Oct 10 (Reuters) - U.S. federal energy regulators said on Thursday they filed a lawsuit in the U.S. Eastern District Court in California against British bank Barclays Plc to recover $435 million in civil penalties for alleged power market manipulation.
Although the U.S. Federal Energy Regulatory Commission (FERC) sought a jury trial, the regulator said the court can affirm the FERC's July 16 order assessing civil penalties against the bank and four former traders.
The FERC filing alleged that Barclays and its traders engaged in a "fraudulent scheme to manipulate electricity prices" in and around California between 2006 and 2008.
Basically, the FERC accused Barclays of losing money on physical power trades to benefit its financial positions.
In response to the lawsuit, Barclays said: "We strongly disagree with the allegations made by FERC against Barclays and its former traders in the FERC's petition, and we believe the penalty previously assessed by the FERC is without basis.
"We intend to vigorously defend this matter in federal court, where the FERC will have the burden of proving its allegations and we will be able to present a balanced and full presentation of the facts."
The FERC said its Office of Enforcement started investigating the bank's trading in 2007 following multiple calls to the Commission's Enforcement Hotline.
In October 2012, the FERC issued a so-called show cause order requiring the bank and traders to show why they should not be found to have violated the law and fined.
The bank and the traders elected in November 2012 not to have an administrative hearing at the FERC and instead chose to have the case heard in federal district court.
After waiting the legally required 60 days after the Commission affirmed the penalty against the bank in July 2013, the FERC filed the lawsuit in federal district court on Wednesday.
PAST FERC FINES
The FERC has issued over $1 billion in fines since the Energy Policy Act of 2005 significantly increased the penalty the commission can impose to $1 million per day per violation from the previous cap of $10,000 a day.
The FERC imposed the biggest fines on Barclays, JPMorgan Chase & Co Inc and Constellation Energy over allegations of power market manipulation. Energy trader Brian Hunter and BP Plc were fined over allegations of natural gas market manipulation, and Florida power companies fined over alleged violations of power reliability standards leading to a blackout.
Constellation is now a unit of Exelon Corp.
BP said it will defend the company against the FERC allegations.
Earlier in 2013, Hunter successfully defended himself against the FERC allegations in federal court. The U.S. Court of Appeals for the District of Columbia Circuit ruled that the Commodity Futures Trading Commission (CFTC) and not the FERC have the authority to fine him. The CFTC is expected to pursue a case against Hunter in federal court in November.