Morgan Stanley agreed to pay $857,089 to settle accusations that it violated trading rules during the California energy crisis, trial lawyers with the Federal Energy Regulatory Commission said on Tuesday.
THE SETTLEMENT, in which Morgan Stanley does not admit any wrongdoing, must be approved by FERC commissioners.
In June, FERC ordered 43 companies to “show cause” why they did not violate trading rules during the state’s energy crisis, and Tuesday is the deadline for the companies to submit responses to the order.
A half-dozen other companies and municipalities last week settled similar cases with FERC.
FERC’s June order accused Morgan Stanley of several Enron-style trading strategies, including an arrangement with Public Service Co. of New Mexico to help inflate wholesale electricity prices. Morgan Stanley said the agreements with that company were used to wheel power from the Southwest to the Pacific Northwest.
The $857,089 payment offered by Morgan Stanley consists of $633,415 in revenues for “cutting non-firm schedules,” according to a settlement document filed by FERC trial lawyers. The remaining $223,674 is revenue attributable to “circular schedules,” FERC attorneys said.
The settlement was reached “in recognition of the burdens, costs and uncertainty associated with the litigation process,” FERC lawyers said.
Separately, FERC trial staff on Friday recommended the agency drop a similar case involving Enron-style trading against the Bonneville Power Administration. Bonneville is the giant federal agency that sells electricity from government-owned hydroelectric dams in the Pacific Northwest.
Cases that are not settled by Nov. 3 will proceed to formal hearings before a FERC administrative law judge.
The cases are pending in docket EL03-137.
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