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04/24/2014

Lawsuit accuses Texas electricity company of market manipulation

GDF Suez, a Houston-based power generator with facilities around the state including in Wise and Ellis counties, has been accused of market manipulation by two electricity trading firms who say Suez's actions have cost them millions. The suit was filed Tuesday in Houston federal court by Aspire Commodities LP and Raiden Commodities LP. It follows reports last year by Platts, a specialty news publisher, that said GDF Suez's activities have become a concern to participants in the state's largest power market, the Electricity Reliability Council of Texas. GDF Suez said Thursday it had no comment on the suit as a pending legal matter.

According to the lawsuit, available here: Download GDF Suez suit, GDF Suez North America "intentionally withholds electricity generation during times of tight supply, for reasons not explained by rational notions of supply and demand, but to use its power in times of such tight supply to drive prices in the ERCOT Real Time market higher. GDF Suez then dumps its electricity at the artificially high price it created to make excessive, artificial profits not supported by genuine supply and demand." The suit also claims Suez has taken actions that have on occasion cost it millions in the ERCOT market "because it can make more elsewhere –- namely, by trading with inside, superior knowledge on commodities markets" through its own electricity trading operations. Barry Hammond, a Houston attorney representing Aspire and Raiden, said he expects during the discovery phase to "lay bare the trading strategies" by Suez companies.

Besides ERCOT's own rules, electricity traders are overseen by the Public Utility Commission of Texas. The agency has a provision, called the "small fish" rule, that exempts from market manipulation charges any generator with less than 5 percent of the state's power market. The lawsuit says Suez has just under 5 percent, and Aspire and Raiden also filed a petition with the PUC asking it to rescind the small fish rule. PUC spokesman Terry Hadley said the agency has 60 days to act on such a petition and has begun taking comments on the petition. He said it was the first such request he was aware of, adding that the small fish rule was last amended in 2006.

-- Jim Fuquay

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