Pennsylvania-based Coaltrain Energy has agreed to pay $4 million in disgorged profits to resolve a FERC investigation into accusations that the company engaged in market manipulation in the course of its up-to-congestion transaction (UTC) trading in 2010.

In its order approving the stipulation and consent agreement issued Oct. 11, FERC said the company “had engaged in market manipulation by placing UTC trades for the sole or primary purpose of collecting marginal loss surplus allocation (MLSA) payments, rather than to profit from price changes.” Under the agreement, Coaltrain neither admits nor denies the alleged violations (IN16-4).

In a 2016 Order to Show Cause, FERC alleged that in 2010, the company shifted from legitimate UTC trading — in which companies aim to predict the changes in spreads between PJM’s real-time and day-ahead markets — to profiting off PJM’s MLSA alone by minimizing the UTC price spreads and collecting refunds of a portion of the transmission loss charges from PJM. (See FERC: Spy Software Provides Evidence of UTC Scam.)

MLSA is designed to account for the loss of electricity as it is transmitted between its source and sink; traders receive rebates proportionate to megawatts delivered. FERC alleged that Coaltrain made trades between nodes in both directions to simply collect the rebates.

The agreement marks the last of three investigations FERC launched over allegedly manipulative UTC trading in PJM. In each case the commission said traders used risk-free strategies designed to maximize line-loss rebates from MLSA, instead of trying to predict price spreads between the RTO’s day-ahead and real-time markets. (See Trader Agrees to Pay $2.7M in Win for FERC and Powhatan Energy to Declare Bankruptcy.)

FERC also accused Coaltrain of providing “false and misleading statements to [FERC Office of] Enforcement staff about the existence of records created by employee monitoring software.”

That charge stems from investigators learning of employee-monitoring software that captured evidence of trading and messaging, which was provided by a former Coaltrain employee. FERC claims that the company concealed information about the software and did not make access readily available; the company had said in its March 2016 response to the show-cause order that it hadn’t occurred to staff that the software contained information relevant to the investigation. (See Traders Deny FERC Charges; Seek Independent Review.)

In addition to Coaltrain itself, the agreement also lists co-owners Peter Jones and Shawn Sheehan and traders Robert Jones, Jeff Miller and Jack Wells as defendants in the case. In the show-cause order, FERC had previously sought more than $42 million in civil penalties from the company and individual defendants.

The fine is to be split into five disgorgement payments to PJM over the same number of years, which the RTO will distribute to its members in a manner to be approved by the commission. Should the provisions be abided by, the agreement will end a 2016 lawsuit FERC filed against Coaltrain in the U.S. District Court for Southern Ohio.

The agreement notes that while FERC’s investigation into Coaltrain will cease, there could be additional sanctions still to come.

“Coaltrain acknowledges and agrees that this may subject it to additional action under the enforcement provisions of the FPA, which in turn may result in additional sanctions separate and apart from the $4,000,000 restitution payment required to be made by Coaltrain pursuant to this agreement.”