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FERC OE uses IMs as evidence against City Power

Founder Tsingas accused of gaming market, lying

Rockville, MD (March 17, 2015) -- FERC issued an order to show cause recently against City Power and its founder Konstantinos "Stephen" Tsingas seeking an answer to why they should not be fined a combined $15 million for allegedly manipulating up-to-congestion transactions in PJM. The trades covered the same period as the Powhatan Energy Fund case, though City and Tsingas collected less money from marginal-loss surplus allocation payments.

If FERC agrees with its Office of Enforcement (OE) staff, it will also seek to disgorge $1,278,358 in allegedly unjust profits.

The case not only includes the trades, some of which were the same kind of round-trip deals that cancelled each other out as Powhatan is alleged to have entered into, but also making false statements to FERC investigators.

Tsingas traded up-to congestion deals for years but once FERC changed the rules, following a complaint from trading firms, to allocate the line loss payments he started to chase them, OE's report attached to the order said. Some of those were "round-trip" trades that canceled each other out, but others were near-zero trades which OE alleged were an attempt to make his intent less obvious.

Once those trades started to work, Tsingas ramped up the trading and by the end of July 2010 he had brought in over $2 million from the allocations, which represented nearly $1.3 million in profit once transaction costs were netted out, the order alleged. The deals cut payments for other firms "dollar for dollar" including to "utilities that deliver electricity to consumers," OE said.

OE started to probe the matter as PJM changed its rules at the end of that summer, so up-to congestion deals would no longer get the allocations for line loss.

When staff approached Tsingas, he denied under oath than any saved instant messages (IMs) between him and his partner existed, even though he allegedly knew that they did.

His partner at the time, Tim Jurco, lived in Kansas while Tsingas was in Fort Lauderdale, Fla. They discussed business over IM and the OE report alleged Tsingas knew Jurco had passed their logs along to their firm's lawyer.

Tsingas made "false statements during 2010 and 2011" about the IMs, which OE learned about in 2012. Staff's report included an exchange from August 2010 where Jurco talked about the saved messages and their content with Tisngas.

The main purpose of up-to congestion trades and other financial products is to help drive convergence in prices by showing where the grid is not working efficiently. But once FERC change the rules so that the trades started getting a share of surplus line loss collections, OE alleged City Power started to do "volume trading," where the goal was not aimed at profiting by arbitraging price spreads but by ensuring the differences between trades were zero or close to that.

Jurco captured the alleged essence of the new trading strategy in an IM from July 2010 that OE quoted: "It isn't trading – it's playing the rules."

Tsingas and Jurco sent IM messages in June 2010 about another, unnamed, firm that was engaged in large transmission reservations on PJM's OASIS system. At the end of the month, they guessed that firm might be seeking to get marginal loss surplus allocation payments, OE said.

The large reservations were happening at peak hours and line losses are more likely to occur then because more electrons essentially fall off the power lines when they are near their capacity. In early July, Tsingas and Jurco surmised the firm was likely entering into deals that went in opposite directions, thus cancelling each other out, to collect the payments.

Staff alleged City Power entered into round trip trades between six different pairs of nodes, which earned it a net profit of $455,730 for the month of July.

Low volatility needed

The OE report also alleged trades between two other nodes, which were not round trip but Tsingas allegedly found to have zero price difference and thus were ramped up to collect the payments. That path, which was the least volatile in PJM, earned the firm $106,401 and Tsingas told Jurco in an IM that it "feels sleazy," OE said.

Jurco argued that the trades could prove "great ammo" for PJM's Independent Market Monitor Joseph Bowring. But Tsingas said "that's OK, as long as we get paid."

They backed off the trades that had them worried, but entered into others that collected the payments and entered into lower volumes than the unnamed firm so that they could "stay below the radar," as Tsingas said in an IM.

Tool developed to help

City Power then focused on the second-least volatile path in PJM, which Tsingas discovered using a "low volatility tool" he developed using MicroSoft Xcel, OE alleged.

The main purpose of up-to congestion is to make money from large price spreads, but the tool made sense since City Power was trying to eliminate difference and collect the payments on sheer transaction volume, it added. Volatility meant possible negative spreads, which could cut or eliminate profits from the payments.

That second-least volatile path, netted City Power $716,227 during the month of July, OE said.

The IMs that OE quoted later in the month included Tsingas calling an unnamed competitor engaged in the trades "pigs" and "disgusting." Eventually Jurco started to voice objections to the strategy, saying "it isn't trading, it's playing the rules."

After Bowring and PJM worked to shut down the payments to up-to congestion trades and the case got to FERC, City Power signed onto a filing with eight other virtual trading firms at FERC decrying the activity OE now alleges it engaged in.

In the case, City Power and the other firms said the rule changes would "remedy certain unpermitted trading patterns," OE quoted.

This story was originally published in Utility Markets Today ( on March 10, 2015 and has been slightly edited for this format. To read more articles like this one, sign up for a Free Trial to Utility Markets Today.


UTILITY MARKETS TODAY is published 245 times per year on business days by Modern Markets Intelligence, Inc. UMT's mission is to deliver exclusive news chronicling ongoing efforts to open competitive wholesale and retail energy markets with in-depth analysis on why some fail and others succeed.


James Downing
Editor, Utility Markets Today
Modern Markets Intelligence, Inc.

Season Crawford
VP of Marketing
Modern Markets Intelligence, Inc.


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