By Michael Brooks

Twin Cities Power will pay $2.5 million in penalties and disgorge almost $1 million in profits for manipulating energy prices in MISO under a settlement approved by the Federal Energy Regulatory Commission last week (IN12-2).

Twin Cities admitted the violations, while the three traders accused in the case neither admitted nor denied wrongdoing, FERC said. Traders Jason Vaccaro, Allan Cho and Gaurav Sharma did agree to pay civil penalties of $400,000, $275,000 and $75,000 respectively. They also agreed to bans from energy trading: Vaccaro for five years, and Cho and Sharma for four years each.

FERC said that while Twin Cities traded and scheduled power in MISO, it also traded financial products on Intercontinental Exchange, including the MISO Cinergy Hub Balance-of-Day Swap (Bal-Day-Cin).

“Twin Cities engaged in a consistent pattern of flowing physical power in the direction of its financial swaps. Twin Cities imported power into MISO when it held a short swap position, or exported power from MISO when it held a long swap position,” FERC said. “Moreover, Twin Cities’ financial positions were larger than its physical positions, such that the increase in the value of Twin Cities’ swaps exceeded the losses from its physical flows.” This showed that Twin Cities was moving energy prices to benefit their swaps, FERC said.

The three traders worked for Twin Cities Power Canada, a Twin Cities subsidiary in Calgary that ended operations in September 2012. At first, the company’s only employees were Cho as president and Vaccaro as vice president. At the time of the violations, the company employed 11 traders, including Sharma. On Feb. 1, 2011, several months prior to FERC’s investigation, Cho, Vaccaro and Sharma were fired.

The penalty is higher than most FERC approved in fiscal year 2014. It is the second penalty approved in fiscal year 2015, after CAISO agreed to pay $2 million for reliability violations related to the 2011 Southwest blackout.