February 23, 2017

Shaun Ledgerwood Featured in Risk.net article on FERC Manipulation Standards

Brattle Principal Shaun Ledgerwood has been featured in a Risk.net article that discusses the need for greater clarity around the U.S. Federal Energy Regulatory Commission’s (FERC) anti-manipulation standards.

Many lawyers and energy industry participants share a common belief that the FERC’s current anti-manipulation standards are so vague they could potentially swallow a large majority of market activity in the power and gas markets. The article points out that the FERC has tried to further explain their anti-manipulation standards by issuing a report on enforcement and two white papers: one on trading compliance practices and the other covering anti-market manipulation enforcement efforts. Though these documents have shed more light on manipulation issues, many believe the definitions of manipulation remain vague, despite attempts to define them into specific groupings.

One of the main criticisms has been the FERC’s activity labeling, as industry participants have struggled to understand their definition of terms such as “gaming” and “uneconomic,” and whether the activities are actually fraudulent. The article reviews several manipulation cases to explain how these labels have been used. Dr. Ledgerwood explains, “example-based enforcement can work if the benchmark again what we are measuring fraud stays consistent over time.” He also notes, “The problem that occurs is that if the definition of fraud becomes more stringent over time, then you lose that value of that precedent as being relevant to what the commission considers to be manipulation.”

The article concludes that energy market participants are not optimistic about the FERC’s attitude toward manipulation, noting that they will still have to be aware of the FERC’s flexible enforcement standards until the rules become more tangible.

“We need to try to come to some agreement as to the types of behavior that are manipulative and the types of behavior that are legitimate,” said Dr. Ledgerwood. “The more we can narrow the bridge between those extremes, the better off we are.”

The article, “FERC Manipulations Definitions Raise Compliance Fears: ‘Vague’ Anti-Manipulation Standards a Source of Frustration for Energy Firms,” is available on the Risk.net website.

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Dr. Ledgerwood is an expert in market competitiveness with an emphasis on the economic analysis of potential market manipulation claims in commodities and securities markets. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4