JP Morgan banned from trading electricity in the US

JP Morgan has been banned from trading electricity in the US after a regulator accused the bank of making "egregious" misrepresentations during an investigation into alleged market maniplation.

People pass a sign for JPMorgan Chase & Co. at it's headquarters in Manhattan on October 2, 2012 in New York City
The punishment handed down to JP Morgan relates to a dispute that began in 2011 Credit: Photo: Getty Images

The six-month ban imposed by the Federal Energy Regulatory Commission (FERC) is the latest sign that US authorities are stepping up their policing of the country's vast energy market. Last month, it proposed Barclays be fined $435m (£274m) for allegedly manipulating electricity prices.

The punishment handed down to JP Morgan relates to a dispute that began in 2011, when the state operator of the power grid in California asked the bank for documents during an investigation into alleged price manipulation in the wider market.

The California Independent System Operator (CAISO) fined the bank $486,000 in February for failing to submit the documents, a fine that JPMorgan asked FERC to overturn because it claims it was not required to produce the documents.

Although JP Morgan withdrew its appeal in June, FERC this week imposed the ban because of the "egregious nature of JP Morgan's repeated submission of false and misleading statements", to CAISO that it found during its own investigation.

Energy experts said that it is the first time that a major company has been suspended from the energy markets since the Enron scandal in 2001. FERC was equipped with new powers after Enron, once the world's largest energy trader, was found guilty of accounting fraud.

JP Morgan said that the suspension is "unsupported by FERC's own regulations, particularly given that the issue in this proceeding was not JP Morgan's conduct in the market, but rather a dispute over document productions". The bank said it is reviewing its options.

When the ban starts in April, JP Morgan will still be able to trade electricity and meet current obligations it has in the market but will not be allowed to make any money from it.

The ban is a further blow to JP Morgan, whose reputation was hit in May when chief executive Jamie Dimon disclosed the bank had run up a $6bn trading loss in the derivatives market.