U.S. FERC Chief to Leave After Replacement Is Confirmed

Jon Wellinghoff, who as chairman of the Federal Energy Regulatory Commission led a crackdown on U.S. banks over alleged manipulation of energy markets, says he is quitting.

Wellinghoff submitted his resignation to President Barack Obama, who asked him to stay until a new commissioner is confirmed by the Senate, Mary O’Driscoll, a spokeswoman for the agency, said today in an interview. His term expires June 30.

“Under Chairman Wellinghoff’s leadership, FERC launched important investigations to protect consumers against traders and financial firms who manipulated energy markets,” Senator Ron Wyden, chairman of the Energy and Natural Resources Committee, said in a statement. Wyden, an Oregon Democrat, also credited Wellinghoff with promoting renewable energy.

The FERC chairman hasn’t given a reason for his departure and hasn’t made any public announcements about the next stage in his career, O’Driscoll said. He turns 64 tomorrow.

Under Wellinghoff, the commission began investigations of possible energy-market manipulation by companies including Barclays Plc (BARC), Deutsche Bank AG (DBK) and JPMorgan Chase & Co. (JPM), promoted incentives to build power lines and stepped up oversight of electric-grid reliability. He was appointed to the FERC in 2006 and Obama named him chairman in March 2009.

Expanded Powers

Congress in 2005 gave the regulator additional powers to police energy markets, including the ability to fine those who jeopardize grid reliability as much as $1 million per violation per day. The agency under Wellinghoff has expanded its office of enforcement to about 200 people whose tasks include policing markets for manipulation.

Since January 2011, the FERC has disclosed 13 investigations of alleged market gaming, including probes of traders for Barclays of London, JPMorgan of New York and Frankfurt-based Deutsche Bank. While the cases against the banks drew attention, Wellinghoff has said the agency isn’t singling out Wall Street in its oversight.

“We’re in full enforcement mode,” he said in November during an interview with reporters and editors at Bloomberg’s Washington office. “We’re not at war with anybody. We’re simply trying to ensure that these markets are operating in a full and fair manner.”

Record Fines

The agency has proposed a record $488 million in penalties against Barclays and four former traders for allegedly gaming U.S. power markets from late 2006 to 2008. Its investigation of possible market violations by a JPMorgan energy trading unit is pending. In both cases, the banks denied wrongdoing, and Barclays has vowed to challenge any penalties in court.

The agency has settled cases with some companies. Deutsche Bank in January agreed to pay $1.6 million to end a dispute with the FERC, backing down from a showdown over the agency’s charge that its traders manipulated California’s markets in early 2010.

The FERC in March 2012 reached a record $245 million settlement with Constellation Energy Group Inc. over alleged energy trading violations in New York. Neither Constellation nor Deutsche Bank admitted wrongdoing.

Wellinghoff has overseen the U.S. electric grid that is increasingly relying on cheaper natural gas and abandoning coal-fired generating plants. The agency also is adopting protections amid growing risks of cyber attacks against utility networks.

Cyberthreats Mounting

“The number of threats seems to be increasing,” he told reporters in April, referring to potential cyber attacks by groups from individuals to nation-states. Last year, the FERC created an office to oversee infrastructure security.

Before being nominated to the FERC, Wellinghoff worked as an energy attorney in Nevada, serving as the state’s first consumer advocate for utility customers. He was the main author of a Nevada law to encourage the use of renewable energy, according to the FERC’s website.

At the U.S. agency, Wellinghoff pushed for “demand response” technologies, which encourage consumers to cut energy use when supplies are limited. While chairman, the regulator approved a major rule to encourage investment in high-voltage power lines.

Wellinghoff led conversations to ease differences between regional and national regulators on various issues, Philip Jones, president of the National Association of Regulatory Utility Commissioners, said in a statement.

“Although we have had our disagreements, as there is always a natural tension between state and federal governments, we utilized our collaborative dialogues to maintain a positive relationship,” he said.

To contact the reporters on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net; Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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