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GDF Suez Wants Texas Power Lawsuit Dismissed

Posted by June 24, 2014

A U.S. subsidiary of French energy firm GDF Suez SA is being sued by two energy firms alleging GDF Suez manipulated the Texas power market, costing the firms more than $20 million in losses.

GDF Suez Energy North America, Inc. said in a court filing on Monday that it is seeking dismissal of the lawsuit.

In addition, the U.S. Commodity Futures Trading Commission has been investigating GDF Suez's conduct in the Texas power market since at least late 2013, according to trade publication Energy Risk.

Officials at GDF Suez did not immediately return calls seeking comment. The CFTC declined to comment.

Government regulators have aggressively investigated energy marketers for alleged market manipulation since the collapse of Enron after the California energy crisis in 2000-2001.

In recent years, the CFTC or the U.S. Federal Energy Regulatory Commission have sought millions of dollars in fines from banks like Barclays PLC and JPMorgan Chase & Co , oil companies like BP PLC and traders for allegedly manipulating power or natural gas markets.

GDF Suez owns natural gas- and coal-fired power plants in Texas with generation capacity totaling roughly 4,000 megawatts.

In April, Aspire Commodities LP and Raiden Commodities LP filed a complaint seeking damages and injunctive relief against GDF Suez in the United States District Court of the Southern District of Texas Houston Division.

Aspire said it has lost about $20 million over the last two years as a result of GDF Suez's activities. Raiden said it has lost "significant amounts."

The plaintiffs accuse GDF Suez of "intentionally withholding electric generation during times of tight supply to drive prices in the ERCOT (Electric Reliability Council of Texas) real-time power market higher." ERCOT operates the power grid for much of Texas.

The plaintiffs said GDF Suez then "dumps its power at the artificially high prices it created to make excessive, artificial profits."

In its June 23 response to the lawsuit, GDF Suez said its conduct was in "complete conformity with ERCOT rules and was expressly authorized by the (Public utilities Commission of Texas)."

Aspire and Raiden said GDF Suez's alleged withholding of power created "artificially high prices on commodities markets such as the IntercontinentalExchange (ICE)."

The CFTC regulates commodity markets like ICE.

Aspire and Raiden said one reason GDF Suez withheld selling energy in the ERCOT market is "because it can make more elsewhere by trading with inside knowledge on commodities markets like ICE."

GDF Suez, however, noted in its response that the plaintiffs do not know if it had ICE or other contracts that could have benefited from any withholding of power in ERCOT.

GDF Suez said it is a so-called "small fish" in ERCOT, with less than 5 percent of installed generating capacity and therefore under ERCOT rules "cannot affect prices through its supply or withholding of energy."

The CFTC probe is led by attorneys from the CFTC's Chicago office, according to Energy Risk, which cited people familiar with the situation.

(Reporting by Scott DiSavino; Additional reporting by Douwe Miedema; Editing by Dan Grebler)

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