FERC, Barclays head toward energy market showdown
It's widely known that the Federal Energy Regulatory Commission (FERC) wants to tame the once wild energy markets, in which the likes of Enron used to run roughshod.
The federal agency won enhanced authority to tackle manipulation in the markets back in 2005 after the California power trading scandal and Enron implosion. It has set its sights on some big names since then, not least of which is Barclays, the beleaguered British bank that now stands accused of manipulation in the California power market. The agency has proposed a $470 million fine, which is just a bit more than Barclays paid to settle Libor manipulation charges.
"The bank has 30 days to show why it should not be penalized for an alleged scheme of manipulating physical electricity prices at a loss in order to make profits in related positions in the swaps market, a strategy known as a 'loss-leader,' " reports Reuters.
"Barclays said it would fight the agency, likely setting up a landmark legal battle that could set a precedent over whether the once-common trading ploy in commodity markets is illegal or simply ill-advised."
FERC has a lot riding on this case, as it apparently would like to bring similar charges against other banks and energy companies. Barclays has tried to put all this behind it. Over the past five years, "for reasons unrelated to the investigation, according to a source familiar with the matter. The bank closed its Portland office in 2011 and effectively quit the Western power market this year."
To the chagrin of shareholders, these charges will not go away.
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