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FERC’s Slap on Wrist for Barclays May Be Troubling Sign of Gutting of Agency Enforcement

Nov. 8, 2017

FERC’s Slap on Wrist for Barclays May Be Troubling Sign of Gutting of Agency Enforcement

Statement of Tyson Slocum, Director, Public Citizen’s Energy Program

Note: On Tuesday, the Federal Energy Regulatory Commission (FERC) slashed its assessed penalty on disgraced Wall Street energy trader Barclays for manipulating California’s electricity market from $435 million to $70 million. Barclays also must refund$35 million of ill-gotten gains. FERC’s enforcement staff, though, found that Barclays’ manipulation cost market participants and consumers much more than Barclays is paying.

FERC’s action is an outrage and sends a clear signal to market manipulators: Crime will now pay.

It would be one thing if this egregious settlement was happening in isolation. But when combined with the appointment of FERC’s new general counsel, James P. Danly – who was on the Skadden Arps legal team defending Dynegy in Public Citizen’s market manipulation case against Midcontinent Independent System (Docket EL15-70) – it appears FERC may be getting soft on rule-breakers.

And last month, Politico broke the news that Skadden partner John Shepherd Jr. will be FERC’s new enforcement chief. Mr. Shepherd co-authored a 2010 Energy Law Journal article with William Scherman attacking FERC’s aggressive enforcement under Norman Bay. Mr. Scherman later authored a Wall Street Journal op-ed attacking Norman Bay’s nomination to FERC chair.

Consumers have benefited from FERC’s aggressive enforcement of wrongdoers. The evisceration of the Barclays settlement, when combined with key staffing decisions at FERC, may signal that the days of tough enforcement on banks, hedge funds and other energy traders may be coming to an end. It has been years since the U.S. Congress held a full oversight hearing into FERC’s operations. That is needed now more than ever to ensure that consumers will be protected from market manipulators.