Dallas, TX – On July 26, 2007, the U.S. Commodity Futures Trading Commission (CFTC) filed a complaint in the U.S. District Court for the Northern District of Texas against Energy Transfer Partners, L.P. (ETP) and three of its subsidiaries: Energy Transfer Company (ETC), Houston Pipeline Company (HPLC), and ETC Marketing, Ltd. The complaint alleges a scheme to manipulate the price of natural gas at the Houston Ship Channel (HSC) delivery hub during September and November 2005.
According to the CFTC, ETP and its subsidiaries attempted to manipulate the October 2005 and December 2005 HSC monthly index prices of natural gas as published by Platts in Inside FERC’s Gas Market Report. The agency alleges the defendants used Hurricane Rita as a pretext, exploiting the anticipated drop in demand as residents evacuated.
The CFTC’s complaint details a four-step plan allegedly devised by the defendants. First, they built a short position in the October 2005 HSC financial basis swap, profiting from a lower HSC index price. Second, they accumulated a large inventory of physical gas despite the lack of demand in Houston. Third, they sold a significant quantity of natural gas for October 2005 delivery at HSC. The intent, the CFTC argues, was to artificially influence the price.
Gregory Mocek, CFTC Director of Enforcement, stated that the defendants utilized multiple contracts and indices in their alleged manipulation attempt, but their efforts were detected. He emphasized that while commodity traders can manage price risk, they do not have the right to manipulate natural gas prices in interstate commerce. Mocek also noted that the Commission had filed 28 similar cases in energy markets over the preceding five years.
The CFTC is seeking permanent injunctive relief, civil penalties, and other appropriate remedies. The specific amount of penalties sought was not disclosed in the release. The case is being litigated in the U.S. District Court for the Northern District of Texas.
Source: CFTC.gov
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