By Nicole Friedman
Louis Dreyfus Energy Services LP has agreed to pay $7.8 million
in penalties in connection with a Federal Energy Regulatory
Commission investigation into alleged market manipulation between
November 2009 and February 2010, the commission said Friday.
The company didn't admit or deny any violations.
Louis Dreyfus Energy Services has agreed to pay $3.7 million to
the Midcontinent Independent System Operator, which operates the
power grid in the Midwest, and $4.1 million to the U.S. Department
of Treasury, the commission said. A trader, Xu Cheng, will pay the
Treasury Department $310,000, the commission said.
The commission's enforcement office said it found that Louis
Dreyfus Energy Services "inflated the value" of financial
instruments it had purchased to protect against fluctuations in
power prices through virtual trades it placed with the power-grid
operator in North Dakota. "This conduct manipulated the MISO
market," according to the order issued Friday.
Louis Dreyfus Energy Services was a subsidiary of Louis Dreyfus
Highbridge Energy LLC at the time. Louis Dreyfus Highbridge Energy
was jointly owned by global commodities firm Louis Dreyfus Holding
BV and J.P. Morgan Chase & Co.-owned hedge fund Highbridge
Capital Management LLC. Louis Dreyfus Highbridge Energy was
purchased in 2012 by DF Energy Acquisition LLC and renamed
Castleton Commodities International LLC.
Castleton didn't immediately respond to a request for
comment.
Louis Dreyfus Energy Services has no history of violations,
according to the order, and agreed to stricter compliance measures
and monitoring.
FERC has broadly cracked down on market manipulation in recent
years. J.P. Morgan Chase & Co. agreed in July to pay $410
million to settle accusations that it manipulated electricity
prices between 2010 and 2012.
Write to Nicole Friedman at nicole.friedman@wsj.com
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