continuing Investigation and Right to Supplement. Respondents' responses to the Second Data Request are based on information and documents reasonably available to Respondents and their counsel as of the date of this letter. The investigation is ongoing, and additional information may become available through continued document review, witness interviews, or other investigative activities. Respondents expressly reserve the right to supplement, amend, or correct any of the responses set forth herein as additional information becomes available or as circumstances warrant. No response should be construed as a complete statement of all facts or information known to Respondents on any given subject.
III. Responses to Supplemental Interrogatories
The following are Respondents' specific objections and responses to each of the eighteen supplemental interrogatories contained in the Second Data Request. Each response incorporates by reference the General Objections set forth in Section II above, regardless of whether a specific cross-reference is made.
Interrogatory No. S-1
Gas Nomination Procedures and Coordination with Dunmore Midstream Partners LP
Interrogatory: Describe in detail the process by which DPT coordinated natural gas nominations with Dunmore Midstream Partners LP ("DMP"), including the timing of gas nominations, the personnel involved in the nomination process, the communication protocols used for gas scheduling, and the extent to which gas scheduling activities were linked to or informed by DPT's electricity trading activities during the Relevant Period.
Objection: Respondents object to Interrogatory No. S-1 to the extent that the use of the term "coordinated" implies improper, unlawful, or manipulative conduct. The gas nomination process between DPT and DMP is a routine operational function common to vertically integrated energy companies that own both generation assets and midstream infrastructure. The term "coordinated" in its colloquial usage aptly describes routine business communications between affiliated entities regarding gas scheduling, but Respondents object to any implication that such coordination was improper or designed to facilitate the trading conduct alleged by Staff. Subject to and without waiving this objection, Respondents respond as follows.
Response: DPT's fleet of gas-fired generation units comprises approximately 2,650 megawatts ("MW") of natural gas-fueled generation capacity, which is part of DEH's total United States net generation capacity of approximately 4,280 MW. These gas-fired units require the procurement and scheduling of natural gas supply through applicable interstate and intrastate pipeline systems to the receipt and delivery points serving each generating facility.
Dunmore Midstream Partners LP ("DMP") is an affiliate of DEH that operates midstream natural gas gathering, processing, and pipeline transportation infrastructure in several states, including Indiana and Minnesota. DMP's pipeline infrastructure supplies natural gas to several of Dunmore's gas-fired generation plants, including facilities relevant to DPT's MISO trading activity during the Relevant Period. The operational relationship between DPT and DMP with respect to gas supply and transportation is governed by intercompany agreements, which are described in greater detail in Respondents' response to Interrogatory No. S-4 below.
Gas nominations for DPT's generation units are submitted in accordance with the applicable pipeline tariff timelines and the standards established by the North American Energy Standards Board ("NAESB"). Under NAESB standards and the tariffs of the relevant interstate pipelines, gas nominations are generally submitted during the following nomination cycles: (i) the Timely Nomination Cycle, with nominations due by 1:00 PM Central Clock Time ("CCT") for the following gas day; (ii) the Evening Nomination Cycle, with nominations due by 6:00 PM CCT; and (iii) the Intraday Nomination Cycles, which permit adjustments during the gas day at designated intervals. The gas scheduling desk within DPT's operations group is responsible for preparing, submitting, and managing gas nominations on a day-to-day basis.
Critically, the gas scheduling function at DPT is organizationally separate from the electricity trading desks. Gas scheduling personnel report through DPT's operations management structure and are not part of the Day-Ahead or Real-Time trading teams. While the gas scheduling desk and the electricity trading desks are located on the same floor of DPT's Houston office, they perform distinct functions and have separate supervisory reporting lines.
Derek Sung, Senior Vice President, Power Marketing & Trading, had general supervisory oversight of both the trading desks and the gas scheduling function as part of his overall responsibility for DPT's power marketing and trading operations. However, Mr. Sung did not directly manage the day-to-day logistics of gas nominations, nor did he personally submit or approve individual gas nominations during the Relevant Period.
Gas scheduling personnel at DPT communicated with their counterparts at DMP's operations team regarding a range of routine operational matters, including available pipeline capacity, receipt point nominations, scheduled quantities, maintenance events affecting pipeline availability, and operational flow orders. These communications were conducted through a combination of email, telephone, and electronic bulletin board systems maintained by the pipeline operators. Such communications are routine operational matters fully consistent with standard industry practice for vertically integrated energy companies that own both generation assets and midstream or gas supply infrastructure. Indeed, the efficient scheduling of fuel supply for generation units is a fundamental operational requirement that is recognized and expected by MISO, pipeline operators, and the Commission itself.
Respondents direct Staff's attention to documents produced in the first and second document productions that include gas scheduling records, nomination confirmations, and communications between DPT and DMP operations personnel during the Relevant Period.
Interrogatory No. S-2
Timing of Gas Nominations Relative to Day-Ahead Market Bids
Interrogatory: Describe the temporal relationship between DPT's MISO Day-Ahead market bid submissions and natural gas nominations submitted through or in coordination with DMP during the Relevant Period, including whether gas nomination decisions were made before, after, or contemporaneously with Day-Ahead bidding decisions, and how each process informed the other.
Objection: Respondents object to Interrogatory No. S-2 as overly broad to the extent it seeks a day-by-day correlation between Day-Ahead bid submissions and gas nominations across the entirety of the approximately fourteen-and-a-half-month Relevant Period, encompassing more than 440 operating days. Compilation of such a daily correlation would impose substantial burden and is disproportionate to the needs of the investigation, particularly given that the relevant trading and nomination data has been produced or is being produced in documentary form. Respondents further incorporate General Objection No. 2 (Burden and Proportionality). Subject to and without waiving this objection, Respondents respond as follows with a description of the general temporal relationship and workflow.
Response: Under MISO's market rules, Day-Ahead Energy Market offers and bids are due by 11:00 AM Eastern Prevailing Time ("EPT") each day for the following operating day. MISO publishes Day-Ahead market clearing results, including Locational Marginal Prices ("LMPs") and unit commitment schedules, by approximately 1:30 PM EPT.
As described in Respondents' response to Interrogatory No. S-1, the Timely Nomination Cycle for gas nominations under NAESB standards requires nominations to be submitted by 1:00 PM CCT, which corresponds to 2:00 PM EPT. Accordingly, there is a temporal gap of approximately three hours between the MISO Day-Ahead bid submission deadline (11:00 AM EPT) and the gas Timely Nomination deadline (2:00 PM EPT), and a gap of approximately thirty minutes between the publication of MISO Day-Ahead clearing results (approximately 1:30 PM EPT) and the gas Timely Nomination deadline (2:00 PM EPT).
DPT's Day-Ahead bidding and gas nomination processes followed independent but parallel workflows that are inherent in the structure of the electricity and natural gas markets. The general workflow during the Relevant Period proceeded as follows:
(a) In the early morning hours, DPT's Day-Ahead trading desk, under the direction of Kyle Renfro and other desk personnel, would evaluate market conditions, load forecasts, congestion expectations, fuel costs, and generation unit availability to formulate Day-Ahead Energy Market offers for DPT's generation units and any virtual positions.
(b) Day-Ahead offers and bids were submitted to MISO by the 11:00 AM EPT deadline.
(c) Following submission of Day-Ahead offers, the gas scheduling desk would estimate gas requirements for the following gas day based on the expected dispatch of DPT's generation units. The gas scheduling desk's estimates were informed by, among other things, anticipated Day-Ahead market clearing outcomes, the units' operating parameters, and historical dispatch patterns.
(d) Gas nominations were submitted through the applicable pipeline systems' electronic nomination platforms by the 1:00 PM CCT (2:00 PM EPT) Timely Nomination deadline, or adjusted in subsequent Evening or Intraday nomination cycles as needed based on actual MISO dispatch instructions.
This sequential workflow — in which electricity market offers are submitted first, followed by gas nominations — is a structural feature of the interrelationship between the wholesale electricity and natural gas markets. It is not unique to DPT; rather, it reflects the operational reality faced by every gas-fired generation owner participating in organized wholesale electricity markets. The gas scheduling desk's use of anticipated Day-Ahead clearing outcomes to inform gas nomination quantities is a necessary and prudent operational practice that ensures adequate fuel supply for committed generation output while minimizing exposure to unnecessary gas procurement costs.
Respondents emphasize that this sequential workflow does not constitute improper coordination or manipulation. It reflects the rational, efficient management of an integrated portfolio of generation assets and fuel supply arrangements, consistent with the obligations of a prudent market participant.
Interrogatory No. S-3
Identification of Personnel Involved in Gas Scheduling Communications Between DPT and DMP
Interrogatory: Identify by name, title, and job function all personnel at DPT and DMP who were involved in gas scheduling communications between DPT and DMP during the Relevant Period.
Objection: Respondents incorporate General Objections Nos. 1, 2, and 4. Subject to and without waiving these objections, Respondents respond as follows.
Response: The following individuals at DPT were primarily responsible for gas scheduling communications with DMP during the Relevant Period. Their names and titles are provided based on custodian records maintained by DPT's human resources department, and these individuals are among the eleven (11) custodians who are subject to document preservation and production obligations in this investigation:
(a) Brian Castellano, Manager, Gas Scheduling — Mr. Castellano served as the primary point of contact for gas nomination and scheduling communications with DMP and with third-party pipeline operators. He reported to DPT's Director of Operations.
(b) Linda Tran, Senior Gas Scheduler — Ms. Tran assisted Mr. Castellano in preparing and submitting gas nominations and was responsible for monitoring intraday gas flow data and adjusting nominations as needed during the Intraday Nomination Cycles.
(c) Marcus Okonkwo, Gas Scheduler — Mr. Okonkwo joined DPT's gas scheduling team in March 2022 and assisted with nomination preparation, pipeline communications, and operational data tracking.
The counterpart personnel at DMP with whom DPT's gas scheduling team communicated included operations dispatchers and pipeline controllers within DMP's operations department. Respondents are confirming the specific names and titles of the relevant DMP personnel and will supplement this response upon completion of that confirmation.
Respondents note that Kyle Renfro, who was responsible for Day-Ahead trading, and Anastasia Petrov, who operated the Real-Time trading desk, did not directly communicate gas nominations to DMP. Neither Mr. Renfro nor Ms. Petrov was involved in the day-to-day logistics of the gas nomination process. While Mr. Renfro and Ms. Petrov had general awareness of gas supply and scheduling matters as part of their broader understanding of DPT's generation portfolio, they did not submit, approve, or direct specific gas nominations during the Relevant Period.
Derek Sung, SVP, Power Marketing & Trading, received periodic operational summaries from the gas scheduling team, including weekly gas supply and scheduling reports, as part of his general supervisory responsibilities. However, Mr. Sung did not manage the nomination process on a day-to-day basis, nor did he personally communicate gas nomination instructions to DMP during the Relevant Period.
Interrogatory No. S-4
Gas Supply Contracts Between DPT/DEH and DMP
Interrogatory: Identify and describe all agreements, contracts, or arrangements between DPT, DEH, or any of their affiliates, on the one hand, and DMP, on the other hand, governing the supply, transportation, or delivery of natural gas to DPT's generation facilities during the Relevant Period, and provide copies of all such agreements.
Objection: Respondents object to Interrogatory No. S-4 to the extent it seeks documents that have already been produced or are being produced in the second document production (Bates DUNMORE-048201 through DUNMORE-111600). Respondents further object to the extent that this interrogatory overlaps with Document Request No. 14 of the First Data Request, to which Respondents have already responded. Rather than re-producing documents previously provided, Respondents will identify the responsive documents by Bates number and provide a narrative description of the relevant agreements. Subject to and without waiving these objections, Respondents respond as follows.
Response: DPT and DMP operate under a series of intercompany gas supply and transportation agreements that govern the pricing, volume commitments, delivery point specifications, and operational terms for the supply of natural gas to DPT's gas-fired generation facilities. The principal agreements in effect during the Relevant Period include:
(a) Master Gas Supply Agreement, dated January 15, 2020, between DPT and DMP, as amended (the "MGSA"). The MGSA establishes the overarching framework for DMP's supply of natural gas to DPT's generation facilities, including pricing mechanisms (generally indexed to published natural gas price indices with adjustments for transportation and gathering costs), volume commitment provisions, and force majeure terms. A copy of the MGSA, as amended, has been produced as Bates DUNMORE-012847 through DUNMORE-012919.
(b) Gas Transportation Agreement, dated March 1, 2020, between DPT and DMP (the "GTA"). The GTA governs the use of DMP's intrastate pipeline capacity for the transportation of natural gas from specified receipt points to delivery points serving DPT's generation facilities. The GTA includes firm transportation capacity commitments and associated minimum volume obligations. A copy of the GTA has been produced as Bates DUNMORE-012920 through DUNMORE-012978.
(c) Intercompany Services Agreement, dated June 1, 2019, between DEH and DMP (the "ISA"). The ISA addresses shared operational services, including gas control, measurement, and scheduling services provided by DMP to DPT's generation facilities. A copy of the ISA has been produced as Bates DUNMORE-013401 through DUNMORE-013445.
Respondents note that these intercompany agreements include minimum volume commitments — often referred to as "minimum generation" contractual obligations — that are directly relevant to understanding DPT's bidding rationale during the Relevant Period. Under the GTA and certain provisions of the MGSA, DPT was obligated to take or pay for specified minimum quantities of natural gas, regardless of whether DPT's generation units were dispatched by MISO. Specifically, certain generation units were subject to take-or-pay obligations requiring minimum gas throughput on a monthly basis, which imposed costs on DPT if those units were shut down or operated below minimum thresholds.
These contractual obligations created a legitimate economic incentive for DPT to maintain minimum generation levels at certain units, even during periods of low or negative electricity prices, because the cost of paying for undelivered gas under the take-or-pay provisions would exceed the losses incurred from operating at negative market prices. This dynamic contributed to the economic rationale for certain negative Day-Ahead offers submitted by DPT during the Relevant Period, as described further in Respondents' response to Interrogatory No. S-5 below.
Additional documents responsive to this interrogatory are being produced in the second document production under the separate cover letter dated August 21, 2023.
Interrogatory No. S-5
Minimum Generation Obligations and Contractual Commitments
Interrogatory: Identify all minimum generation obligations, contractual capacity commitments, reliability-must-run agreements, or other arrangements that required or incentivized DPT to maintain minimum output levels at any of its generation units during the Relevant Period, and explain how such obligations affected DPT's Day-Ahead bidding strategies.
Objection: Respondents incorporate General Objections Nos. 1, 2, and 4.
Response: During the Relevant Period, several of DPT's gas-fired generation units were subject to contractual and operational obligations that required or incentivized the maintenance of minimum output levels, even during periods when prevailing electricity market prices would not otherwise have supported economic dispatch. These obligations included the following categories:
(a) Take-or-Pay Gas Supply Obligations. As described in Respondents' response to Interrogatory No. S-4, certain of DPT's generation units were subject to minimum volume commitments under the MGSA and GTA with DMP. Failure to take the contracted minimum gas volumes would result in take-or-pay charges payable by DPT to DMP. These charges created an economic cost associated with shutting down or derating the affected units below minimum operating levels.
(b) Reliability-Must-Run Commitments. Two of DPT's generation units in the MISO footprint — the Greenfield Generating Station (Unit 3, 410 MW) and the Ashland Energy Center (Unit 1, 285 MW) — were subject to MISO reliability-must-run ("RMR") or system support resource ("SSR") arrangements during portions of the Relevant Period. Under these arrangements, the units were required to remain available and operate at minimum output levels when called upon by MISO for reliability purposes, irrespective of market clearing prices.
(c) Contractual Capacity Obligations. DPT had entered into bilateral capacity contracts with certain MISO load-serving entities that imposed availability and performance obligations, including requirements to offer capacity into the MISO Day-Ahead market and to maintain minimum availability metrics. Failure to meet these obligations could result in financial penalties or contract termination.
(d) Startup and Shutdown Cost Considerations. Certain of DPT's gas-fired combined cycle units have significant startup costs (ranging from approximately $45,000 to $120,000 per start, depending on whether the start is hot, warm, or cold) and operational constraints, including minimum run times of eight to twelve hours once started. For these units, the cost of shutting down and subsequently restarting the unit often exceeded the losses associated with operating at minimum load during periods of low or negative prices. This economic calculus — a well-recognized component of generation unit dispatch optimization — supported the submission of negative Day-Ahead offers to avoid costly shutdown-restart cycles.
These obligations, individually and in combination, created a legitimate economic basis for DPT's submission of negative Day-Ahead offers during portions of the Relevant Period. The negative offers typically ranged from approximately negative fifteen dollars per megawatt-hour (-$15/MWh) to negative forty dollars per megawatt-hour (-$40/MWh), depending on the unit, the applicable minimum generation constraints, the prevailing natural gas price, and the anticipated duration of the low-price period. These offer prices reflected the economic cost of maintaining minimum operation relative to the cost of shutting down and restarting the affected units — i.e., the "stay-on" cost — and were calculated based on DPT's assessment of the unit-specific operational and contractual parameters described above.
Respondents maintain that these negative offers were entirely consistent with MISO's market rules, which expressly permit negative offers, and with the Commission's longstanding recognition that negative offers can reflect legitimate operational and economic considerations, particularly for generation units with significant minimum generation constraints, high startup costs, or contractual must-run obligations.
Respondents direct Staff to the documents produced and being produced that contain unit-specific cost data, offer price worksheets, and operational logs supporting these responses.
Interrogatory No. S-6
Trader Compensation Structure (General)
Interrogatory: Describe the compensation structure for all personnel on DPT's MISO trading desks during the Relevant Period, including but not limited to base salary, bonus, incentive compensation, profit sharing, and any other forms of compensation, and explain how each component was determined.
Objection: Respondents object to Interrogatory No. S-6 to the extent it seeks personal compensation data for all fourteen MISO desk personnel that is unrelated to the alleged conduct under investigation. Individual compensation data is personal, private, and commercially sensitive information, the production of which is warranted only to the extent that compensation structures are relevant to understanding trader incentives and the alleged trading conduct at issue. Respondents incorporate General Objection No. 4 (Confidential Commercial Information). Subject to and without waiving this objection, Respondents respond as follows regarding the general compensation structure applicable to DPT's MISO trading desk personnel.
Response: During the Relevant Period, DPT's MISO trading desks employed fourteen (14) trading personnel, including Day-Ahead and Real-Time traders, analysts, and support staff, all of whom reported to Derek Sung, SVP, Power Marketing & Trading. These personnel were compensated through a standard compensation structure consisting of two primary components:
(a) Fixed Base Salary. Each trading desk employee received a fixed annual base salary, determined based on the individual's role, experience, seniority, and market comparables for similarly situated positions in the wholesale power trading industry. Base salaries were reviewed annually as part of DEH's company-wide compensation review process and were not contingent on trading performance or desk profitability.
(b) Annual Discretionary Bonus. In addition to base salary, trading desk personnel were eligible to receive an annual discretionary bonus. The bonus pool was established by DEH's compensation committee at the parent-company level, based on the overall financial performance of DEH and its subsidiaries. Individual bonus awards were determined by DPT's management based on a combination of individual performance, desk-level profitability, and company-wide financial results. Bonuses were discretionary and not guaranteed. No trading desk employee had a contractual right to a specific bonus amount, and bonus determinations were subject to final approval by DEH's compensation committee.
DPT's trading desk personnel did not receive any of the following forms of compensation during the Relevant Period: (i) direct profit-sharing arrangements tied to individual trades or strategies; (ii) commissions based on trading volumes or transaction counts; or (iii) carried interest or equity participation in trading profits. The compensation structure was designed to align individual incentives with the long-term, overall financial performance of DPT and DEH, rather than to incentivize specific short-term trading strategies or high-risk positions.
Interrogatory No. S-7
Trader Incentive Compensation — Specific Metrics and Formulas
Interrogatory: Identify the specific metrics, formulas, targets, benchmarks, or other criteria used to determine incentive compensation for MISO Day-Ahead and Real-Time traders at DPT during the Relevant Period, including whether compensation was directly or indirectly tied to Financial Transmission Rights ("FTR") portfolio performance, virtual trading profits, congestion-related revenues, or any other specific revenue or profit categories.
Objection: Respondents object to Interrogatory No. S-7 on the grounds that it seeks confidential commercial information regarding DPT's proprietary compensation evaluation framework. Respondents incorporate General Objection No. 4. Subject to and without waiving this objection, Respondents respond as follows.
Response: As described in Respondents' response to Interrogatory No. S-6, the annual bonus for DPT's MISO trading desk personnel was discretionary in nature. Bonuses were not determined by application of a rigid, mechanical formula or algorithm. Rather, bonus determinations reflected a holistic evaluation of multiple factors, which were applied by DPT's management — principally Derek Sung, SVP, Power Marketing & Trading — in the exercise of informed judgment. The evaluation framework considered the following factors, among others:
(1) Overall Desk Profit and Loss ("P&L") Relative to Budget Targets. The aggregate profitability of DPT's MISO trading operations was a significant factor in bonus determinations. The desk's P&L performance was measured against annual budget targets established at the beginning of each fiscal year. Performance above budget targets generally supported higher bonus awards for the desk as a whole, while performance below budget targets generally resulted in lower awards. P&L was measured on an aggregated basis across all revenue streams, including energy margin, capacity revenue, ancillary services, FTR settlements, and virtual trading results.
(2) Risk Management Adherence. Compliance with DPT's internal risk management policies and procedures was an important qualitative factor in bonus evaluations. This included adherence to approved position limits, Value-at-Risk ("VaR") limits, authorized product lists, and escalation procedures. Violations of risk management policies could result in reduced bonus awards or other disciplinary measures.
(3) Qualitative Assessment by Derek Sung. Mr. Sung, as the senior manager responsible for DPT's MISO trading operations, exercised qualitative judgment in evaluating individual trader performance, including factors such as market knowledge, analytical contribution, teamwork, professional development, and adherence to company values and policies.
Respondents specifically note that trader compensation was not specifically or separately tied to FTR portfolio performance, virtual trading profits, or congestion-related revenues as isolated line items or discrete performance metrics. The financial results of FTR positions, virtual trading (Increment Offers and Decrement Bids), and congestion-related revenues were subsumed within the overall desk-level P&L calculation described above. There were no separate bonus pools, incentive tiers, or compensation multipliers attributable to any individual trading strategy, product type, or revenue category.
Respondents believe that this compensation structure is consistent with industry norms for wholesale power trading operations and did not create an incentive for traders to pursue the specific trading strategies alleged by Staff to the exclusion of other, legitimate considerations.
Interrogatory No. S-8
Kyle Renfro Compensation Details
Interrogatory: State Kyle Renfro's total compensation, including base salary, bonus, and all other forms of compensation, for each of calendar years 2021 and 2022, and for the period from January 1, 2023 through March 31, 2023.
Objection: Respondents object to Interrogatory No. S-8 on several grounds. First, the request for Mr. Renfro's compensation for calendar year 2021 seeks information outside the Relevant Period (January 3, 2022 through March 17, 2023) and is not reasonably calculated to lead to information relevant to the investigation. Respondents incorporate General Objection No. 1. Second, Respondents object to this interrogatory on the grounds that it seeks personal, confidential, and commercially sensitive compensation information. Respondents incorporate General Objection No. 4. Notwithstanding these objections, and solely in the interest of cooperation, Respondents will provide Mr. Renfro's compensation data for calendar year 2022 and the first quarter of 2023, subject to the confidentiality protections afforded by the non-public nature of this investigation under 18 C.F.R. Part 1b. Respondents request that Staff treat this information as strictly confidential and limit its distribution to Staff members with a need to know.
Response: Subject to the foregoing objections and confidentiality request, Respondents provide the following compensation information for Kyle Renfro:
Calendar Year 2022:
• Base Salary: Information provided under confidential treatment.
• Annual Discretionary Bonus (paid in Q1 2023 for CY2022 performance): Information provided under confidential treatment.
• Total Compensation: Information provided under confidential treatment.
January 1, 2023 through March 17, 2023 (end of Relevant Period):
• Base Salary (pro-rata): Information provided under confidential treatment.
• Bonus: No bonus was awarded or accrued for this partial-year period as of the date of this response.
Respondents note that the specific dollar amounts are set forth in a confidential annex to this letter, designated as Confidential Annex A, which is being provided under separate cover with the designation "CONFIDENTIAL — PERSONAL COMPENSATION DATA — SUBJECT TO 18 C.F.R. PART 1b." Respondents request that this annex be maintained separately from the body of this response and be accessible only to Staff members directly involved in the investigation.
Respondents further note that Mr. Renfro's compensation was consistent with the general compensation structure described in Respondents' responses to Interrogatory Nos. S-6 and S-7 above. His compensation was not uniquely structured, designed, or calibrated to incentivize the specific trading behavior alleged by Staff. Mr. Renfro's compensation reflected his role, seniority, and overall performance, and was determined through the same process applied to all MISO desk personnel.
Interrogatory No. S-9
Anastasia Petrov Compensation Details
Interrogatory: State Anastasia Petrov's total compensation, including base salary, bonus, and all other forms of compensation, for each of calendar years 2021 and 2022, and for the period from January 1, 2023 through March 31, 2023.
Objection: Respondents assert the same objections to Interrogatory No. S-9 as those set forth in response to Interrogatory No. S-8 above, which are incorporated by reference herein. As with Mr. Renfro's compensation data, Respondents object to the request for calendar year 2021 data as outside the Relevant Period and object to the disclosure of personal, confidential compensation information. Subject to these objections, Respondents will provide Ms. Petrov's compensation data for calendar year 2022 and the first quarter of 2023 under the same confidentiality protections described above.
Response: Subject to the foregoing objections and confidentiality request, Respondents provide the following compensation information for Anastasia Petrov:
Calendar Year 2022:
• Base Salary: Information provided under confidential treatment.
• Annual Discretionary Bonus (paid in Q1 2023 for CY2022 performance): Information provided under confidential treatment.
• Total Compensation: Information provided under confidential treatment.
January 1, 2023 through March 17, 2023 (end of Relevant Period):
• Base Salary (pro-rata): Information provided under confidential treatment.
• Bonus: No bonus was awarded or accrued for this partial-year period as of the date of this response.
The specific dollar amounts for Ms. Petrov's compensation are set forth in Confidential Annex A, referenced in Respondents' response to Interrogatory No. S-8 above, under the same confidential treatment designation and access restrictions.
Ms. Petrov's compensation reflected a similar general structure to that described for the MISO desk personnel generally, adjusted for her specific role on the MISO Real-Time trading desk, her level of seniority, and her individual performance. As with Mr. Renfro, Ms. Petrov's compensation was not uniquely structured to incentivize any particular trading strategy or activity.
Interrogatory No. S-10
Internal Trading Policies and Procedures (General Description)
Interrogatory: Provide a comprehensive description of DPT's internal trading policies, procedures, and risk management guidelines applicable to the MISO Day-Ahead and Real-Time trading desks during the Relevant Period, including all policies governing authorized products, position limits, risk limits, trade execution, trade confirmation, escalation procedures, and compliance oversight.
Objection: Respondents incorporate General Objections Nos. 2 and 4.
Response: During the Relevant Period, DPT maintained a comprehensive set of internal trading policies, procedures, and risk management guidelines that governed all of its wholesale power marketing and trading activities, including its MISO Day-Ahead and Real-Time trading operations. The principal document governing these activities was the DPT Trading Policies and Procedures Manual (the "Trading Manual"), which was last updated on November 8, 2021, prior to the commencement of the Relevant Period. A copy of the Trading Manual has been produced as Bates DUNMORE-005210 through DUNMORE-005298.
The Trading Manual addressed the following key areas:
(a) Authorized Products. The Trading Manual maintained a list of authorized products and instruments that DPT's trading desks were permitted to trade. Authorized products for the MISO desk included Day-Ahead and Real-Time physical energy, capacity, ancillary services (regulation, spinning reserves, and supplemental reserves), Financial Transmission Rights (FTRs), and virtual transactions (Increment Offers and Decrement Bids). Trading in products not on the authorized list required prior written approval from the SVP, Power Marketing & Trading, and the VP, Regulatory Affairs.
(b) Position Limits. The Trading Manual established position limits at both the desk level and the individual trader level. Desk-level position limits set maximum net open positions (measured in megawatts, megawatt-hours, or notional dollar value) for the MISO desk as a whole. Individual trader limits set maximum positions for each authorized trader. Position limits were reviewed and updated quarterly by the risk management function.
(c) Value-at-Risk ("VaR") Limits. The Trading Manual established VaR limits for DPT's trading portfolio, calculated using a 95% confidence interval, one-day holding period methodology. Desk-level VaR was monitored daily by the risk management function. Breaches of VaR limits triggered mandatory escalation and position reduction procedures.
(d) Escalation Procedures. The Trading Manual established procedures for escalating out-of-limit positions, VaR breaches, unauthorized trades, and other exceptions. Escalation typically required notification to the SVP, Power Marketing & Trading, and, in certain circumstances, to the VP, Regulatory Affairs. Severe or repeated violations could result in disciplinary action.
(e) Trade Confirmation and Booking Procedures. All trades were required to be entered into DPT's trade capture system (an Allegro-based platform) promptly upon execution. Trade confirmations were processed by the middle office and reconciled with counterparty confirmations on a daily basis.
(f) Counterparty Credit Policies. The Trading Manual established credit evaluation and approval procedures for bilateral counterparties, including credit limits, collateral requirements, and margin call procedures.
(g) Compliance Oversight. General compliance oversight was shared between Rhonda Vasquez, VP, Regulatory Affairs, and Derek Sung, SVP, Power Marketing & Trading. Ms. Vasquez was responsible for monitoring regulatory developments, maintaining FERC filings, and providing compliance guidance. Mr. Sung was responsible for ensuring that trading activities were conducted in accordance with the Trading Manual and applicable market rules.
Respondents note that the Trading Manual was a comprehensive document reflecting industry-standard practices for the risk management and governance of wholesale power trading operations. While Respondents acknowledge — as set forth in more detail in their response to Interrogatory No. S-18 below — that the Trading Manual did not include certain FERC-specific compliance features that have since been implemented as part of Dunmore's enhanced compliance program, the Trading Manual provided a robust framework for the governance of DPT's trading activities during the Relevant Period.
Respondents direct Staff to the Trading Manual and related policy documents produced in the first and second document productions.
Interrogatory No. S-11
Policies Specifically Addressing Negative or Below-Cost Offers
Interrogatory: State whether DPT had any specific policies, guidelines, procedures, or approval requirements governing the submission of negative-price or below-marginal-cost offers in the MISO Day-Ahead Energy Market during the Relevant Period, and if so, describe such policies in detail.
Objection: Respondents incorporate General Objections Nos. 1 and 2.
Response: DPT's Trading Policies and Procedures Manual, as described in Respondents' response to Interrogatory No. S-10 above, did not include a specific, standalone policy requiring separate pre-approval, enhanced review, or special documentation for negative-price offers or below-marginal-cost offers as a distinct category. Negative offers were treated as part of the normal bidding process and were subject to the same position limits, risk management oversight, and general compliance procedures applicable to all Day-Ahead Energy Market offers.
Respondents note that the absence of a standalone policy for negative offers was not unusual or indicative of a compliance deficiency during the Relevant Period. MISO's market rules expressly permit market participants to submit negative offers in the Day-Ahead Energy Market, and negative offers are a common feature of organized wholesale electricity markets. The Commission has long recognized that negative offers may reflect legitimate economic and operational considerations, including, among others:
• Units with must-run or minimum generation obligations (contractual or reliability-based);
• Units with high startup costs that exceed the cost of operating at minimum load during low-price periods;
• Units with take-or-pay fuel supply obligations;
• Units eligible for production tax credits or other incentive payments that create a net economic benefit from generation even at negative market prices; and
• Portfolio optimization strategies in which the cost of maintaining unit availability (including through negative-price operation) is offset by the value of the unit's capacity, ancillary service, or other revenue streams.
DPT's negative offers during the Relevant Period were submitted based on the economic and operational considerations described in Respondents' response to Interrogatory No. S-5 above, and were consistent with the legitimate uses of negative offers recognized by the Commission and by MISO's market rules.
Respondents further note that following the appointment of Jennifer Caulfield as Chief Compliance Officer ("CCO") on February 6, 2023, Dunmore began a comprehensive review of its trading policies and procedures, including the development of enhanced procedures specifically addressing below-cost offer submissions. The enhanced procedures, which are described in more detail in Respondents' response to Interrogatory No. S-18 below, include documentation requirements, supervisory review protocols, and contemporaneous cost-justification standards for negative-price and below-marginal-cost offers. These enhancements were implemented as part of Dunmore's broader commitment to strengthening its compliance program, and not as an acknowledgment that the prior absence of such policies was improper.
Interrogatory No. S-12
Policies Governing FTR Acquisition and Management
Interrogatory: Describe DPT's policies and procedures for the acquisition, management, valuation, and risk oversight of Financial Transmission Rights during the Relevant Period, including any policies governing the relationship between FTR positions and physical generation or virtual trading positions.
Objection: Respondents incorporate General Objections Nos. 2 and 4.
Response: DPT's FTR portfolio was managed as a component of the overall MISO trading book under the general supervision of Derek Sung, SVP, Power Marketing & Trading. FTR acquisitions and management were governed by the Trading Policies and Procedures Manual described in Respondents' response to Interrogatory No. S-10, and FTR positions were subject to the same desk-level position limits and VaR framework applicable to all trading positions.
FTR positions were acquired through MISO's annual and monthly FTR auctions, consistent with the procedures set forth in MISO's Open Access Transmission, Energy and Operating Reserve Markets Tariff. DPT participated in the FTR auctions through MISO's electronic auction platform, submitting bids for FTR positions on source-sink pairs that corresponded to DPT's generation portfolio, load obligations, and anticipated congestion exposure.
During the Relevant Period, the notional value of DPT's FTR positions totaled approximately $47.3 million across various source-sink pairs, including but not limited to paths involving the Indiana Hub and Minnesota Hub pricing nodes. The FTR portfolio included both obligation FTRs and option FTRs, with varying tenors corresponding to the annual and monthly auction periods.
DPT's FTR positions were acquired primarily as hedging instruments designed to manage DPT's exposure to congestion costs and congestion-related revenue uncertainty in connection with its physical generation portfolio. The use of FTRs for congestion hedging is a standard and well-established practice in organized wholesale electricity markets, and the Commission has consistently recognized the value of FTRs as a tool for managing transmission congestion risk. DPT's FTR portfolio was managed in accordance with this purpose.
The Trading Manual did not include a specific policy governing the relationship between FTR positions and physical generation or virtual trading positions as a discrete topic. FTR positions, physical generation positions, and virtual trading positions were all managed within the integrated MISO trading book, and portfolio-level risk metrics (including position limits and VaR) captured the aggregate risk of all positions, including any interactions among them.
Respondents direct Staff to FTR auction records, position reports, and risk management reports produced in the first and second document productions.
Interrogatory No. S-13
Policies Governing Virtual Trading (Increment Offers and Decrement Bids)
Interrogatory: Describe DPT's policies and procedures governing virtual trading in MISO, including Increment Offers ("INCs") and Decrement Bids ("DECs"), and identify any limitations, approval requirements, or risk management controls specifically applicable to virtual trading during the Relevant Period.
Objection: Respondents incorporate General Objections Nos. 2 and 4.
Response: Virtual trading — the submission of Increment Offers and Decrement Bids in the MISO Day-Ahead Energy Market — was an authorized product under DPT's Trading Policies and Procedures Manual. Virtual transactions were subject to the same position limits and VaR framework described in Respondents' response to Interrogatory No. S-10, with no separate or enhanced approval requirements for virtual transactions as a distinct product category.
During the Relevant Period, DPT executed virtual transactions totaling approximately 1,620 gigawatt-hours ("GWh") at the Minnesota Hub pricing node. Virtual trading activity also occurred at other MISO pricing nodes, though the Minnesota Hub was the most active node for DPT's virtual trading during the Relevant Period. Virtual positions included both Increment Offers (virtual supply) and Decrement Bids (virtual demand), with net positions varying by day and by market conditions.
Virtual trading decisions were made by desk traders, including Anastasia Petrov on the MISO Real-Time desk, based on their assessment of Day-Ahead versus Real-Time price differentials. The purpose of virtual trading, as understood and practiced by DPT's MISO desk, was to capture price differentials between the Day-Ahead and Real-Time markets when the trader identified a material divergence between Day-Ahead clearing prices and expected Real-Time settlement prices. This approach is consistent with the design and intended function of MISO's virtual trading construct, which the Commission has recognized as a mechanism that improves price convergence between Day-Ahead and Real-Time markets and enhances overall market efficiency.
The Trading Manual did not include specific guidelines regarding the maximum volume of virtual transactions at a single node, the maximum holding period for virtual positions (virtual positions settle on a daily basis and do not carry forward), or the relationship between virtual positions and physical generation or FTR positions. These matters were addressed through the general position limit and VaR framework applicable to all trading activity.
Respondents direct Staff to virtual trading records, transaction logs, and position reports produced in the first and second document productions.
Interrogatory No. S-14
Communications Between Kyle Renfro and Anastasia Petrov Regarding Trading Strategy
Interrogatory: Describe the nature, frequency, and subject matter of communications between Kyle Renfro and Anastasia Petrov regarding MISO Day-Ahead and Real-Time trading strategy during the Relevant Period, and identify the communication channels used for such communications.
Objection: Respondents object to Interrogatory No. S-14 to the extent it seeks the disclosure of communications that are protected by the attorney-client privilege or the work product doctrine, including any communications that occurred after the engagement of Calderwood & Harkness LLP in connection with this investigation. Communications between Mr. Renfro and Ms. Petrov that post-date the receipt of FERC's preliminary inquiry letter on May 22, 2023, or that were made in anticipation of or in connection with this investigation, may be subject to privilege or work product protection and will be logged on the master privilege log to the extent they are withheld. Subject to and without waiving this objection, Respondents respond as follows regarding communications during the Relevant Period that pre-date the engagement of counsel.
Response: Kyle Renfro and Anastasia Petrov were both members of DPT's MISO trading desk, which consisted of fourteen (14) trading personnel under the supervision of Derek Sung, SVP, Power Marketing & Trading. Mr. Renfro was primarily responsible for Day-Ahead trading activities, while Ms. Petrov was primarily responsible for Real-Time trading activities. Both traders sat on the same trading floor in DPT's Houston office and interacted regularly in the course of their daily responsibilities.
Communications between Mr. Renfro and Ms. Petrov regarding MISO trading matters were frequent, occurring on a daily or near-daily basis during the Relevant Period. Such communications were conducted through multiple channels, including:
(a) In-person conversations on the trading floor, which were the most common form of communication during trading hours;
(b) Internal email through DPT's corporate email system;
(c) Instant messaging through DPT's internal instant messaging platform (Vireo Software chat and an internal Northgate Data Systems system); and
(d) Telephone calls, including desk-line calls during trading hours.
The subject matter of the communications between Mr. Renfro and Ms. Petrov addressed routine trading desk topics, including but not limited to: real-time market conditions and price movements; congestion patterns at the Indiana Hub, Minnesota Hub, and other MISO pricing nodes; anticipated generation unit dispatch and availability; weather conditions and load forecast developments; Day-Ahead versus Real-Time price differentials; portfolio positioning and hedging considerations; and operational issues affecting generation units.
Such communication among traders on the same desk is standard practice in the wholesale power trading industry and is necessary for effective portfolio management. The Day-Ahead and Real-Time desks, while staffed by different individuals, manage complementary aspects of the same generation portfolio, and regular communication between the traders responsible for each market timeframe is essential for coherent portfolio optimization.
Respondents direct Staff to responsive email and instant message communications between Mr. Renfro and Ms. Petrov that have been produced in the first and second document productions. Respondents note that certain in-person conversations on the trading floor were not recorded or transcribed, and therefore no documentary record of such conversations exists.
Interrogatory No. S-15
Approval or Knowledge of Trading Strategy by Senior Management
Interrogatory: State whether Derek Sung, Rhonda Vasquez, Elena Mirova, Martin Llewellyn, or Gavin Harcourt had kn