FERC vs. Powhatan Energy Fund, LLC

What do independent experts think?

Twelve independent experts reviewed the allegations. The video above describes the background of the investigation and the five videos below profile specific experts.  Position papers from the twelve experts are found elsewhere on this site.

Kevin and Rich Gates are both officers of Powhatan Energy Fund LLC’s managing member.

FERC opened an investigation into Powhatan Energy Fund LLC for market manipulation in August 2010. Powhatan tried to educate FERC’s Office of Enforcement about basic concepts of financial markets (e.g. spread trades, pricing signals, hedging risks, etc.) and legal tenets such as the constitutional right of due process. But FERC didn’t care. So, Powhatan sent them this letter and launched www.ferclitigation.com on March 1, 2014. Eventually, FERC sued Powhatan in the Eastern District of Virginia. While Powhatan toiled in court hoping to get justice, FERC threw up every road block possible to delay and drag things out. Their objective seemed to bleed Powhatan of its resources by making any argument, no matter how frivolous. Ultimately, Powhatan was forced to declare bankruptcy in February of 2022, about twelve years after FERC’s investigation began. During these twelve years, Powhatan spent millions of dollars in direct expenses, paid multiples higher in indirect expenses, and its principals worked countless unpaid hours. Yet, surprisingly, Powhatan was never even able to complete discovery. FERC’s malicious litigation tactics “worked” in as much as they never had to present their arguments to a jury.

In part because of the publicity generated from this website, Powhatan met many other market participants who got in the crosshairs of the FERC over the past decade. Unfortunately, Powhatan’s experience with FERC isn’t unique. There are many others who had their lives thrown into turmoil and their finances gutted by this out-of-control government agency. As a matter of fact, since the Federal Power Act was modified in 2005 to give FERC enforcement authority, FERC has never had a case adjudicated in court. In every single incident, FERC simply bullies and extorts its victims into settlements or pushes them into bankruptcy.

Why does FERC behave this way? It’s hard to know, but it’s widely accepted that the FERC is a highly political and influential agency.

It’s notable that when FERC initiated its investigation into Powhatan, Jon Wellinghoff was the Chairman of the Commission and Norman Bay (“Norm”) was the Director of Enforcement, a position he held because of Jon’s appointment. During his tenure as Director of Enforcement, Norm was involved in hiding exculpatory evidence from Powhatan and may have also been involved in inappropriately withholding documents responsive to a FOIA request. Jon pushed the Whitehouse to nominate Norm as the successor Chairman. Against the recommendation of Senator Lisa Murkowski, Norm was later appointed to be Chairman of the FERC.

While working at the FERC, Jon and Norm each did things that benefited SolarCity. Shortly after leaving FERC, Jon did things that threatened the integrity of the agency’s regulatory and enforcement work. After that, he leveraged his time at the FERC and went to work for SolarCity as its Chief Policy Advisor. In this role, he reported directly to Elon Musk’s cousin, Lyndon Rive. After leaving SolarCity, Jon later worked for a consulting firm that had Tesla as a client.

There is a lot of complicated information on this site. Here, we try to help you understand what’s being discussed.

Terms

City Power: A small business that did similar trades to the ones Alan Chen executed on behalf of Powhatan. FERC also accused it of market manipulation. The firm settled with the FERC. It is unaffiliated with Powhatan, Oceanside Power, and Coaltrain Energy.

Coaltrain Energy: A small business that did similar trades to the ones Alan Chen executed on behalf of Powhatan. FERC also accused it of market manipulation. The firm settled with the FERC. It is unaffiliated with Powhatan, Oceanside Power, and City Power.

Due Process:  The Fourteenth Amendment to the United States Constitution requires, in part, that laws give the person of ordinary intelligence a reasonable opportunity to know what is prohibited.  It incorporates notions of fair notice or warning and requires legislatures to set reasonably clear guidelines for law enforcement officials and triers of fact in order to prevent arbitrary and discriminatory enforcement.

FERC:  Federal Energy Regulatory Commission. The FERC describes itself as an independent agency that regulates the interstate transmission of electricity, natural gas and oil. It is part of the United States Department of Energy. The Commission is overseen by five commissioners who are appointed by the President of the United States with the advice of the United States Senate. Also known as “Commission.”

MLSA:  Marginal Loss Surplus Allocation. This is the disbursement of over-collected transmission line losses.  Also known as a “TLC.”  

Monkeys throwing darts: A somewhat casual way of saying or implying the word “random” or concept of “randomization.”

Oceanside Power, LLC: A small business that did similar trades to the ones Alan Chen executed on behalf of Powhatan. FERC also accused it of market manipulation. Oceanside Power settled with the FERC for these allegations. It is unaffiliated with Powhatan, Coaltrain Energy, and City Power.

Orwellian:  An adjective describing the situation, idea, or societal condition that George Orwell identified as being destructive to the welfare of a free and open society. It denotes an attitude and a brutal policy of draconian control by propaganda, surveillance, misinformation, denial of truth, and manipulation of the past.

PJM: PJM Interconnection LLC. It is a Regional Transmission Organization that coordinates the movement of wholesale electricity in the electrical grid serving all or parts of 13 states in the Northeast and the Midwest. PJM is one of seven federally regulated transmission organizations and is based in Valley Forge, Pennsylvania.

Powhatan Energy Fund LLC:  A small business that invested in the same markets as Oceanside Power, Coaltrain Energy, and City Power. When it was accused of market manipulation, it launched this website. It declared bankruptcy in February 2022 even though it never made it through discovery in court. Also known as “Powhatan.”

Prosecutorial misconduct:  It’s an illegal act or failing to act, on the part of a prosecutor. Bar organizations are supposed to hold prosecutors accountable when they commit it, but rarely do so.

Public corruption:  This is a breach of the public’s trust by government officials who use their public office to obtain personal gain. It is a violation of federal law for any federal, state, or local government official to ask for or receive anything of value in exchange for, or because of, any official act.

Scienter:  The United States Supreme Court defines scienter as a mental state embracing intent to deceive, manipulate or defraud.

Spread trade:  A generic term for a type of trading strategy commonly used by traders in securities, commodities, and derivative securities markets and widely recognized by regulators as a legitimate trading strategy.

TLC:  Transmission Loss Credit. This is the disbursement of over-collected transmission line losses. Also known as an “MLSA.”  

Transparency:  It is something that is honest, open, and not secretive. FERC’s Office of Enforcement has stated that they would like this characteristic to define the markets they regulate. This is one area of agreement Powhatan has with FERC and is the reason for this site.

UTC:  Up-to Congestion. A spread trading vehicle at PJM. It is described in the documents “Market Settlements“ and “Two Settlement – Virtual Bidding Transactions“ published by PJM.

Wash-like trades:  We are not sure. You better ask FERC OE what it means.

Wash Sale:  A transaction involving no change in beneficial ownership.

Individuals

Backfield, Samuel: He is an attorney with the FERC Office of Enforcement who worked alongside Steve Tabackman and Daniel Lloyd. He withdrew from the case in November 2019. Currently, he works on the staff of a FERC Commissioner.

Bay, Norman: We call him Norm but the Wall Street Journal called him “Harry Reid’s Personal Prosecutor.” He was the Director of Enforcement at FERC who oversaw the investigation of Powhatan. On July 15, 2014, he was confirmed by the Senate with a 52-45 vote to be a FERC Commissioner. According to RTO Insider, his last act as the Director of Enforcement at FERC was to charge Powhatan with market manipulation. While working at the FERC, he did things that helped SolarCity. He resigned prematurely as a Commissioner on February 3, 2017 leaving the FERC without a quorum of Commissioners. Bay works as a partner at Willkie Farr & Gallagher LLP. Mr. Bay also received an appointment at The Duke University Energy Initiative and Nicholas Institute for Environmental Policy Solutions and an advisory board position at Dartmouth’s Arthur L. Irving Institute for Energy & Society.

Bowring, Joe: His firm, Monitoring Analytics LLC, is the Independent Market Monitor for the PJM markets. He was appointed by PJM and approved by the FERC. He and his firm are responsible for monitoring compliance with the rules, standards, procedures and practices of the PJM markets. A recording of a very interesting phone call Dr. Bowring had with Coaltrain has been referenced in this case. Despite all these things, Dr. Bowring didn’t think he or his colleague should be deposed. You can read more about him on pages 13 and 14 of this document.

Brint, Juliana: She is an attorney who worked alongside John Estes at Skadden, Arps, Slate, Meagher & Flom LLP and represented Alan Chen, HEEP Fund, and CU Fund. She and John both now work at Jenner & Block LLP.

Canizares, Elizabeth: She was an attorney with the FERC Office of Enforcement who worked alongside Steve Tabackman and Sam Backfield. In November 2019, she left FERC to work for the Securities and Exchange Commission.

Chen, Alan:  He was an independent manager who Powhatan hired to advise and manage the fund. He obtained a Ph.D. in engineering in China in 1995 and moved to the United States to seek a better life for him and his family. In the following decade, he gained experience and developed knowledge about the electrical grid in the United States, with a particular expertise in the PJM market. Chen was pushed into settlement with FERC in November 2021, more than 11 years after the investigation was initiated, which was before he was able to depose any witnesses.

Danly, James: He was an attorney at Skadden, Arps, Slate, Meagher & Flom LLP who has represented Alan Chen, HEEP Fund, and CU Fund. He then became general counsel, Chairman, and Commissioner of FERC. He is now a partner at Skadden, Arps, Meagher & Flom LLP.

Estes, John: He is an attorney who worked alongside Julianna Brint at Skadden, Arps, Slate, Meagher & Flom LLP who represented Alan Chen, HEEP Fund, and CU Fund. Both he and Juliana are now at Jenner & Block LLP.

Gasteiger, Larry:  From August 2009 to August 2014, he was the Deputy Director of the Office of Enforcement and served under Mr. Norman Bay. When Mr. Bay become a Commissioner, he served as his Chief of Staff. After this site was made public, Mr. Gasteiger seemed to defend FERC’s Enforcement practices when he said “As we know transparency can be generally a good thing. Unless you’re the subject of the transparency and then it becomes an issue.” In 2016, Gasteiger left the Commission to join PSEG, a utility company. He subsequently left PSEG to work for WIRES as its Executive Director.

Gates, Kevin and Rich:  They are both officers of Powhatan Energy Fund LLC’s managing member. They are identical twins who obtained their Eagle Scout awards in 1986. In September 2021, they crafted this surreply which was submitted to the court in which they said they were “cynical.” They now manage money for investors in the wholesale power markets at Elmagin Capital LLC.

Hagan, Daniel: He is an attorney at White & Case who represented Powhatan near the onset of this investigation. Powhatan saved notes, invoices, and/or communications related to his work.

Hamal, Cliff: He was FERC’s “expert” who prepared this report that was filed with the court. Powhatan never got a chance to cross examine him on his “analysis”, which would have been great fun.

Lloyd, Daniel: He is an attorney with the FERC Office of Enforcement who worked alongside Steve Tabackman. In June 2023, he left FERC to work for the Securities and Exchange Commission.

Marcus, Jonathan:  He is an attorney who worked alongside John Estes and Julianna Brint at Skadden, Arps, Slate, Meagher & Flom LLP who represented Alan Chen, HEEP Fund, and CU Fund. He is now working as the General Counsel of the CME Group.

McSwain, William:  He was an attorney at Drinker Biddle & Reath LLP who represented Powhatan Energy Fund LLC until 2018 when he became the U.S. Attorney of the Eastern District of Pennsylvania. He now works at Duane Morris.

Minzner, Max: He was FERC’s general counsel under Norman Bay. After this site was public and received national media attention, he authored this post that supported FERC’s Enforcement practices. In January 2017, Norman Bay presented Mr. Minzner with a Chairman’s Medal. He eventually left the Commission and, after a stint at Arcadia, now works as Exelon’s Deputy General Counsel.

Olson, Tom: He is an attorney at FERC who has been involved in this case. Although it’s believed he no longer has a LinkedIn profile, he once used that social media site to describe himself as “tireless defender of the nation’s energy systems.” His communications with Steve Tabackman on personal gmail accounts in September 2021 received attention from many.

Owens, James: He is an attorney with the FERC Office of Enforcement who worked alongside Steve Tabackman. He left FERC in January 2017. During Trump’s administration, he worked at the Department of Transportation. He now works as Chief Legal and Policy Officer at Nuro.

Owings, Lisa: She is an attorney with the FERC Office of Enforcement. She worked alongside Steve Tabackman and Daniel Lloyd. In the summer of 2021, she left FERC and the energy industry and now works as an Associate General Counsel for Regulatory Compliance at Zoom.

Parkinson, Larry: He is an attorney who worked in the Office of Enforcement when Norman Bay was its director. When Mr. Bay became Chairman, Bay promoted Parkinson to become Director of Enforcement. He left FERC unceremoniously in early 2021.

Rosenblatt, Lauren:  She was an attorney with the FERC Office of Enforcement. Steve Tabackman reported to her. Around September 2014, she left the FERC to work as an attorney at NV Energy, a firm based in former Senator Harry Reid’s State of Nevada. She’s since left that job and currently works as Chief Operating Officer and General Counsel at Uplift Solar.

Slocum, Tyson: He is a Director of Public Citizen. On April 11, 2014, he said Powhatan was “disgraced.”

Spence, David: He is the Rex G. Baker Centennial Chair in Natural Resources Law at the University of Texas in Austin. In 2021, he published a piece in the Emory Law Journal that said “…the Powhatan attack on FERC echoes recent Republican critiques of delegation and the dangers of the ‘deep state’; like those critiques, it misapprehends the purpose, origins, and inevitability of the modern administrative state. The administrative state is both constitutional and inevitable.” Three years later, the SCOTUS both (a) overturned the Chevron doctrine and (b) limited the administrative state even further with the Jarkesy ruling.

Tabackman, Steve: He is the attorney who led the investigation of Powhatan for the FERC’s Office of Enforcement. In 2014, Pulitzer Prize-winning Joseph Rago mentioned Mr. Tabackman in his WSJ Op Ed titled ‘Investors at War with Political Power.’ In 2012, Mr. Tabackman fell asleep in a deposition when the investigation into Powhatan’s trading activity was not public. In October 2021, he withdrew from our case on the same day it became public that he sent an emails to Tom Olson via GMail that, in part, said “But you never heard that here”

Wellinghoff, Jon: He was chairman of the FERC from 2009 to 2013. While working at the FERC, he did things that helped SolarCity. During this time, he called FERC OE a “world-class enforcement office.” Shortly after this site launched, he told us to “shut up.”