FERC Orders Disgorgement Plus $722 Million in Penalties for Market Manipulation in PJM and MISO in a “scam for the history books.”

“This order concerns one of the largest and most brazen frauds in the history of the Federal Energy Regulatory Commission. Today we find that American Efficient, LLC and its affiliates (together, American Efficient) stole half a billion dollars from hard‑working Americans by collecting compensation for fake ‘energy efficiency resources.’…This is a scam for the history books.”[1]

Rarely is the Federal Energy Regulatory Commission (Commission or FERC) so unequivocal in its denouncement of an entity. “It is long established that the ‘primary aim [of the FPA] is the protection of consumers from excessive rates and charges.’”[2] FERC is at heart a consumer protection agency, and  “the breadth of agency discretion is, if anything, at zenith when the action assailed relates primarily … to the fashioning of policies, remedies and sanctions.”[3] With this pronouncement, FERC issued a sweeping rebuke to American Efficient and its affiliated companies, concluding a years‑long enforcement investigation into what the Commission characterized as a widespread scheme to exploit the PJM Interconnection, L.L.C.’s (PJM) and the Midcontinent Independent System Operator, Inc.’s (MISO) capacity markets.

This proceeding is a significant boon for ratepayers in the MISO and especially PJM region. In an order issued on April 15, 2026, FERC assessed approximately $722 million in civil penalties and required the disgorgement of roughly $410 million in unjust profits, marking one of the largest enforcement actions in the Commission’s history.

At issue is American Efficient’s participation in organized capacity markets administered by PJM and MISO. Unlike energy markets, which compensate resources for real‑time power production, capacity markets pay resources for a forward commitment to provide capacity in the future. Since 2009, both PJM and MISO permitted Energy Efficiency Resources (EERs) to participate in these markets, provided they met tariff requirements designed to ensure that the resources actually reduced load and contributed to system reliability.

American Efficient described itself as an “upstream” or “midstream” EER provider. Rather than installing energy efficiency measures or contracting directly with end‑use customers, American Efficient entered into agreements with retailers, distributors, and manufacturers of energy‑efficient products. Under those agreements, American Efficient paid what it openly described as “micropayments” in exchange for sales data and purported rights to the products’ “environmental attributes.” Describing one such arrangement with Home Depot, the Commission wrote:

“One of the products covered by the Program Agreement between American Efficient and Home Depot was a $10,619 refrigerator. If a consumer walked into Home Depot and bought that refrigerator, Home Depot would note that purchase on a ‘sales data sheet’ that it sent to American Efficient. American Efficient would then send Home Depot a ‘micropayment’ of fifteen cents (i.e., 0.001% of the refrigerator’s retail price) and, under its contract with Home Depot, purportedly receive title to the so‑called ‘Environmental Attributes’ of the refrigerator.

American Efficient contends that, through this arrangement, it obtained the right to bid energy savings associated with that refrigerator into the PJM capacity market. American Efficient claims this is so despite the fact that American Efficient did nothing to incentivize the sale; did not require Home Depot to use the ‘micropayment’ it received from American Efficient for any specific purpose, such as discounting or promoting the refrigerator; had no relationship or contract with the refrigerator purchaser, whose effort and investment actually creates the load reduction for which American Efficient gets paid; and provided no notice to the purchaser that American Efficient was claiming the right to capture and monetize the capacity value that would otherwise have accrued to the purchaser.

To top it off, American Efficient claims the right to force the person who purchased the refrigerator to pay American Efficient, through their electric bills, for the energy savings resulting from the purchaser’s own $10,619 outlay. This is a scam for the history books. Yet American Efficient made this same claim for more than one billion items sold by its Program Partners.”[4] [Emphasis Added]

Over more than a decade, American Efficient cleared more than 20,000 MW of capacity in PJM alone, collecting nearly $500 million in capacity payments funded by ratepayers.

The Commission identified three independent bases for concluding that American Efficient violated the PJM and MISO tariffs.

First, the Commission found that American Efficient lacked the requisite ownership or contractual authority over the load‑reduction capability it offered into the capacity markets. Under both tariffs, an EER provider must own or have contractual control over the load reductions created by an energy efficiency project. FERC concluded that such control can only arise from the installation or implementation of energy‑efficiency measures at an end‑use customer’s site, and that American Efficient had no contracts with end‑use customers, no ability to control installations, and no authority over whether the purported load reductions ever materialized.

Second, FERC determined that American Efficient’s program was not “designed to achieve” energy reductions, as required by both tariffs. The Commission emphasized that “designed to achieve” requires intent and purpose, namely, that the program be structured to produce energy savings that would not otherwise occur. Indeed, American Efficient’s executives themselves said so. American Efficient’s then-Policy Director stated that “American Efficient did not believe it was causing energy efficiency to occur, but [instead] was calculating what was already occurring.”[5]

Third, the Commission rejected American Efficient’s practice of offering “historicals”—capacity based on product sales that occurred before the company even had agreements with retailers. FERC found it logically impossible for American Efficient’s payments to have incentivized prior sales and concluded that this practice alone demonstrated the fundamentally rent‑seeking nature of the scheme.

Beyond tariff violations, FERC found that American Efficient engaged in market manipulation in violation of section 222 of the Federal Power Act (FPA) and the Commission’s Anti‑Manipulation Rule. The Commission concluded that American Efficient operated a fraudulent scheme by holding itself out as a legitimate EER provider while knowingly offering capacity it could not deliver.

The order details numerous material misrepresentations and omissions, including claims that the program reduced consumer prices, failures to disclose the trivial size of micropayments, false affirmations of contractual authority, and the omission of the company’s prior disqualification from ISO‑NE and MISO capacity markets. According to the Commission, these actions distorted the information relied upon by PJM and MISO and impaired the proper functioning of organized markets.

Furthermore, per the Commission, “the record shows extensive high-level involvement of Modern executives in the violations, including involvement of the CEO and founders.”[6]

To remedy the misconduct, FERC ordered disgorgement of unjust profits to PJM and MISO and imposed civil penalties approaching three quarters of a billion dollars. The Commission also held American Efficient’s parent company and affiliates jointly liable, applying its longstanding “single entity” doctrine to prevent corporate structure from frustrating statutory purposes.

For more information, see the Order here: Link

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[1] American Efficient, LLC, Order Assessing Civil Penalties, 195 FERC ¶ 61,043, PP 1-7 (2026) (“FERC Order”).

[2] Xcel Energy Servs. Inc. v. FERC, 815 F.3d 947, 952 (D.C. Cir. 2016) (quoting Mun. Light Bds. of Reading & Wakefield v. FPC, 450 F.2d 1341, 1348 (D.C. Cir. 1971), cert. denied, 405 U.S. 989 (1972)).

[3] Niagara Mohawk Power Corp. v. Fed’l Power Comm’n, 379 F.2d 153, 159 (D.C. Cir. 1967).

[4] FERC Order at P 5.

[5] Id. P 12.

[6] Id. P 562.