Gates therefore said he stands by his earlier statement that FERC created a market "where a monkey could have made money that summer" by randomly picking nodes, MWs, congestion caps and hours. "We now have the data and I intend to prove it empirically," Gates added. "Once I'm done with the analysis, I intend to create an animated monkey to put on my website to present the results of my work and help explain the market that FERC created."
And, speaking of perspective, that SNL Financial article puts some of FERC's "evidence" against Gates into perspective.
For instance, staff said Chen and Powhatan's investors, including Gates, should have known that it was improper for Chen to submit trades in PJM's up-to congestion, or UTC, market on the funds' behalf just to maximize the rebates PJM gives market participants that use its transmission lines when it collects excess line-loss payments.
Staff further alleged that Gates and Chen suspected as much, citing an email exchange between the two parties suggesting that they "contact a law firm, the FERC, or PJM to try to get more insight into this issue." They never did, however, but instead decided to have Chen ramp up the trading activity, staff asserted.
Gates told SNL Energy that the problem with most of the emails and other information cited by staff to support its case is that they were taken out of context.
For instance, when asked if he indeed suspected that the types of trades in which Chen was engaging might be improper and why he did not seek advice on the issue, Gates recalled that the email exchange regarding the potential need for guidance took place in March 2010 and Chen did not begin trading in an allegedly illegal manner until the following June.
“The timing and the content of the email shows we weren't talking about Alan's trading at all — it was about the rebates themselves. We were concerned that FERC would try to retroactively take them back — not just for us, but for everyone," Gates said. He insisted that he never thought Chen's trading would be considered illegal.
Gates further explained that he did not contact an energy attorney at that time because he thought the possibility that FERC might punish market participants retroactively for flaws in existing rules was "preposterous when those rules were clearly approved." He also thought that while an attorney could quantify the risk or the likelihood that FERC may do so, contacting one would do nothing to protect him from that risk.
According to Gates, his decision not to seek legal advice at that time was the right one. He noted that after FERC in July 2011 tried to retroactively "claw-back those rebates" by ordering virtual (financial) traders such as Powhatan to return the previously refunded amounts, a federal appeals court in August 2013 remanded that decision, finding that the agency failed to justify its mandate. Moreover, Gates stressed that FERC staff has not alleged that any of Chen's trading activities prior to June 2010 were improper.
Personally, I'm looking forward to the animated monkey! I hope it's an evil monkey! They're ever so much more fun!