Posted on 05/09/2002 10:07:02 AM PDT by randita
Editorial: Energy's blame game
While feds slept, Enron milked California
Sacramento Bee
Published 2:15 a.m. PDT
Thursday, May 9, 2002
In the winter of 2001, when California electricity prices were skyrocketing and federal regulators were sitting on their hands, the Bush administration knew it was all California's fault. "The problem is a lack of supply," said Vice President Dick Cheney. "The problem is a flawed regulatory scheme."
It was nice spin, but, as it now turns out, also a lot of vice presidential hot air. California officials and economists who complained last year about the Federal Energy Regulatory Commission's torpor in the face of market manipulation by traders and generators weren't making it up. The memos released this week by the Enron Corp. amount to a step-by-step manual showing how Enron energy traders bilked California as the Bush administration spun political fairy tales and FERC slept.
California may have bungled electricity deregulation, but the documents are proof that it also got robbed by electricity pirates.
The Enron documents show that the pirates gave puckish Hollywood code names to their market-gaming ploys, names such as "Death Star" and "Get Shorty." Behind the cutsie labels was a strategy to artificially constrict electricity supply, be it transmission capacity or generated electrons, in order to demand, and receive, outrageous peak prices.
The unearthing of Enron's activities is not just a post-mortem political exercise about who actually was to blame for California's electricity crisis last year. The memos are still relevant to issues now before FERC about how to deal with the aftermath and make California consumers whole for the pillaging by Enron and its like. California needs justice and help on three major fronts:
* FERC must take seriously an appeal pending before regulators to order the energy firms to disgorge some of their excess profits they accumulated by selling electricity at prices that weren't "just and reasonable" as federal law requires.
* FERC must order some of these same firms to either renegotiate some long-term energy contracts they signed with the state during this era of market manipulation, or void them entirely.
* FERC must put in place permanent safeguards in the nation's energy market so that future "Death Stars" don't surface ever again. One solution may be to extend indefinitely a cap on the price of electricity when the market begins to heat up, a cap that guarantees everyone a profit, just not one that is obscene.
Meanwhile, beware of the regulator or politician who preaches the beauty of the energy marketplace as an efficient balancer of supply and demand. Electricity creates a market unlike any other. It's a commodity that can't be stored, and must be transported on wires with a finite transmission capacity. The memos from Enron show how easily it can be gamed if regulators are sleeping and an administration is in the generators' pocket. The market remains ripe for gaming if FERC and the president don't wise up.
Copyright © The Sacramento Bee / ver. 4
Although I am for limited government, I think there should be some requirement that reporters/editors/columnists have IQ's above those of rocks and must know at least a smidgen about their topics.
Actually, didn't this occur in the 4th quarter 2000, which would place this under the Clinton administration?
If Republicans at FERC are smart they will force democrats like Feinstein to make public apologies and request publicly that they don't want FERC to sanction those found guilty of gaming the power system, because one of the guilty parties is the State of California.
This should be an interesting politial season
According to FERC regs, that's what should happen. Somehow I can't see the politicans at FERC being so "mean spirited", can you?
Your observation on this article being pennance for the other one is outstanding. It fits.
To recap, California: Surprise culprit in energy price rigging (the state itself!) was printed in a local paper on a Sunday (probably on a back page). The story never got any traction, ever here on FR.
Then, on Tuesday, the "megawatt laundering" story hit the national press, only it had morphed into something else. The NYT published a story with the exact opposite conclusion as the previous SacBee story. Enron Forced Up California Energy Prices, Documents Show.
Now, on Thursday, the SacBee sees which side their bread is buttered on and joins the bandwagon with this new editorial, totally ignoring their earlier story.
Regardless, what is wrong with a company selling it's product to the highest bidder? Isn't that what Enron is being accused of?
I can't see FERC being that mean spirited, but remember that Davis has really ticked off a lot of folks at FERC. I can see Ashcroft telling Feinstein that she is right and he will punish all price gougers to the fullest extent of the law, including the State of California, unless she does something publicly she doesn't really want to do. I can see FERC raising the threat of doing something bad to California and using that as a way to force the Governor to back away from his opposition to allowing a multi-state power pool control California power sales. I see this as a way the FERC can almost guarantee the implementation of a larger power pool that they want and Davis is opposed to.
Regardless, what is wrong with a company selling it's product to the highest bidder? Isn't that what Enron is being accused of?
Are you saying that the Sacramento BEE is an evil price gouging newspaper! Oh, my! (/sarcasm)
YES, the political campaign season has started again and the democrats have gone crazy!
Snopercod , have you read the Wall Street article (I think there is one ) which reports the same thing that the NY Times reported in " Enron Forced Up California Energy Prices, Documents Show". If so do you have any comments regarding the variance between the two stories!
The OC Register had the NY Times article, which I thought was biased!
Tell me how successful this evil plan could be, when Enron ended up selling only 200 MwH to California during the entire Cal Power Crisis -- $57,000 worth of juice (@$285/MwH)?
How could Enron be such a villain, if they profiteth so little?
Could you help me understand where you got your numbers as they look really way too low to me. Remember that Portland General Electric was an Enron subsidiary.
One would think that a "bastion of free markets" like the WSJ would at least offer some kind of a defense for the idea of a company selling it's product to the highest bidder.
Isn't that what a market is defined as in the first place?
Now IF [that's a big "if"] Enron actually did artificially create "congestion" on the grid, then that would be fraud, and should be prosecuted. None of the articles mentioned how this grid congestion was accomplished. Their editors either think we're too dumb to understand what happened, or maybe it never really did happen.
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