Surveillance

The Division of Analytics and Surveillance (DAS) develops, refines, and implements surveillance tools and algorithmic screens to perform continuous surveillance and analysis of market participant behavior, economic incentives, operations, and price formation, both in the natural gas and electricity markets.  In the context of surveillance, DAS seeks to: (1) detect anomalous activities in the markets; and (2) identify potential investigative subjects.  When a surveillance screen trips, staff conducts a series of analyses to gain information about the activity that caused it.  First, staff evaluates the activity using available market data and information to determine whether there is a fundamentals-based explanation for the activity.  Most often, staff finds such an explanation.  However, when the follow-up analyses fail to explain the screen trip or surveillance alert, staff performs a more in-depth review of the conduct, which may involve contacting the market participant to request additional information and discuss the conduct at issue.  Staff classifies this heightened review as the opening of a surveillance inquiry.  If, after conducting a surveillance inquiry, staff is still concerned that there is a potential violation, it will recommend that DOI open an investigation into the matter.

Natural Gas

DAS conducts surveillance and analysis of the physical natural gas markets to detect potential manipulation and anti-competitive behavior.  Automated natural gas screens cover the majority of physical and financial trading hubs in the United States, monitoring daily and monthly markets.  These screens and data feeds alert staff to anomalous market conditions and market participant actions based on a review of supply, demand, pipeline utilization, operational notices, and physical and financial trading.  Asset-based screens evaluate natural gas trading around infrastructure, including natural gas storage, pipeline capacity, and electric generation.  In addition, DAS uses Large Trader Report data from the CFTC to weigh potential financial incentives that might encourage a market participant to engage in a manipulative scheme.  

Electricity

DAS accesses data from a variety of public and non-public sources to screen for anomalies and potentially manipulative behavior or other violations in the ISO/RTO markets and bilateral wholesale electricity markets.  Each month, DAS runs and reviews approximately 100 electric surveillance screens; monthly, hourly, and intra-hour sub-screens; and reports for over 40,000 hub and pricing nodes within the six ISOs/RTOs.  DAS utilizes these screens and reports to identify patterns by monitoring the interactions between bids and cleared physical and financially settled electricity products.  Additionally, DAS screens non-ISO/RTO markets and cross-ISO/RTO portfolio trades for potential manipulation. 

Enhanced Surveillance Matters

In addition to these ongoing surveillance efforts, DAS also closely follows market conditions so that when there are disruptive events, such as periods of unusually high prices in the wholesale natural gas or electricity markets or dramatic weather events that impact those markets, DAS is prepared to conduct enhanced surveillance surrounding the events.  This enhanced surveillance may involve DAS: (1) seeking additional data from ICE and/or market participants to augment its normal data feeds; (2) conducting outreach to market participants, other federal agencies, or state regulators; and/or (3) developing new screening methods that utilize additional data or account for the changes in the markets caused by the ongoing event.  Depending on the events under review, this enhanced surveillance may involve coordinated efforts by both the natural gas and electric surveillance teams. 

Market-Based Rate Ex Post Analysis

DAS conducts analytical reviews of wholesale electric market-based rate transactions to detect the potential exercise of market power and ensure that jurisdictional rates remain just and reasonable and not unduly discriminatory or preferential.  DAS staff routinely analyzes the combined results of 33 statistical indicators to detect potential instances of the exercise of market power within 59 geographic regions or market hubs.  This ex post analysis evaluates transactions against market fundamentals at the time of execution, with the primary goal of identifying outcomes that may be inconsistent with expectations of a competitive market, and thus an indication of a potential exercise of market power.