State electricity officials leveled a startling new accusation Thursday at JPMorgan & Chase Co., saying the investment bank is stonewalling a power-plant renovation that could be needed to keep the lights on in Southern California.
The California Independent System Operator's allegations open a new front in the state's battle with the Wall Street titan. The ISO, which runs the state's transmission grid, is already pressing claims that JPMorgan's electricity traders used questionable tactics to wring an extra $73 million in profit out of the state's power market.
In the latest charge, filed with the Federal Energy Regulatory Commission, the ISO said JPMorgan is standing in the way of a plan to overhaul a pair of generating units in Huntington Beach.
Because of a marketing contract, JPMorgan can veto the project and is refusing to budge, the ISO said.
As a result, "the reliability of service in Southern California is in great jeopardy," the ISO said in its filing with FERC. The ISO asked FERC to override JPMorgan's contract rights so the project can get done.
It wasn't clear if this latest controversy is connected to the probe of JPMorgan's electricity-trading methods. The ISO didn't say why it thinks JPMorgan is blocking the makeover of the Huntington Beach plants.
In an emailed response to a request for comment, JPMorgan said its "goal is to work cooperatively to help to find an economic and efficient way to make generation available in California. The issue raised in today's filing by the CAISO relates to a private contract between JPMorgan and a third party."
The issue stems from the extended shutdown at Southern California Edison's San Onofre nuclear plant.
The ISO says the Huntington Beach plants must be converted to compensate for possible shortages during next summer's air-conditioning season in Edison and San Diego Gas & Electric Co. territories.
"This solution is the only viable means that the ISO has been able to identify to meet reliability needs," the ISO said in its 358-page filing with FERC.
Both disputes between the ISO and JPMorgan are a legacy of California's deregulation of electricity in the late 1990s, which forced investor-owned utilities to sell many of their plants.
Much of California's electricity is now controlled by independent power generators, and trading firms like JPMorgan.
One of those independent generators is AES Corp. of Arlington, Va. It operates four separate plants in Huntington Beach, two of which had been in mothballs.
When the San Onofre plant went down last winter, AES put those two Huntington Beach plants back into service.
Their power was critical in preventing blackouts in Southern California this past summer, the ISO said.
Since then, however, both of those plants have been permanently retired to comply with air-quality regulations in Southern California.
But they can still come in handy next summer. AES can convert them into "synchronous condensers" facilities that don't produce power but make the electricity from other plants flow more efficiently through the transmission lines.
That's where JPMorgan comes in.
It holds a contract to market the electricity generated at two neighboring plants, also owned by AES. Because of the contract, JPMorgan can halt any changes to the two plants.
"JPMorgan has declined to provide consent so far," the ISO said.
The state and JPMorgan have been fighting for more than a year over allegations that the bank's traders used Enron-style tricks to make excessive profits. JPMorgan has denied any wrongdoing.
FERC on Wednesday slapped JPMorgan with a six-month suspension of its trading privileges for furnishing false information to investigators looking into the bidding allegations.