ASIC sues Delta Electricity over alleged market manipulation of energy futures

The complaint carries the potential for a hefty fine as the watchdog tightens oversight of the electricity market.

Delta Electricity’s Vales Point Power Station at Lake Macquarie in NSW. Picture: Toby Zerna

The corporate watchdog has launched legal action against the operator of the Vales Point coal-fired power station in NSW, alleging it manipulated Australia’s electricity futures market over several weeks in 2022.

In civil penalty proceedings filed in the Federal Court, the Australian Securities and Investments Commission accused Delta Power & Energy – formerly known as Sunset Power International – of attempting to influence the daily settlement prices of New South Wales Peak Load Electricity Futures Contracts on the ASX market.

In a statement, a Delta spokeswoman said the company was studying the complaint.

“Delta takes its compliance obligations seriously. The matters alleged by ASIC occurred prior to Sev.en Global Investment ownership and the appointments of the current chief executive and executive manager, energy markets,” the company said. “Delta has fully co-operated with ASIC throughout the investigation.”

It said it would not add any more comment.

ASIC claims Delta placed a series of trades late in the session on 30 occasions between September 8 and October 6, 2022, with the intention of shifting market prices in its favour. According to ASIC, Delta placed orders for quarterly futures contracts shortly before the market closed, with the purpose of distorting the daily settlement price — a key market reference used to determine contract values. These actions, the regulator alleges, gave the misleading impression of legitimate market activity based on supply and demand.

The corporate regulator argues Delta’s conduct was designed to give the appearance that it was simply seeking to purchase electricity futures at the lowest available price, when in fact the orders were intended to influence pricing benchmarks.

ASIC further alleges the trading strategy distorted the pricing of calendar-year “strip” products, which bundle together quarterly contracts, and affected the integrity of the broader energy derivatives market.

“ASIC described Delta’s trading conduct as creating a false or misleading appearance of market activity and had, or was likely to have, the effect of influencing a financial benchmark,” the regulator said in a statement.

Daily settlement prices are used as reference points for the valuation and settlement of futures contracts.

Any deliberate attempt to influence these prices can have a ripple effect across the market, impacting trading strategies, portfolio valuations and risk management practices.

Delta is owned by Sev.en Global Investments, which acquired the company from coal baron Trevor St Baker in 2022.

ASIC is seeking declarations and financial penalties against the company. The case has been filed in the Federal Court and will be listed for a case management hearing at a date yet to be determined.

The case comes as ASIC steps up its surveillance of wholesale energy and financial markets, warning that it will take enforcement action where it sees attempts to manipulate critical pricing mechanisms.

If the court upholds the allegations, the case could carry broader implications for how generators and energy traders participate in the futures market, particularly as volatility increases with the exit of coal and the growth of renewable generation.

ASIC has in recent months signalled its scrutiny of the market. Macquarie was last year handed a record $4.99m penalty, with ASIC insisting he bank had failed to prevent at least three clients from attempting to manipulate energy market futures contracts through at least 51 big bids at the end of the day.

Originally published as ASIC sues Delta Electricity over alleged market manipulation of energy futures