Texas power generator accused of electricity market manipulation

04/24/2014 7:45 PM

04/24/2014 7:46 PM

GDF Suez, a Houston-based power generator with facilities around the state including in Wise and Ellis counties, has been accused of market manipulation by two electricity trading firms, which say Suez’s actions have cost them millions.

The suit was filed Tuesday in federal court in Houston by Aspire Commodities LP and Raiden Commodities LP. It follows reports last year by Platts, an energy industry news service, that GDF Suez’s activities have become a concern to participants in the state’s largest power grid, the Electricity Reliability Council of Texas.

GDF Suez said Thursday it had no comment on the suit as a pending legal matter.

According to the lawsuit, GDF Suez North America “intentionally withholds electricity generation during times of tight supply, for reasons not explained by rational notions of supply and demand, but to use its power in times of such tight supply to drive prices in the ERCOT Real Time market higher. GDF Suez then dumps its electricity at the artificially high price it created to make excessive, artificial profits not supported by genuine supply and demand.”

The suit claims Suez also has taken actions that on occasion have cost it millions in the ERCOT market “because it can make more elsewhere — namely, by trading with inside, superior knowledge on commodities markets” through its own electricity trading operations.

Barry Hammond, a Houston attorney representing Aspire and Raiden, said he expects during the discovery phase to “lay bare the trading strategies” by Suez companies. He said a hearing on the suit is set for August.

Besides ERCOT’s own rules, electricity traders are overseen by the Public Utility Commission of Texas. The agency has a provision, called the “small fish swim free” rule, that exempts from market manipulation charges any generator with less than 5 percent of the state’s power market.

The lawsuit says Suez has just under 5 percent of that market. In 2012 and 2013, Suez agreed to a PUC “voluntary mitigation plan” that established that Suez would not exceed 5 percent of ERCOT capacity and thus would qualify as a small fish. The 2013 agreement put its capacity at 3,957 megawatts, or 4.85 percent of ERCOT supply.

The PUC has taken enforcement actions against larger generators, including Dallas-based Luminant, in the past.

In a separate action, Aspire Commodities and Raiden Commodities filed a petition with the PUC asking it to rescind the “small fish” rule.

PUC spokesman Terry Hadley said the agency has 60 days to act on such a petition and has begun accepting comments on the request. He said it was the first such request he was aware of, adding that the small fish rule was last amended in 2006.

In November, Platts reported that ERCOT’s own market monitor last year issued a report that concluded that a “small fish” generator “could exert its power to affect prices.” It said a number of ERCOT market participants backed changes to the rule.

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