Barclays fined $453 mn for fudging US electricity markets

A US regulator yesterday slapped a fine totaling $453 million on Barclays Bank and four of its traders for manipulating electric energy prices.

The Federal Energy Regulatory Commission (FERC) ordered Barclays and its traders to pay $453 to the US Treasury within 30 days for manipulating electric energy prices in California and other western markets between November 2006 and December 2008.

FERC also ordered Barclays to give up $34.9 million, plus interest, in unjust profits and distribute the money to help low-income homeowners pay energy bills in Arizona, California, Oregon, and Washington.

The fine is the biggest penalty ever levied by the FERC, and would exceed the fine Barclays paid over the Libor bid-rigging scandal.

The London-based bank was fined a record £290 million in August by the US and British regulators for manipulating the Libor benchmark interest rate.

The FERC alleged that Barclays manipulated physical electricity prices at a loss in order to make profits in related positions in the swaps market

The FERC said that messages sent between the four Barclays traders - Daniel Brin, Scott Connelly, Karen Levine, and Ryan Smith - reveal that  they deliberately sold positions in electricity at a loss to drive prices down, while other traders in the bank betted on falling prices to make huge profits for the bank.

The massive bets were made on future electricity prices in California, Arizona and the District of Columbia through complicated financial instruments.

The most damaging evidence against the bank is that the four traders ignored warnings from a Barclays executive, who told the FERC he had advised employees against losing "money on a transaction for the intention of making money on another transaction."

Barclays said in a statement, that it has done no wrong, which means that it will have to move the federal district court to squash the FERC order.

''We believe that our trading was legitimate and in compliance with applicable law,'' Barclays spokesman Marc Hazelton said today in a statement. ''We intend to vigorously defend this matter.''