By Rich Heidorn Jr.

WASHINGTON — The Federal Energy Regulatory Commission has opened three investigations into questionable activity from last winter but has not found evidence that “widespread or sustained market manipulation” contributed to high natural gas and power prices.

Staffers from FERC’s Office of Enforcement (OE) announced the probes at the commission’s monthly meeting Thursday.

One of the investigations focuses on an allegation that a market participant attempted to suppress a monthly natural gas index to benefit short financial derivative positions.

The other two probes are seeking to determine whether generators may have profiteered “through offer behavior that resulted in increased uplift payments,” FERC said. All three investigations are at an “early stage,” FERC said.

Screens Tripped

OE’s Division of Analytics and Surveillance conducts regular monitoring of the natural gas and electric markets, including automated screens to detect anomalous trading activity that may indicate market manipulation.

To determine the causes of the extreme price spikes in January, OE supplemented its screenings with interviews with market participants and analyses of non-public market data from RTOs and ISOs, including physical and virtual bids and offers, market awards, marginal cost estimates and uplift payments. Staff compared the physical trading with financial derivative positions, using its newly granted access to the Commodity Future Trading Commission’s Large Trader Database. OE’s Division of Energy Market Oversight and Division of Investigations also took part.

The focus included the gas price spikes at the Transco New York trading hub, where prices rose to $120/MMBtu on Jan. 22, as well as the $40 price at the Chicago trading hub in late January.

Alerts from the commission’s natural gas surveillance screens resulted in conference calls with companies to obtain explanations for their physical trading and financial positions. “With one exception, which has resulted in an ongoing investigation, staff concluded that the companies contacted had valid explanations for their trading,” staff said in a presentation to the commissioners.

The consensus among those interviewed was that the high gas prices resulted from the “extreme and universal nature of the cold weather,” staff said.

“Also, market participants reported that less hedging of natural gas at the first of month price had occurred in light of certain additions of new delivery capacity into the New York area and forecasts of warmer weather than actually occurred,” staff continued. “The reduced hedges left many entities exposed to very volatile daily prices that occurred during January and February and may have increased price volatility as entities covered short positions. The depletion of natural gas storage was also a factor. Market psychology was also important as the price spikes were unprecedented. For example, market participants feared significant price premiums and lack of adequate counterparties.”

Gas demand was increased by conservative operator actions resulting from the mismatch between gas and electric operations, such as PJM’s decision to commit some gas generators over the Martin Luther King Jr. holiday weekend to ensure their availability the following Tuesday.

Because of the high level of generator outages, OE also searched for patterns of outages across generator fleets and conducted discussions with RTO market monitors to identify potential economic withholding.

Staff also investigated allegations of improper behavior it received through the enforcement hotline but determined that none of the allegations had merit.