1016-00004 · Dunmore Energy Holdings · Settlement Negotiations

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PRIVILEGED & CONFIDENTIAL — SETTLEMENT COMMUNICATION SUBJECT TO FED. R. EVID. 408 AND 18 C.F.R. § 1b.9

CALDERWOOD & HARKNESS LLP Attorneys at Law

Houston Office 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Tel: (713) 458-6000

Fax: (713) 458-6001

Principal Office 600 Lexington Avenue New York, New York 10022 Tel: (212) 735-9200

Fax: (212) 735-9201

January 8, 2024

VIA ELECTRONIC MAIL AND HAND DELIVERY

Christine Pham, Senior Attorney 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 — Settlement Counter-Proposal

Dear Ms. Pham:

We write on behalf of our clients, Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH") and Dunmore Power Trading LLC ("DPT" and, together with DEH, "Respondents"), in connection with the above-referenced non-public investigation conducted by the Federal Energy Regulatory Commission's Office of Enforcement ("FERC OE" or "Staff"). This letter constitutes a settlement communication within the meaning of 18 C.F.R. § 1b.9 and Federal Rule of Evidence 408, and its contents are strictly confidential and may not be used for any purpose other than the settlement discussions in this proceeding.

I. Introduction and Purpose

This letter is submitted following the first settlement conference held on December 4, 2023, at which counsel for Respondents and representatives of FERC OE engaged in a productive and candid exchange regarding the parties' respective positions and the contours of a potential consensual resolution of this matter. We appreciated the professionalism and openness of the dialogue during that session, and it is in the spirit of continued good-faith engagement that we submit this counter-proposal.

On December 18, 2023, following the settlement conference, FERC Staff communicated a revised settlement offer to undersigned counsel. Staff's revised offer proposed a civil penalty of $8.5 million together with disgorgement of $3.2 million, for a total monetary resolution of $11.7 million. Respondents acknowledge that this revised offer represented a meaningful and appreciated reduction from Staff's initial demand as set forth in the Preliminary Findings letter dated October 2, 2023, which sought a civil penalty of $18 million and disgorgement of $12.8 million, totaling $30.8 million.

While Respondents appreciate the movement reflected in Staff's revised position, they respectfully submit that the revised offer still substantially overstates the appropriate resolution of this matter in light of the factual record, the expert economic evidence, and the relevant Commission precedent. Respondents maintain the defenses and positions articulated in their Response to Preliminary Findings submitted on November 6, 2023, and in the accompanying expert report of Dr. Leonard Whitfield, which was submitted on November 20, 2023. Respondents do not believe that FERC OE would prevail on the merits before an Administrative Law Judge with respect to either the market manipulation allegations under Section 222 of the Federal Power Act, 16 U.S.C. § 824v, and 18 C.F.R. § 1c.2, or the disgorgement claims premised on Staff's flawed economic methodology.

Notwithstanding the strength of their defenses, Respondents have a genuine and demonstrated desire to reach a mutually acceptable resolution of this matter. Continued litigation before an Administrative Law Judge would impose significant costs on both parties and the Commission, and would inject prolonged uncertainty into Dunmore's business operations and regulatory relationships. It is in the interest of both parties and the public to resolve this matter expeditiously and fairly.

Accordingly, Dunmore respectfully submits the following counter-proposal:

A civil penalty of $3.5 million, with no disgorgement, accompanied by a comprehensive 36-month Enhanced Compliance Plan to be independently monitored by Ridgeway Compliance Solutions LLC, together with standard "neither admit nor deny" resolution language and a continuing cooperation commitment consistent with Dunmore's exemplary record throughout this investigation.

The sections that follow set forth the basis for this proposal in detail.

II. Summary of Counter-Proposal Terms

For the convenience of FERC Staff, the material terms of Dunmore's counter-proposal are summarized below. Each element is addressed in greater detail in the sections that follow.

These proposed terms, taken together, represent a fair, proportionate, and appropriate resolution of this matter. Dunmore's proposal ensures meaningful accountability through a substantial financial penalty and a rigorous, independently monitored compliance program, while also reflecting the significant weaknesses in FERC Staff's underlying theories and the speculative nature of the disgorgement calculation.

III. Disgorgement Is Speculative and Unquantifiable

A central element of Dunmore's counter-proposal is the omission of any disgorgement component. This position is firmly grounded in the expert economic analysis of Dr. Leonard Whitfield, the factual record developed through the investigation, and applicable Commission policy and precedent. As set forth below, Staff's disgorgement figures — whether the original $12.8 million or the revised $3.2 million — are not supported by reliable economic methodology and should not form part of any resolution.

A. Dr. Whitfield's Expert Analysis Demonstrates Minimal Market Impact

On November 20, 2023, Respondents submitted to FERC OE the expert report of Dr. Leonard Whitfield of Whitfield Economic Advisors LLC. Dr. Whitfield is a nationally recognized expert in energy market economics with over twenty-five years of experience in the analysis of wholesale electricity markets, including extensive work involving MISO, PJM, and SPP market structures. His report was the product of an independent and rigorous economic analysis of DPT's trading activity during the Relevant Period and its actual impact on market outcomes at the Indiana Hub and Minnesota Hub.

Dr. Whitfield's principal conclusion was that the actual market impact of DPT's trading activity at the Indiana Hub and Minnesota Hub during the Relevant Period — which FERC Staff has defined as January 3, 2022 through March 17, 2023 — was no more than $2.1 million. This figure represents only a small fraction of FERC Staff's initial estimate of $12.8 million in alleged "unjust profits," and is also substantially below Staff's revised disgorgement figure of $3.2 million.

Dr. Whitfield reached this conclusion through a detailed analysis of locational marginal pricing ("LMP") data, congestion patterns, and transmission outage records across the Indiana Hub and Minnesota Hub during the Relevant Period. His analysis employed a "but-for" methodology that isolated the incremental effect of DPT's Day-Ahead bidding activity on congestion components of LMP, controlling for the substantial exogenous factors that drove congestion during this period. This methodology is consistent with the approaches accepted by the Commission and other federal agencies in quantifying market harm.

Critically, Dr. Whitfield demonstrated that the congestion patterns observed at the Indiana Hub during the Relevant Period were primarily driven by a series of significant transmission outage events — including planned outages on the Reynolds-Greentown 345 kV line and the Harding-Benton 230 kV corridor — that occurred independently of and without reference to DPT's bidding activity. These outage events, which are documented in MISO's public transmission outage logs, accounted for the vast majority of congestion differentials between the Indiana Hub and the Minnesota Hub during the months when DPT's trading activity was most concentrated. When the effect of these outage events was properly accounted for, the residual market impact attributable to DPT's bidding was minimal.

Even accepting FERC Staff's revised disgorgement figure of $3.2 million at face value, that figure exceeds the total estimated market impact identified by Dr. Whitfield and therefore cannot be supported by any reliable economic methodology. Disgorgement by its nature is an equitable remedy intended to deprive wrongdoers of the actual fruits of their misconduct. It is not a penalty, and it may not be imposed on the basis of inflated or speculative calculations that overstate actual market impact.

B. The Causal Link Between DPT's Trading and Alleged Profits Is Speculative

FERC Staff's unjust profits calculation — both in the Preliminary Findings letter and in the revised settlement offer — relies on a fundamental assumption that all congestion-related value in DPT's Financial Transmission Rights ("FTR") positions was attributable to DPT's bidding behavior during the Relevant Period. DPT held FTR positions with a total notional value of approximately $47.3 million across the MISO footprint during the Relevant Period, and Staff's methodology attributed to manipulation a substantial portion of the congestion revenues earned on those positions. This assumption is both factually incorrect and economically unsupportable.

As Dr. Whitfield's analysis demonstrated in detail, the FTR positions in question were acquired by DPT through MISO's Annual and Monthly FTR Auction processes months before the start of the Relevant Period as part of DPT's routine hedging strategy. FTR acquisition decisions are made on the basis of forward-looking assessments of transmission congestion patterns, fuel price differentials, generation availability, and load forecasts. These decisions are made independently of — and temporally prior to — any subsequent Day-Ahead bidding decisions. Staff's methodology improperly collapses the temporal and causal distinction between FTR acquisition and Day-Ahead bidding, treating decisions made at different times and for different purposes as though they constituted a single manipulative scheme.

Moreover, DPT's virtual transactions at the Minnesota Hub — which totaled approximately 1,620 GWh during the Relevant Period — similarly reflected legitimate trading activity grounded in DPT's assessment of forward price differentials, load variability, and arbitrage opportunities between the Day-Ahead and Real-Time markets. Dr. Whitfield's analysis demonstrated that the contribution of these virtual transactions to congestion differentials between the Minnesota Hub and the Indiana Hub was dwarfed by the impact of physical transmission constraints, including the outage events described above. In other words, even if DPT had not placed a single virtual transaction at the Minnesota Hub during the Relevant Period, the vast majority of the congestion differentials — and the resulting FTR revenues — would have occurred regardless.

The law is clear that disgorgement must be based on actual, quantifiable unjust enrichment — not speculative extrapolations that assume every favorable market movement during a relevant period was caused by the respondent's conduct. The Commission has repeatedly recognized that disgorgement is an equitable remedy that must be calibrated to the actual gains attributable to the specific conduct at issue, and that overbroad disgorgement calculations that fail to account for intervening causes and independent market forces are inappropriate. Here, FERC Staff's methodology fails to satisfy this standard. The causal link between DPT's trading activity and the alleged unjust profits is, at best, speculative and, at worst, nonexistent for the vast majority of the claimed amount.

C. Policy and Precedent Favor Waiving Disgorgement

In cases where the causal nexus between alleged conduct and market harm is genuinely contested and the amount of unjust enrichment is unquantifiable with reasonable certainty, the Commission has appropriately resolved matters without a disgorgement component. The Commission's enforcement program has recognized that not every settlement requires disgorgement — particularly where the respondent's conduct did not result in clearly identifiable, quantifiable gains that are causally attributable to the alleged violation, and where the civil penalty component of the resolution is sufficient to serve the Commission's deterrence objectives.

Including disgorgement based on Staff's current methodology in any consent agreement in this matter would set a troubling and inappropriate precedent. It would effectively penalize routine hedging and portfolio management activities — including the acquisition of FTR positions and the execution of virtual transactions — that are expressly authorized by the MISO tariff and that serve important market functions, including price discovery and convergence. Energy market participants across all RTOs and ISOs regularly engage in the types of portfolio management activities at issue here, and the imposition of disgorgement premised on the mere temporal overlap between FTR positions and Day-Ahead bidding activity would create an unacceptable chilling effect on legitimate market participation.

For all of these reasons, Dunmore respectfully submits that no disgorgement should be required as part of any resolution of this matter, and that the civil penalty and Enhanced Compliance Plan described in this letter are more than sufficient to serve the Commission's enforcement objectives.

IV. The Proposed $3.5 Million Penalty Is Appropriate

Dunmore's proposed civil penalty of $3.5 million is the product of a careful and good-faith assessment of the factual record, the applicable Penalty Guidelines, the strength of Respondents' defenses, and the relevant mitigating factors. As set forth below, this amount reflects appropriate accountability for the conduct at issue while properly crediting Dunmore's cooperation, remediation, and the substantial weaknesses in Staff's underlying theories.

A. Dunmore's Conduct Was Less Culpable Than Staff's Analysis Suggests

As detailed at length in Dunmore's Response to Preliminary Findings submitted on November 6, 2023, DPT's Day-Ahead offers at the Indiana Hub — including offers at prices ranging from -$15/MWh to -$40/MWh — were consistent with a legitimate portfolio optimization strategy, not market manipulation under Section 222 of the Federal Power Act or 18 C.F.R. § 1c.2. The Commission's anti-manipulation rule requires, among other elements, proof of fraudulent or deceptive conduct undertaken with the requisite scienter. Staff's theory of the case conflates aggressive-but-legitimate competitive bidding with actionable fraud, and does not adequately account for the business context in which DPT's trading decisions were made.

DPT's negative price offers at the Indiana Hub reflected the opportunity costs and contractual commitments associated with minimum generation requirements at DPT's gas-fired generation units in the MISO footprint. These units are subject to minimum operating levels established by their physical operating characteristics and, in certain cases, by contractual minimum-take obligations under fuel supply agreements. When market conditions indicated that the expected revenues from Day-Ahead energy sales at the Indiana Hub would be below the incremental costs of generation but above the costs of decommitting and recommitting the units, negative price offers were an economically rational strategy to maintain dispatch and avoid the substantial start-up costs associated with cycling the units. This practice is well-recognized in the industry and is not, standing alone, indicative of manipulative intent.

The bidding strategy was developed and executed within the context of DPT's overall portfolio management across the MISO market. DPT is a significant participant in the MISO wholesale electricity market, having traded approximately 18.4 million MWh in calendar year 2022 alone. The Indiana Hub positions at issue in this investigation constituted a small fraction of DPT's total MISO trading portfolio, and the bidding decisions were made by DPT's trading desk of 14 traders during the Relevant Period under established risk management protocols. These protocols were overseen by Derek Sung, Senior Vice President, Power Marketing & Trading, who testified at length regarding the legitimate business rationale for DPT's bidding activity during his September 19, 2023, testimony under 18 C.F.R. § 1b.12.

The evidence developed during this investigation does not support a finding that DPT's traders acted with the intent to manipulate market prices or to create artificial congestion for the purpose of benefiting DPT's FTR positions. Rather, the evidence is consistent with aggressive but economically rational bidding within the parameters of the MISO market design. While Dunmore acknowledges that certain aspects of its trading activity warranted enhanced compliance oversight — and has taken significant steps to implement such oversight, as described below — the degree of culpability associated with the conduct at issue is substantially lower than what Staff's penalty analysis suggests.

B. Mitigating Factors Warrant a Substantially Reduced Penalty

The Commission's Penalty Guidelines and settled enforcement practice recognize a range of mitigating factors that appropriately reduce the penalty applicable to a given set of facts. Several of the most significant mitigating factors are present here and strongly support the proposed $3.5 million penalty.

Full Cooperation. Dunmore has cooperated fully, promptly, and extensively with FERC OE's investigation from its inception. This cooperation has been acknowledged by Staff at various points during the investigation and is, by any measure, exemplary. Specifically, Dunmore's cooperation has included the following:

• Document Productions: Dunmore produced approximately 187,000 documents comprising approximately 1.24 million pages from 11 custodians. These productions were completed across three rolling productions: the first on July 24, 2023; the second on August 21, 2023; and the third on October 30, 2023. Each production was completed on or ahead of the schedule agreed upon with Staff, and Dunmore provided detailed privilege logs and production metadata in the formats requested by FERC OE. Dunmore also engaged a nationally recognized e-discovery vendor, Westlake Analytics, to ensure the integrity and completeness of its productions.

• Testimony Under 18 C.F.R. § 1b.12: Dunmore made six employees available for sworn testimony under 18 C.F.R. § 1b.12, including three of the most senior individuals with direct knowledge of the trading activity at issue: Kyle Renfro, Vice President and Head Trader (September 5, 2023); Anastasia Petrov, Senior Trader (September 12, 2023); and Derek Sung, Senior Vice President, Power Marketing & Trading (September 19, 2023). In each instance, the witnesses appeared voluntarily, were well-prepared, and provided responsive and forthcoming testimony. No assertion of the Fifth Amendment privilege against self-incrimination was made by any witness, and Dunmore did not interpose objections to any substantive line of questioning.

• Data Request Responses: Dunmore timely and substantively responded to two comprehensive sets of data requests issued by FERC OE. The first set, issued on June 15, 2023, included 41 interrogatories and 23 document requests. Dunmore's response, submitted on July 24, 2023, included detailed narrative responses to each interrogatory, supported by document citations and spreadsheet analyses. The second set, issued on September 25, 2023, included 18 supplemental interrogatories, to which Dunmore responded on October 16, 2023. In both instances, Dunmore's responses were complete and did not require follow-up correspondence or motions to compel.

This level of cooperation is a significant mitigating factor under the Penalty Guidelines and warrants substantial credit in determining the appropriate penalty.

Pre-Existing Remedial Measures. Dunmore's commitment to compliance enhancement predated the formal investigation and was not undertaken merely in response to regulatory pressure. Specifically, Dunmore appointed Jennifer Caulfield as Chief Compliance Officer on February 6, 2023 — nearly two months before the referral letter from Velthorn Market Analytics, Inc. (the MISO Independent Market Monitor) to FERC OE on April 3, 2023, and more than three months before FERC OE's preliminary inquiry letter of May 22, 2023. Ms. Caulfield's appointment was part of a broader organizational initiative, approved by the DEH Board of Directors, to enhance Dunmore's regulatory compliance infrastructure across all of its energy trading operations. The timing of this appointment demonstrates that Dunmore independently recognized the need for enhanced compliance oversight and acted proactively and in good faith — not merely in response to regulatory scrutiny.

Voluntary Remediation. In addition to the pre-existing remedial measures described above, Dunmore retained Ridgeway Compliance Solutions LLC on October 15, 2023 — shortly after receiving FERC OE's Preliminary Findings letter on October 2, 2023 — to design and implement an enhanced compliance program tailored to the specific risks identified in this investigation. Ridgeway Compliance Solutions is led by Dr. Carolyn Whitford, a recognized authority in energy market compliance who previously served as a senior compliance officer at a major RTO. The engagement of Ridgeway demonstrates Dunmore's proactive approach to remediation and its genuine commitment to preventing any recurrence of the conduct at issue.

C. Penalty Guidelines Analysis Supports the Proposed Amount

FERC Staff's initial penalty calculation of $18 million was premised on a base penalty of $9 million, which was then doubled through the application of multipliers for the duration of the alleged conduct (spanning approximately 14.5 months) and its purported scope across multiple trading hubs. Dunmore respectfully submits that this calculation overstates both the seriousness of the underlying conduct and the appropriate values for the relevant multipliers.

First, as to the base penalty, the Commission's Penalty Guidelines direct that the base penalty should be calibrated to, among other things, the actual or potential harm caused by the violation. Given Dr. Whitfield's analysis showing a maximum market impact of $2.1 million — less than one-sixth of Staff's original disgorgement estimate — the base penalty should be substantially lower than the $9 million figure used in Staff's initial calculation. A base penalty anchored to the actual demonstrated market impact, rather than Staff's inflated estimate, would be on the order of $2 million to $3 million.

Second, as to the multipliers, the duration of the alleged conduct and the number of market hubs involved do not justify a doubling of the base penalty. While the Relevant Period spans from January 3, 2022 through March 17, 2023, DPT's trading activity at the Indiana Hub was not continuous throughout this period. There were extended intervals during which DPT's Day-Ahead offers at the Indiana Hub were at or above $0/MWh and were entirely unremarkable. The geographic scope of the conduct, while spanning two hubs, involved a single market (MISO) and a single integrated trading strategy. These factors support, at most, a modest upward adjustment — not a doubling of the base penalty.

Third, the mitigating factors described above — full cooperation, pre-existing remedial measures, and voluntary remediation — each independently warrant significant downward adjustments under the Penalty Guidelines. When these factors are taken together, the cumulative mitigating credit is substantial.

When these considerations are properly applied, the resulting penalty falls within a range that is consistent with the $3.5 million figure proposed by Dunmore. This amount is also consistent with resolutions in comparable FERC enforcement matters involving contested allegations of MISO market manipulation where cooperation and remediation were present as mitigating factors.

V. Dunmore's Financial Profile and Ability to Pay

Dunmore wishes to be clear that it is not seeking inability-to-pay treatment in connection with this proceeding. Dunmore Energy Holdings Ltd. is a substantial enterprise with the financial capacity to pay the proposed penalty. In fiscal year 2022, DEH generated consolidated revenue of $3.82 billion and EBITDA of $891 million. DPT, as a wholly owned subsidiary of DEH, generated MISO-related revenue of approximately $614 million in the same fiscal year. Dunmore is financially sound and has ample resources to satisfy its obligations under any consent agreement.

The proposed penalty amount of $3.5 million is proportionate and meaningful in the context of Dunmore's financial profile. It reflects a sufficient quantum to serve the Commission's deterrence objectives while remaining within the bounds of what is warranted by the factual record and the applicable Penalty Guidelines. The proposed penalty is not nominal, and its imposition will be noted by market participants and by Dunmore's own management and Board of Directors as a significant regulatory consequence.

Dunmore proposes a two-installment payment schedule — with the first installment of $1.75 million due within 30 calendar days of a Commission order approving the consent agreement, and the second installment of $1.75 million due within 180 calendar days of such order — solely for administrative convenience. This payment schedule is not premised on financial hardship or any claim of inability to pay the full amount upon entry of the order. Dunmore is prepared to discuss alternative payment arrangements if Staff has a preference for a different schedule.

VI. Comprehensive 36-Month Enhanced Compliance Plan

As a central component of its counter-proposal, Dunmore commits to a robust and comprehensive 36-month Enhanced Compliance Plan ("ECP"). The ECP is designed to address the specific compliance risks identified in this investigation and to ensure that Dunmore maintains industry-leading compliance practices across its energy trading operations. The key elements of the proposed ECP are as follows:

1. Chief Compliance Officer. Jennifer Caulfield is confirmed as Dunmore's Chief Compliance Officer. Ms. Caulfield reports directly to the DEH Board of Directors and has the authority, resources, and organizational independence necessary to oversee all aspects of Dunmore's regulatory compliance program. Ms. Caulfield's appointment, which occurred on February 6, 2023, predated the commencement of this investigation and reflects Dunmore's independent commitment to compliance excellence.

2. Annual Compliance Training. All trading personnel across DPT's MISO and SPP trading desks — currently numbering 22 individuals — will receive a minimum of 16 hours of compliance training per year for the duration of the ECP period. Training topics will include, at a minimum: the Commission's anti-manipulation rules under 18 C.F.R. § 1c.2; the prohibition on market manipulation under Section 222 of the Federal Power Act; MISO tariff requirements applicable to Day-Ahead and Real-Time market participation; FTR trading compliance; cross-product transaction awareness; and case studies drawn from Commission enforcement actions. Training will be conducted by qualified internal and external instructors, including representatives of Ridgeway Compliance Solutions LLC.

3. Quarterly Compliance Audits. Ridgeway Compliance Solutions LLC, under the direction of Dr. Carolyn Whitford, Founder and Managing Director, will conduct quarterly compliance audits of DPT's trading operations for the duration of the monitoring period. Each quarterly audit will include a review of trading activity across DPT's Day-Ahead, Real-Time, and FTR portfolios; an assessment of compliance with internal policies and procedures; interviews with trading personnel and compliance staff; and a written report summarizing findings and recommendations. Ridgeway's audit reports will be made available to FERC OE upon request.

4. Automated Trade Surveillance Systems. Dunmore will implement automated surveillance technology to detect potential manipulation patterns in DPT's Day-Ahead and Real-Time trading activity. The surveillance system will include, at a minimum: real-time monitoring of bidding patterns and price offers at major trading hubs; cross-product transaction monitoring designed to identify potential correlations between physical or virtual trading activity and FTR position values; FTR position analysis with automated alerts for unusual congestion benefit patterns; and exception-based reporting to the CCO. The surveillance system will be operational within 120 days of the date of any Commission order approving the consent agreement.

5. Quarterly Reporting to FERC OE. Dunmore will submit quarterly compliance reports to the Office of Enforcement for the full 36-month duration of the ECP. Each quarterly report will describe the compliance activities undertaken during the reporting period, including training sessions conducted, audit findings, surveillance system alerts and their resolution, and any disciplinary actions taken in connection with compliance matters. Reports will be submitted within 30 calendar days following the end of each calendar quarter.

6. Annual Compliance Certification. On each anniversary of the date of any Commission order approving the consent agreement, CEO Gavin Harcourt and CCO Jennifer Caulfield will execute and submit to FERC OE annual certifications attesting to Dunmore's compliance with all requirements of the ECP. Each certification will confirm that the signatories have personally reviewed the compliance program and believe, based on reasonable inquiry, that Dunmore is in material compliance with all ECP requirements.

7. Comprehensive Updated Policies and Procedures. Dunmore will develop and implement comprehensive updated policies and procedures governing trading desk oversight, FTR position monitoring, and cross-product transaction review. These policies will be drafted with the assistance of Ridgeway Compliance Solutions and will be submitted to FERC OE for review within 90 days of the date of any Commission order approving the consent agreement. The policies will be reviewed and updated annually throughout the ECP period.

Ridgeway Compliance Solutions LLC has been retained at a flat fee of $385,000 for compliance program design, initial training, and an initial 12-month monitoring period. Dunmore commits to extending the engagement of Ridgeway, or to retaining an alternative independent compliance monitor of comparable qualifications acceptable to FERC OE, for the full 36-month duration of the ECP.

The compliance plan period would commence on the date of any Commission order approving the consent agreement and would continue for 36 months thereafter. Upon conclusion of the ECP period, Dunmore would provide a final compliance report and certification to FERC OE summarizing the activities and outcomes of the compliance program.

Dunmore respectfully submits that this comprehensive Enhanced Compliance Plan constitutes significant and independently valuable remediation. The ECP imposes substantial ongoing obligations on Dunmore, including significant financial expenditures for independent monitoring, surveillance technology, and training, as well as ongoing reporting obligations to the Commission. The ECP ensures that the Commission's compliance objectives are fully served and should be credited as a substantial mitigating factor in determining the appropriate monetary component of any resolution.

VII. Proposed Process and Next Steps

Dunmore is committed to the prompt and good-faith resolution of this matter. To that end, Dunmore proposes that the parties schedule a second settlement conference at the earliest mutually convenient date to discuss the terms set forth in this letter. Undersigned counsel is available during the weeks of January 22 and January 29, 2024, and would be pleased to accommodate Staff's scheduling preferences.

Should the parties reach agreement on the material terms of a resolution — whether on the basis of this counter-proposal or through further negotiation — Dunmore is prepared to promptly negotiate, finalize, and execute a Stipulation and Consent Agreement for submission to the Commission for approval. Dunmore's counsel has substantial experience with the Commission's consent agreement process and is prepared to work efficiently with Staff's counsel to prepare the necessary documentation.

Dunmore remains committed to good-faith negotiations and a prompt resolution of Docket No. IN23-7-000. Respondents continue to believe that a consensual resolution is in the best interests of all parties and the public, and they look forward to continued constructive dialogue with FERC Staff.

VIII. Conclusion

For the reasons set forth above, Dunmore respectfully submits that a civil penalty of $3.5 million, with no disgorgement, combined with the comprehensive 36-month Enhanced Compliance Plan described in Section VI and Dunmore's demonstrated cooperation throughout this investigation, represents a fair, proportionate, and appropriate resolution of Docket No. IN23-7-000.

This counter-proposal reflects an 88.6% reduction from FERC Staff's initial demand of $30.8 million. Dunmore believes that this reduction is warranted in light of the strength of Respondents' defenses on the merits, the expert economic analysis of Dr. Leonard Whitfield demonstrating minimal actual market impact, the speculative and unsupportable nature of Staff's disgorgement calculations, and Dunmore's extensive cooperation and proactive remediation efforts. At the same time, the proposed $3.5 million penalty and 36-month ECP ensure meaningful accountability and robust prospective compliance — outcomes that serve the Commission's core enforcement objectives.

Dunmore respectfully requests that FERC Staff give careful consideration to this counter-proposal and looks forward to continuing the productive dialogue initiated during the December 4, 2023, settlement conference. We are confident that a mutually acceptable resolution is achievable and stand ready to work with Staff toward that end.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Catherine Bloom, Partner 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Tel: (713) 458-6114

Email: cbloom@calderwoodharkness.com

Counsel for Dunmore Energy Holdings Ltd. and Dunmore Power Trading LLC

cc: Margaret Hollowell, Director, Division of Investigations, FERC Office of Enforcement cc: Thomas Adebayo, Lead Investigator, FERC Office of Enforcement cc: Martin Llewellyn, General Counsel, Dunmore Energy Holdings Ltd. (via separate cover)

Term	Dunmore's Counter-Proposal
Civil Penalty	$3,500,000 total
Payment Schedule	Two equal installments of $1,750,000 each — first installment due within 30 calendar days of a Commission order approving the consent agreement; second installment due within 180 calendar days of such order
Disgorgement	$0 — disgorgement is unwarranted and speculative for the reasons set forth in Section III
Enhanced Compliance Plan	Comprehensive 36-month compliance program, including independent monitoring by Ridgeway Compliance Solutions LLC, as described in Section VI
Resolution Language	Standard "neither admit nor deny" provision, consistent with Commission practice
Cooperation	Continuing cooperation commitment consistent with Respondents' exemplary cooperation record throughout this investigation

PRIVILEGED & CONFIDENTIAL — SETTLEMENT COMMUNICATION SUBJECT TO FED. R. EVID. 408 AND 18 C.F.R. § 1b.9
CALDERWOOD & HARKNESS LLP Attorneys at Law
Houston Office 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Tel: (713) 458-6000
Fax: (713) 458-6001
Principal Office 600 Lexington Avenue New York, New York 10022 Tel: (212) 735-9200
Fax: (212) 735-9201
January 8, 2024
VIA ELECTRONIC MAIL AND HAND DELIVERY
Christine Pham, Senior Attorney 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 — Settlement Counter-Proposal
Dear Ms. Pham:
We write on behalf of our clients, Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH") and Dunmore Power Trading LLC ("DPT" and, together with DEH, "Respondents"), in connection with the above-referenced non-public investigation conducted by the Federal Energy Regulatory Commission's Office of Enforcement ("FERC OE" or "Staff"). This letter constitutes a settlement communication within the meaning of 18 C.F.R. § 1b.9 and Federal Rule of Evidence 408, and its contents are strictly confidential and may not be used for any purpose other than the settlement discussions in this proceeding.
I. Introduction and Purpose
This letter is submitted following the first settlement conference held on December 4, 2023, at which counsel for Respondents and representatives of FERC OE engaged in a productive and candid exchange regarding the parties' respective positions and the contours of a potential consensual resolution of this matter. We appreciated the professionalism and openness of the dialogue during that session, and it is in the spirit of continued good-faith engagement that we submit this counter-proposal.
On December 18, 2023, following the settlement conference, FERC Staff communicated a revised settlement offer to undersigned counsel. Staff's revised offer proposed a civil penalty of $8.5 million together with disgorgement of $3.2 million, for a total monetary resolution of $11.7 million. Respondents acknowledge that this revised offer represented a meaningful and appreciated reduction from Staff's initial demand as set forth in the Preliminary Findings letter dated October 2, 2023, which sought a civil penalty of $18 million and disgorgement of $12.8 million, totaling $30.8 million.
While Respondents appreciate the movement reflected in Staff's revised position, they respectfully submit that the revised offer still substantially overstates the appropriate resolution of this matter in light of the factual record, the expert economic evidence, and the relevant Commission precedent. Respondents maintain the defenses and positions articulated in their Response to Preliminary Findings submitted on November 6, 2023, and in the accompanying expert report of Dr. Leonard Whitfield, which was submitted on November 20, 2023. Respondents do not believe that FERC OE would prevail on the merits before an Administrative Law Judge with respect to either the market manipulation allegations under Section 222 of the Federal Power Act, 16 U.S.C. § 824v, and 18 C.F.R. § 1c.2, or the disgorgement claims premised on Staff's flawed economic methodology.
Notwithstanding the strength of their defenses, Respondents have a genuine and demonstrated desire to reach a mutually acceptable resolution of this matter. Continued litigation before an Administrative Law Judge would impose significant costs on both parties and the Commission, and would inject prolonged uncertainty into Dunmore's business operations and regulatory relationships. It is in the interest of both parties and the public to resolve this matter expeditiously and fairly.
Accordingly, Dunmore respectfully submits the following counter-proposal:
A civil penalty of $3.5 million, with no disgorgement, accompanied by a comprehensive 36-month Enhanced Compliance Plan to be independently monitored by Ridgeway Compliance Solutions LLC, together with standard "neither admit nor deny" resolution language and a continuing cooperation commitment consistent with Dunmore's exemplary record throughout this investigation.
The sections that follow set forth the basis for this proposal in detail.
II. Summary of Counter-Proposal Terms
For the convenience of FERC Staff, the material terms of Dunmore's counter-proposal are summarized below. Each element is addressed in greater detail in the sections that follow.
These proposed terms, taken together, represent a fair, proportionate, and appropriate resolution of this matter. Dunmore's proposal ensures meaningful accountability through a substantial financial penalty and a rigorous, independently monitored compliance program, while also reflecting the significant weaknesses in FERC Staff's underlying theories and the speculative nature of the disgorgement calculation.
III. Disgorgement Is Speculative and Unquantifiable
A central element of Dunmore's counter-proposal is the omission of any disgorgement component. This position is firmly grounded in the expert economic analysis of Dr. Leonard Whitfield, the factual record developed through the investigation, and applicable Commission policy and precedent. As set forth below, Staff's disgorgement figures — whether the original $12.8 million or the revised $3.2 million — are not supported by reliable economic methodology and should not form part of any resolution.
A. Dr. Whitfield's Expert Analysis Demonstrates Minimal Market Impact
On November 20, 2023, Respondents submitted to FERC OE the expert report of Dr. Leonard Whitfield of Whitfield Economic Advisors LLC. Dr. Whitfield is a nationally recognized expert in energy market economics with over twenty-five years of experience in the analysis of wholesale electricity markets, including extensive work involving MISO, PJM, and SPP market structures. His report was the product of an independent and rigorous economic analysis of DPT's trading activity during the Relevant Period and its actual impact on market outcomes at the Indiana Hub and Minnesota Hub.
Dr. Whitfield's principal conclusion was that the actual market impact of DPT's trading activity at the Indiana Hub and Minnesota Hub during the Relevant Period — which FERC Staff has defined as January 3, 2022 through March 17, 2023 — was no more than $2.1 million. This figure represents only a small fraction of FERC Staff's initial estimate of $12.8 million in alleged "unjust profits," and is also substantially below Staff's revised disgorgement figure of $3.2 million.
Dr. Whitfield reached this conclusion through a detailed analysis of locational marginal pricing ("LMP") data, congestion patterns, and transmission outage records across the Indiana Hub and Minnesota Hub during the Relevant Period. His analysis employed a "but-for" methodology that isolated the incremental effect of DPT's Day-Ahead bidding activity on congestion components of LMP, controlling for the substantial exogenous factors that drove congestion during this period. This methodology is consistent with the approaches accepted by the Commission and other federal agencies in quantifying market harm.
Critically, Dr. Whitfield demonstrated that the congestion patterns observed at the Indiana Hub during the Relevant Period were primarily driven by a series of significant transmission outage events — including planned outages on the Reynolds-Greentown 345 kV line and the Harding-Benton 230 kV corridor — that occurred independently of and without reference to DPT's bidding activity. These outage events, which are documented in MISO's public transmission outage logs, accounted for the vast majority of congestion differentials between the Indiana Hub and the Minnesota Hub during the months when DPT's trading activity was most concentrated. When the effect of these outage events was properly accounted for, the residual market impact attributable to DPT's bidding was minimal.
Even accepting FERC Staff's revised disgorgement figure of $3.2 million at face value, that figure exceeds the total estimated market impact identified by Dr. Whitfield and therefore cannot be supported by any reliable economic methodology. Disgorgement by its nature is an equitable remedy intended to deprive wrongdoers of the actual fruits of their misconduct. It is not a penalty, and it may not be imposed on the basis of inflated or speculative calculations that overstate actual market impact.
B. The Causal Link Between DPT's Trading and Alleged Profits Is Speculative
FERC Staff's unjust profits calculation — both in the Preliminary Findings letter and in the revised settlement offer — relies on a fundamental assumption that all congestion-related value in DPT's Financial Transmission Rights ("FTR") positions was attributable to DPT's bidding behavior during the Relevant Period. DPT held FTR positions with a total notional value of approximately $47.3 million across the MISO footprint during the Relevant Period, and Staff's methodology attributed to manipulation a substantial portion of the congestion revenues earned on those positions. This assumption is both factually incorrect and economically unsupportable.
As Dr. Whitfield's analysis demonstrated in detail, the FTR positions in question were acquired by DPT through MISO's Annual and Monthly FTR Auction processes months before the start of the Relevant Period as part of DPT's routine hedging strategy. FTR acquisition decisions are made on the basis of forward-looking assessments of transmission congestion patterns, fuel price differentials, generation availability, and load forecasts. These decisions are made independently of — and temporally prior to — any subsequent Day-Ahead bidding decisions. Staff's methodology improperly collapses the temporal and causal distinction between FTR acquisition and Day-Ahead bidding, treating decisions made at different times and for different purposes as though they constituted a single manipulative scheme.
Moreover, DPT's virtual transactions at the Minnesota Hub — which totaled approximately 1,620 GWh during the Relevant Period — similarly reflected legitimate trading activity grounded in DPT's assessment of forward price differentials, load variability, and arbitrage opportunities between the Day-Ahead and Real-Time markets. Dr. Whitfield's analysis demonstrated that the contribution of these virtual transactions to congestion differentials between the Minnesota Hub and the Indiana Hub was dwarfed by the impact of physical transmission constraints, including the outage events described above. In other words, even if DPT had not placed a single virtual transaction at the Minnesota Hub during the Relevant Period, the vast majority of the congestion differentials — and the resulting FTR revenues — would have occurred regardless.
The law is clear that disgorgement must be based on actual, quantifiable unjust enrichment — not speculative extrapolations that assume every favorable market movement during a relevant period was caused by the respondent's conduct. The Commission has repeatedly recognized that disgorgement is an equitable remedy that must be calibrated to the actual gains attributable to the specific conduct at issue, and that overbroad disgorgement calculations that fail to account for intervening causes and independent market forces are inappropriate. Here, FERC Staff's methodology fails to satisfy this standard. The causal link between DPT's trading activity and the alleged unjust profits is, at best, speculative and, at worst, nonexistent for the vast majority of the claimed amount.
C. Policy and Precedent Favor Waiving Disgorgement
In cases where the causal nexus between alleged conduct and market harm is genuinely contested and the amount of unjust enrichment is unquantifiable with reasonable certainty, the Commission has appropriately resolved matters without a disgorgement component. The Commission's enforcement program has recognized that not every settlement requires disgorgement — particularly where the respondent's conduct did not result in clearly identifiable, quantifiable gains that are causally attributable to the alleged violation, and where the civil penalty component of the resolution is sufficient to serve the Commission's deterrence objectives.
Including disgorgement based on Staff's current methodology in any consent agreement in this matter would set a troubling and inappropriate precedent. It would effectively penalize routine hedging and portfolio management activities — including the acquisition of FTR positions and the execution of virtual transactions — that are expressly authorized by the MISO tariff and that serve important market functions, including price discovery and convergence. Energy market participants across all RTOs and ISOs regularly engage in the types of portfolio management activities at issue here, and the imposition of disgorgement premised on the mere temporal overlap between FTR positions and Day-Ahead bidding activity would create an unacceptable chilling effect on legitimate market participation.
For all of these reasons, Dunmore respectfully submits that no disgorgement should be required as part of any resolution of this matter, and that the civil penalty and Enhanced Compliance Plan described in this letter are more than sufficient to serve the Commission's enforcement objectives.
IV. The Proposed $3.5 Million Penalty Is Appropriate
Dunmore's proposed civil penalty of $3.5 million is the product of a careful and good-faith assessment of the factual record, the applicable Penalty Guidelines, the strength of Respondents' defenses, and the relevant mitigating factors. As set forth below, this amount reflects appropriate accountability for the conduct at issue while properly crediting Dunmore's cooperation, remediation, and the substantial weaknesses in Staff's underlying theories.
A. Dunmore's Conduct Was Less Culpable Than Staff's Analysis Suggests
As detailed at length in Dunmore's Response to Preliminary Findings submitted on November 6, 2023, DPT's Day-Ahead offers at the Indiana Hub — including offers at prices ranging from -$15/MWh to -$40/MWh — were consistent with a legitimate portfolio optimization strategy, not market manipulation under Section 222 of the Federal Power Act or 18 C.F.R. § 1c.2. The Commission's anti-manipulation rule requires, among other elements, proof of fraudulent or deceptive conduct undertaken with the requisite scienter. Staff's theory of the case conflates aggressive-but-legitimate competitive bidding with actionable fraud, and does not adequately account for the business context in which DPT's trading decisions were made.
DPT's negative price offers at the Indiana Hub reflected the opportunity costs and contractual commitments associated with minimum generation requirements at DPT's gas-fired generation units in the MISO footprint. These units are subject to minimum operating levels established by their physical operating characteristics and, in certain cases, by contractual minimum-take obligations under fuel supply agreements. When market conditions indicated that the expected revenues from Day-Ahead energy sales at the Indiana Hub would be below the incremental costs of generation but above the costs of decommitting and recommitting the units, negative price offers were an economically rational strategy to maintain dispatch and avoid the substantial start-up costs associated with cycling the units. This practice is well-recognized in the industry and is not, standing alone, indicative of manipulative intent.
The bidding strategy was developed and executed within the context of DPT's overall portfolio management across the MISO market. DPT is a significant participant in the MISO wholesale electricity market, having traded approximately 18.4 million MWh in calendar year 2022 alone. The Indiana Hub positions at issue in this investigation constituted a small fraction of DPT's total MISO trading portfolio, and the bidding decisions were made by DPT's trading desk of 14 traders during the Relevant Period under established risk management protocols. These protocols were overseen by Derek Sung, Senior Vice President, Power Marketing & Trading, who testified at length regarding the legitimate business rationale for DPT's bidding activity during his September 19, 2023, testimony under 18 C.F.R. § 1b.12.
The evidence developed during this investigation does not support a finding that DPT's traders acted with the intent to manipulate market prices or to create artificial congestion for the purpose of benefiting DPT's FTR positions. Rather, the evidence is consistent with aggressive but economically rational bidding within the parameters of the MISO market design. While Dunmore acknowledges that certain aspects of its trading activity warranted enhanced compliance oversight — and has taken significant steps to implement such oversight, as described below — the degree of culpability associated with the conduct at issue is substantially lower than what Staff's penalty analysis suggests.
B. Mitigating Factors Warrant a Substantially Reduced Penalty
The Commission's Penalty Guidelines and settled enforcement practice recognize a range of mitigating factors that appropriately reduce the penalty applicable to a given set of facts. Several of the most significant mitigating factors are present here and strongly support the proposed $3.5 million penalty.
Full Cooperation. Dunmore has cooperated fully, promptly, and extensively with FERC OE's investigation from its inception. This cooperation has been acknowledged by Staff at various points during the investigation and is, by any measure, exemplary. Specifically, Dunmore's cooperation has included the following:
• Document Productions: Dunmore produced approximately 187,000 documents comprising approximately 1.24 million pages from 11 custodians. These productions were completed across three rolling productions: the first on July 24, 2023; the second on August 21, 2023; and the third on October 30, 2023. Each production was completed on or ahead of the schedule agreed upon with Staff, and Dunmore provided detailed privilege logs and production metadata in the formats requested by FERC OE. Dunmore also engaged a nationally recognized e-discovery vendor, Westlake Analytics, to ensure the integrity and completeness of its productions.
• Testimony Under 18 C.F.R. § 1b.12: Dunmore made six employees available for sworn testimony under 18 C.F.R. § 1b.12, including three of the most senior individuals with direct knowledge of the trading activity at issue: Kyle Renfro, Vice President and Head Trader (September 5, 2023); Anastasia Petrov, Senior Trader (September 12, 2023); and Derek Sung, Senior Vice President, Power Marketing & Trading (September 19, 2023). In each instance, the witnesses appeared voluntarily, were well-prepared, and provided responsive and forthcoming testimony. No assertion of the Fifth Amendment privilege against self-incrimination was made by any witness, and Dunmore did not interpose objections to any substantive line of questioning.
• Data Request Responses: Dunmore timely and substantively responded to two comprehensive sets of data requests issued by FERC OE. The first set, issued on June 15, 2023, included 41 interrogatories and 23 document requests. Dunmore's response, submitted on July 24, 2023, included detailed narrative responses to each interrogatory, supported by document citations and spreadsheet analyses. The second set, issued on September 25, 2023, included 18 supplemental interrogatories, to which Dunmore responded on October 16, 2023. In both instances, Dunmore's responses were complete and did not require follow-up correspondence or motions to compel.
This level of cooperation is a significant mitigating factor under the Penalty Guidelines and warrants substantial credit in determining the appropriate penalty.
Pre-Existing Remedial Measures. Dunmore's commitment to compliance enhancement predated the formal investigation and was not undertaken merely in response to regulatory pressure. Specifically, Dunmore appointed Jennifer Caulfield as Chief Compliance Officer on February 6, 2023 — nearly two months before the referral letter from Velthorn Market Analytics, Inc. (the MISO Independent Market Monitor) to FERC OE on April 3, 2023, and more than three months before FERC OE's preliminary inquiry letter of May 22, 2023. Ms. Caulfield's appointment was part of a broader organizational initiative, approved by the DEH Board of Directors, to enhance Dunmore's regulatory compliance infrastructure across all of its energy trading operations. The timing of this appointment demonstrates that Dunmore independently recognized the need for enhanced compliance oversight and acted proactively and in good faith — not merely in response to regulatory scrutiny.
Voluntary Remediation. In addition to the pre-existing remedial measures described above, Dunmore retained Ridgeway Compliance Solutions LLC on October 15, 2023 — shortly after receiving FERC OE's Preliminary Findings letter on October 2, 2023 — to design and implement an enhanced compliance program tailored to the specific risks identified in this investigation. Ridgeway Compliance Solutions is led by Dr. Carolyn Whitford, a recognized authority in energy market compliance who previously served as a senior compliance officer at a major RTO. The engagement of Ridgeway demonstrates Dunmore's proactive approach to remediation and its genuine commitment to preventing any recurrence of the conduct at issue.
C. Penalty Guidelines Analysis Supports the Proposed Amount
FERC Staff's initial penalty calculation of $18 million was premised on a base penalty of $9 million, which was then doubled through the application of multipliers for the duration of the alleged conduct (spanning approximately 14.5 months) and its purported scope across multiple trading hubs. Dunmore respectfully submits that this calculation overstates both the seriousness of the underlying conduct and the appropriate values for the relevant multipliers.
First, as to the base penalty, the Commission's Penalty Guidelines direct that the base penalty should be calibrated to, among other things, the actual or potential harm caused by the violation. Given Dr. Whitfield's analysis showing a maximum market impact of $2.1 million — less than one-sixth of Staff's original disgorgement estimate — the base penalty should be substantially lower than the $9 million figure used in Staff's initial calculation. A base penalty anchored to the actual demonstrated market impact, rather than Staff's inflated estimate, would be on the order of $2 million to $3 million.
Second, as to the multipliers, the duration of the alleged conduct and the number of market hubs involved do not justify a doubling of the base penalty. While the Relevant Period spans from January 3, 2022 through March 17, 2023, DPT's trading activity at the Indiana Hub was not continuous throughout this period. There were extended intervals during which DPT's Day-Ahead offers at the Indiana Hub were at or above $0/MWh and were entirely unremarkable. The geographic scope of the conduct, while spanning two hubs, involved a single market (MISO) and a single integrated trading strategy. These factors support, at most, a modest upward adjustment — not a doubling of the base penalty.
Third, the mitigating factors described above — full cooperation, pre-existing remedial measures, and voluntary remediation — each independently warrant significant downward adjustments under the Penalty Guidelines. When these factors are taken together, the cumulative mitigating credit is substantial.
When these considerations are properly applied, the resulting penalty falls within a range that is consistent with the $3.5 million figure proposed by Dunmore. This amount is also consistent with resolutions in comparable FERC enforcement matters involving contested allegations of MISO market manipulation where cooperation and remediation were present as mitigating factors.
V. Dunmore's Financial Profile and Ability to Pay
Dunmore wishes to be clear that it is not seeking inability-to-pay treatment in connection with this proceeding. Dunmore Energy Holdings Ltd. is a substantial enterprise with the financial capacity to pay the proposed penalty. In fiscal year 2022, DEH generated consolidated revenue of $3.82 billion and EBITDA of $891 million. DPT, as a wholly owned subsidiary of DEH, generated MISO-related revenue of approximately $614 million in the same fiscal year. Dunmore is financially sound and has ample resources to satisfy its obligations under any consent agreement.
The proposed penalty amount of $3.5 million is proportionate and meaningful in the context of Dunmore's financial profile. It reflects a sufficient quantum to serve the Commission's deterrence objectives while remaining within the bounds of what is warranted by the factual record and the applicable Penalty Guidelines. The proposed penalty is not nominal, and its imposition will be noted by market participants and by Dunmore's own management and Board of Directors as a significant regulatory consequence.
Dunmore proposes a two-installment payment schedule — with the first installment of $1.75 million due within 30 calendar days of a Commission order approving the consent agreement, and the second installment of $1.75 million due within 180 calendar days of such order — solely for administrative convenience. This payment schedule is not premised on financial hardship or any claim of inability to pay the full amount upon entry of the order. Dunmore is prepared to discuss alternative payment arrangements if Staff has a preference for a different schedule.
VI. Comprehensive 36-Month Enhanced Compliance Plan
As a central component of its counter-proposal, Dunmore commits to a robust and comprehensive 36-month Enhanced Compliance Plan ("ECP"). The ECP is designed to address the specific compliance risks identified in this investigation and to ensure that Dunmore maintains industry-leading compliance practices across its energy trading operations. The key elements of the proposed ECP are as follows:
1. Chief Compliance Officer. Jennifer Caulfield is confirmed as Dunmore's Chief Compliance Officer. Ms. Caulfield reports directly to the DEH Board of Directors and has the authority, resources, and organizational independence necessary to oversee all aspects of Dunmore's regulatory compliance program. Ms. Caulfield's appointment, which occurred on February 6, 2023, predated the commencement of this investigation and reflects Dunmore's independent commitment to compliance excellence.
2. Annual Compliance Training. All trading personnel across DPT's MISO and SPP trading desks — currently numbering 22 individuals — will receive a minimum of 16 hours of compliance training per year for the duration of the ECP period. Training topics will include, at a minimum: the Commission's anti-manipulation rules under 18 C.F.R. § 1c.2; the prohibition on market manipulation under Section 222 of the Federal Power Act; MISO tariff requirements applicable to Day-Ahead and Real-Time market participation; FTR trading compliance; cross-product transaction awareness; and case studies drawn from Commission enforcement actions. Training will be conducted by qualified internal and external instructors, including representatives of Ridgeway Compliance Solutions LLC.
3. Quarterly Compliance Audits. Ridgeway Compliance Solutions LLC, under the direction of Dr. Carolyn Whitford, Founder and Managing Director, will conduct quarterly compliance audits of DPT's trading operations for the duration of the monitoring period. Each quarterly audit will include a review of trading activity across DPT's Day-Ahead, Real-Time, and FTR portfolios; an assessment of compliance with internal policies and procedures; interviews with trading personnel and compliance staff; and a written report summarizing findings and recommendations. Ridgeway's audit reports will be made available to FERC OE upon request.
4. Automated Trade Surveillance Systems. Dunmore will implement automated surveillance technology to detect potential manipulation patterns in DPT's Day-Ahead and Real-Time trading activity. The surveillance system will include, at a minimum: real-time monitoring of bidding patterns and price offers at major trading hubs; cross-product transaction monitoring designed to identify potential correlations between physical or virtual trading activity and FTR position values; FTR position analysis with automated alerts for unusual congestion benefit patterns; and exception-based reporting to the CCO. The surveillance system will be operational within 120 days of the date of any Commission order approving the consent agreement.
5. Quarterly Reporting to FERC OE. Dunmore will submit quarterly compliance reports to the Office of Enforcement for the full 36-month duration of the ECP. Each quarterly report will describe the compliance activities undertaken during the reporting period, including training sessions conducted, audit findings, surveillance system alerts and their resolution, and any disciplinary actions taken in connection with compliance matters. Reports will be submitted within 30 calendar days following the end of each calendar quarter.
6. Annual Compliance Certification. On each anniversary of the date of any Commission order approving the consent agreement, CEO Gavin Harcourt and CCO Jennifer Caulfield will execute and submit to FERC OE annual certifications attesting to Dunmore's compliance with all requirements of the ECP. Each certification will confirm that the signatories have personally reviewed the compliance program and believe, based on reasonable inquiry, that Dunmore is in material compliance with all ECP requirements.
7. Comprehensive Updated Policies and Procedures. Dunmore will develop and implement comprehensive updated policies and procedures governing trading desk oversight, FTR position monitoring, and cross-product transaction review. These policies will be drafted with the assistance of Ridgeway Compliance Solutions and will be submitted to FERC OE for review within 90 days of the date of any Commission order approving the consent agreement. The policies will be reviewed and updated annually throughout the ECP period.
Ridgeway Compliance Solutions LLC has been retained at a flat fee of $385,000 for compliance program design, initial training, and an initial 12-month monitoring period. Dunmore commits to extending the engagement of Ridgeway, or to retaining an alternative independent compliance monitor of comparable qualifications acceptable to FERC OE, for the full 36-month duration of the ECP.
The compliance plan period would commence on the date of any Commission order approving the consent agreement and would continue for 36 months thereafter. Upon conclusion of the ECP period, Dunmore would provide a final compliance report and certification to FERC OE summarizing the activities and outcomes of the compliance program.
Dunmore respectfully submits that this comprehensive Enhanced Compliance Plan constitutes significant and independently valuable remediation. The ECP imposes substantial ongoing obligations on Dunmore, including significant financial expenditures for independent monitoring, surveillance technology, and training, as well as ongoing reporting obligations to the Commission. The ECP ensures that the Commission's compliance objectives are fully served and should be credited as a substantial mitigating factor in determining the appropriate monetary component of any resolution.
VII. Proposed Process and Next Steps
Dunmore is committed to the prompt and good-faith resolution of this matter. To that end, Dunmore proposes that the parties schedule a second settlement conference at the earliest mutually convenient date to discuss the terms set forth in this letter. Undersigned counsel is available during the weeks of January 22 and January 29, 2024, and would be pleased to accommodate Staff's scheduling preferences.
Should the parties reach agreement on the material terms of a resolution — whether on the basis of this counter-proposal or through further negotiation — Dunmore is prepared to promptly negotiate, finalize, and execute a Stipulation and Consent Agreement for submission to the Commission for approval. Dunmore's counsel has substantial experience with the Commission's consent agreement process and is prepared to work efficiently with Staff's counsel to prepare the necessary documentation.
Dunmore remains committed to good-faith negotiations and a prompt resolution of Docket No. IN23-7-000. Respondents continue to believe that a consensual resolution is in the best interests of all parties and the public, and they look forward to continued constructive dialogue with FERC Staff.
VIII. Conclusion
For the reasons set forth above, Dunmore respectfully submits that a civil penalty of $3.5 million, with no disgorgement, combined with the comprehensive 36-month Enhanced Compliance Plan described in Section VI and Dunmore's demonstrated cooperation throughout this investigation, represents a fair, proportionate, and appropriate resolution of Docket No. IN23-7-000.
This counter-proposal reflects an 88.6% reduction from FERC Staff's initial demand of $30.8 million. Dunmore believes that this reduction is warranted in light of the strength of Respondents' defenses on the merits, the expert economic analysis of Dr. Leonard Whitfield demonstrating minimal actual market impact, the speculative and unsupportable nature of Staff's disgorgement calculations, and Dunmore's extensive cooperation and proactive remediation efforts. At the same time, the proposed $3.5 million penalty and 36-month ECP ensure meaningful accountability and robust prospective compliance — outcomes that serve the Commission's core enforcement objectives.
Dunmore respectfully requests that FERC Staff give careful consideration to this counter-proposal and looks forward to continuing the productive dialogue initiated during the December 4, 2023, settlement conference. We are confident that a mutually acceptable resolution is achievable and stand ready to work with Staff toward that end.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Catherine Bloom, Partner 1001 Fannin Street, Suite 4200 Houston, Texas 77002 Tel: (713) 458-6114
Email: cbloom@calderwoodharkness.com
Counsel for Dunmore Energy Holdings Ltd. and Dunmore Power Trading LLC
cc: Margaret Hollowell, Director, Division of Investigations, FERC Office of Enforcement cc: Thomas Adebayo, Lead Investigator, FERC Office of Enforcement cc: Martin Llewellyn, General Counsel, Dunmore Energy Holdings Ltd. (via separate cover)
Term | Dunmore's Counter-Proposal
Civil Penalty | $3,500,000 total
Payment Schedule | Two equal installments of $1,750,000 each — first installment due within 30 calendar days of a Commission order approving the consent agreement; second installment due within 180 calendar days of such order
Disgorgement | $0 — disgorgement is unwarranted and speculative for the reasons set forth in Section III
Enhanced Compliance Plan | Comprehensive 36-month compliance program, including independent monitoring by Ridgeway Compliance Solutions LLC, as described in Section VI
Resolution Language | Standard "neither admit nor deny" provision, consistent with Commission practice
Cooperation | Continuing cooperation commitment consistent with Respondents' exemplary cooperation record throughout this investigation

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