I stumbled across this the other day -- the Federal Energy Regulatory Commission's (FERC) Notices of Alleged Violations page. It reads like a Who's Who of international finance (and Big Carbon).
There's a fun one involving Barclays [PDF], right at the top:
Staff alleges that Barclays Bank PLC and the individual traders (collectively Barclays) each violated 18 CFR 1c.2 (2011) by engaging in a coordinated scheme during certain months in the period November 2006 to December 2008 by trading day-ahead fixed-price physical electricity at the locations of MidColumbia, Palo Verde, South Path 15 and North Path 15 to benefit Barclays’ Intercontinental Exchange (ICE) fixed-for-floating financial swap positions in those markets. Specifically, staff alleges that Barclays assembled substantial physical positions in the opposite direction of Barclays’ fixed-for-floating financial swap positions and that Barclays flattened those physical positions in the next-day fixed-price physical markets to move the ICE daily index settlement up if buying and down if selling.
I think that means they were gaming the Northwest, Southwest, and California energy markets to influence the rates on the interest rate trades ("swaps") they buy and sell on ICE (a commodity market for energy which also sells financial products related to energy (options, derivatives, etc)).
That other (former) paragon of International Finance virtue known as JPMorgan got its derivative caught in the energy market zipper recently, too:
In simplest terms, JPMorgan submitted bids in the day-ahead market that were so low the firm was certain to be accepted onto ISO's roster of potential electricity suppliers — in fact, they were negative bids, essentially offering to pay ISO to take their electricity. The bidding is overseen by software, not human beings, and the automated program isn't smart enough to distinguish a real bid from a potentially fake one. (Implausible as it may seem, there can be legitimate reasons for a power generator to submit a negative bid, but they don't apply to JPMorgan.) ISO believes that JPMorgan never intended to make that sale, but the beauty of its low bids was that they made it eligible to collect bid cost recovery payments.
The next step was for JPMorgan to make sure that ISO didn't actually buy its electricity, presumably because the profit margin from the bid cost recovery claim was greater than from actually selling energy. So in the real-time market, it priced its electricity so high that ISO wouldn't buy it.
The bottom line, the ISO says, is that JPMorgan's traders never intended to sell it electricity via these bids. The scheme, it says, seems to have been designed purely to capture a bid cost recovery payment the bank didn't deserve, at a rate that was inflated anyway.
Someone with a little gumption and the ability to decipher regulatory filings would likely find all sorts of crafty dodges and siphons concocted by our titans of finance.
And maybe share them in comments.