FOLSOM, Calif. (AP) -- Federal regulators have intensified an investigation into JPMorgan Chase & Co. electricity trading in California.
The California Independent System Operator, a Folsom-based agency that runs the state's power grid and oversees last-minute electricity sales, said earlier this year that the big electricity trader might have figured out a way to exploit vulnerabilities in the state's $8 billion-a-year electricity market.
The Federal Energy Regulatory Commission began a formal probe on Thursday, saying JPMorgan may have submitted misleading information or omitted information in its dealings with the agency and the California Independent System Operator, better known as ISO. ISO manages California's power grid and energy market.
"We preliminarily find that JPMorgan may have submitted misleading information or omitted material information," FERC said.
The Sacramento Bee (sacb.ee/Se4Mbd) reports the commission has threatened to suspend JPMorgan's right to sell electricity in the California.
The agency had earlier launched an informal probe after state officials complained JP Morgan might have used improper trading techniques in 2010 and 2011 to siphon $73 million in profits from the California energy market. The ISO "sought information from JPMorgan during its investigation into serious concerns of market manipulation last year and did not receive the cooperation required to pursue its investigation," said ISO President Steve Berberich in a prepared statement.
JPMorgan has denied wrongdoing and said it made "an inadvertent error" in its submissions to the agency.
In a prepared statement, JP Morgan told the Bee it promptly corrected its mistake and notified FERC of the problem. "Such an inadvertent error does not justify revoking JPMorgan's" license to trade in California," the bank said. The institution also demands the return of $20 million connected to the trades in question that ISO seized.
ISO officials disagreed with the warnings of some analysts that the California energy market was still vulnerable to widespread manipulation of the market like occurred in 2001 that led to billions in profits for traders and "rolling blackouts" throughout the state. The ISO said its probe shows it's more attune to market manipulation than it was in 2001.
Information from: The Sacramento Bee, http://www.sacbee.com