On October 28, the Federal Energy Regulatory Commission (Commission) issued an order approving a $2.7 million settlement relating to allegations that North America Power Partners (NAPP) engaged in fraudulent conduct in violation of the Commission's prohibition against market manipulation and committed multiple violations of the PJM Interconnection, LLC's (PJM) Open Access Transmission Tariff (OATT). The Commission's order resolves an Office of Enforcement investigation into NAPP's conduct that occurred more than two years ago. NAPP did not admit or deny the allegations contained in the settlement with the Office of Enforcement.
The Office of Enforcement's investigation stems from NAPP's activities in PJM's Demand Response Programs during 2007 and 2008. NAPP, a Curtailment Service Provider, acts as an agent for individual resources that seek to participate in PJM's Demand Response Programs. In March 2008, PJM referred certain issues relating to NAPP's participation in PJM's Synchronized Reserve Market (SRM), Interruptible Load for Reliability Program (ILR), and the Interchange Energy Market (IEM) to the Office of Enforcement. Through the course of its investigation, the Office of Enforcement alleged the following:
The Office of Enforcement alleged that NAPP's actions constituted a fraudulent scheme in violation of the Commission's prohibition against market manipulation and also violated multiple provisions of PJM's OATT. As a product of NAPP's settlement with the Office of Enforcement, NAPP is obligated to pay a civil penalty of $500,000; disgorge $2,258,127, plus interest, in unjust profits; and undertake a compliance program that provides semiannual reports to the Office of Enforcement for two years.
Notably, the Office of Enforcement concluded that NAPP violated the Commission's prohibition against market manipulation even though NAPP's activities did not affect market prices or cause actual harm to system reliability. Instead, the Office of Enforcement maintained that the Commission's market manipulation prohibition was violated because NAPP's actions operated as a fraud upon PJM. In this regard, the Office of Enforcement asserted that NAPP's most serious violations were committed willfully and intentionally through the participation or oversight of NAPP's Senior Vice President of Operations at that time. Further, NAPP's alleged lack of cooperation at the initial stages of the investigation was cited as an exacerbating factor, offset by its improved cooperation in later stages of the investigation.
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