FERC enforcement report cites screenshots, keylogger

The Federal Energy Regulatory Commission has issued an Order to Show Cause and Notice of Proposed Penalty against Coaltrain Energy, L.P. and six individuals relating to alleged fraudulent transactions in PJM Interconnection L.L.C.'s energy markets.  The Order, and a supporting Enforcement Staff Report, also includes allegations that Coaltrain made false and misleading statements and material omissions during the investigation.  Notably, the report describes FERC Enforcement staff's discovery of troves of documents allegedly covered up by the respondents, including keystroke logs and computer screenshots recorded by the company's software.  This e-discovery aspect gives FERC's Coaltrain enforcement case a unique character.

Fundamentally, the Coaltrain case presents FERC Enforcement staff's allegations that the respondents violated of the Commission’s Prohibition of Energy Market Manipulation, and that Coaltrain violated a Commission market behavior rule about accurate communications.  At issue is an alleged scheme involving trades from June 15 until September 2, 2010.  Traders allegedly engaged in a large volume of marginally profitable Up To Congestion (UTC) trades -- not to make money on those UTC trades, but with the intent to earn outsize payments from PJM's Marginal Loss Surplus Allocation (MLSA) program. FERC Enforcement staff's report describes its view of these trades as similar to those at issue in other recent enforcement cases, and different from normal arbitrage or "spread" trades.

The FERC Enforcement staff report in the Coaltrain case sheds light on another aspect of enforcement activity: how did Enforcement staff conduct its investigation of Coaltrain and the other respondents?  In this case, the company’s computer security monitoring software, called Spector 360, played a key role.  According to the report, Spector 360 "recorded every keystroke on employees’ computers (other than co-owners Peter Jones and Sheehan) and took screen shots of every employee monitor every twenty seconds all day long".

As staff noted in a footnote:

A large portion of the evidence in this matter is derived from the documents and other materials recorded by Spector 360. While the keystroke text data is not much different from ordinary documents, the screen shots taken by Spector 360 are very different, and create a visual record of what Respondents were working on, what they were looking for, how they conducted their analyses, and what they actually saw—as if standing over their shoulders while they work. This evidence will be reproduced as images taken from the screen shots.

Indeed, the Enforcement staff report includes a series of screenshots allegedly captured by Coaltrain's software.  According to the report, the evidence captured by Spector 360 shows how the respondents developed, implemented, and communicated about their scheme.

Not only does the FERC Enforcement staff report allege that this evidence exists, but moreover it alleges respondents made false and misleading statements about Spector 360 and the data it logged, including claims that they "forgot" about it.  According to the report, the Spector 360 data included material responsive to data requests issued as part of the investigation - but Coaltrain allegedly only provided it to Enforcement after a former employee told Enforcement that the Spector 360 data existed:

Enforcement sent several data requests to Coaltrain beginning in August 2010. In June 2012, Enforcement discovered from a former Coaltrain employee that Respondents had failed to produce an enormous set of documents that were highly relevant to the matters under investigation and responsive to Enforcement’s prior data requests. As it turned out, for nearly two years Respondents had failed to tell Enforcement that before, during, and after the summer of 2010, Coaltrain had deployed computer monitoring software, called Spector 360, that had recorded every keystroke (saved as text files) and made screenshots every twenty seconds of every monitor (saved as image files) on the work and home computers of every employee other than the co-owners, Peter Jones and Sheehan. Enforcement then asked Respondents to produce the missing materials. Respondents admitted that they still retained the data, but they at first refused to produce it by falsely denying that they could access the Spector 360 materials. Respondents belatedly produced the materials only after Enforcement arranged with the software manufacturer to give Respondents a new license at no cost. Once produced, the Spector 360 documents proved to be an enormous trove of responsive and relevant materials—about 10 gigabytes per employee during the summer of 2010.

FERC has docketed the case as IN16-4-000.  In its show cause order, the Commission directs Coaltrain and its co-owners to show cause why they should not be jointly and severally required to disgorge unjust profits of $4,121,894, and directs all Respondents to show cause why they should not be assessed civil penalties in the following amounts:

• Coaltrain: $26,000,000
• Peter Jones: $5,000,000
• Shawn Sheehan: $5,000,000
• Robert Jones: $1,000,000
• Jeff Miller: $500,000
• Jack Wells: $500,000
• Adam Hughes: $250,000

Computer energy efficiency increases

Computers can do amazing things, but are often viewed as consuming significant amounts of energy.  For example, centralized server operations like large data centers can consume as much power as heavy industrial manufacturing.  Whether powered by the default electricity mix or by purely renewable power, we often think that crunching numbers on computers means using a lot of power.  For this reason, computer makers and customers alike push for energy efficiency in their computing activities.

Newly published research suggests that the energy efficiency of computers doubles roughly every 18 months.  A team of researchers led by Stanford professor Jonathan Koomey looked at the peak power consumption of electronic computing devices ranging from 1946's ENIAC to the present.  ENIAC, which the U.S. Army used to calculate trajectories for artillery, took up 1,800 square feet (bigger than the average U.S. house at the time), and could consume up to 150 kilowatts of electricity.  Modern computers, and even smart phones, can now outperform ENIAC when it comes to computation, but are much more efficient in terms of their power demanded to perform a fixed set of calculations.  According to what is now being called "Koomey's Law", over the years since ENIAC first powered up, computers' energy efficiency on that basis has doubled roughly every 18 months.

This finding follows on Professor Koomey's July 2011 report on data center energy usage, which found that although data centers consume more and more electricity each year, their energy consumption is growing less than their increase in server power.