Posted on 01/08/2003 5:28:20 AM PST by snopercod
(This article was originally published Tuesday.)
LOS ANGELES (Dow Jones)--More than 20 energy trading companies and utilities may have cumulatively earned tens of millions of dollars in revenue from 1998-2002 through the use of questionable trading tactics in California's electricity market, according to a report released Monday evening by the state's Independent System Operator.
The report outlines how much revenue a given company may have earned through trading strategies similar to those outlined in Enron Corp. (ENRNQ) memos released last May, said ISO spokesman Gregg Fishman.
The results support the agency's long-held claim that the bulk of power overcharges during the state's 2000-01 electricity crisis didn't come from market manipulation or gaming strategies, but from the abuse of market power. Market power refers to a company's ability to use its market share to influence prices.
"We have said all along that the greatest dollar amounts of damage come from (parties) charging high prices because they had the power to do so," Fishman said. "Still, that doesn't take away from the importance of addressing gamesmanship."
The ISO report was submitted last October, per request, to the Federal Energy Regulatory Commission. FERC is handling California's request that suppliers refund $8.9 billion to the state for charging "unjust and unreasonable" power prices during the energy crisis, when blackouts and price spikes were frequent.
FERC has given California officials until Feb. 28 to submit evidence of market manipulation in the refund case. A FERC judge has already recommended the refund amount be set at $1.8 billion, but the final decision rests with the commission board.
Death Star Strategy May Have Been Widespread
The ISO's report shows that 21 companies and utilities may have reaped $14.4 million in revenue by using trading tactics similar to Enron's "Death Star" strategy. The strategy involved collecting payment from the ISO for relieving congestion on transmission lines when in fact no power was moved.
The companies which may have reaped the most benefit from such a strategy were Royal Dutch/Shell (RD) unit Coral Power at $3.9 million; Sempra (SRE) at $1.6 million; British Columbia Power Exchange at $1.08 million; and Williams Companies (WMB) at $966,283, the report said.
The report cautions, however, that while ISO data indicates Enron-like strategies may have been employed by these companies, the evidence is not conclusive.
"To make a determination of intent, you need to take our information and look at it in parallel with a variety of agencies' information. We are the fingerprint expert at what might be a crime scene, so we pick up evidence and then the agencies have to weigh it with other forensic evidence to determine what happened," Fishman said.
Companies Deny Using Enron Tactics
Spokesmen for several companies denied they had engaged in Enron-type trading strategies.
"We have conducted a comprehensive review of our trading activities for FERC and did not find that Coral manipulated the market or engaged in inappropriate business activity," said Coral spokesman Jimmy Fox.
Sempra spokesman Doug Kline said his company's internal investigation also failed to unearth evidence of wrongdoing.
"We've found nothing that indicates our conduct is inconsistent with ISO rules or had any effect on energy supply or power prices," Kline said.
The ISO sent a copy of the report to the U.S. Attorney's Office in San Francisco, California's attorney general, a state Senate panel, the state Public Utilities Commission and the state Electricity Oversight Board, Fishman said. The report was kept confidential until Monday in order to give investigatory agencies time to digest it, Fishman said.
A California Senate committee that is investigating energy market manipulation will query the ISO about the report at a hearing Jan. 14, said Christian Schreiber, an investigator for the committee chaired by Sen. Joe Dunn, D-Santa Ana.
"These findings are the tip of the iceberg. Even if they don't account for the bulk of the profits, the fact that this behavior could occur is suggestive of the greater dysfunction in the market," Schreiber said. -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; jessica.berthold@dowjones.com
You are really on target with that one.
Some of these folks sold their soul and professional reputation to try to help out California when times were tough by doing anything and everything to try to implement what Davis and his upper management appointees wanted.
It is a shame.
Good point on sending an e-mail to the author and thanking her for her courage and initiative in pursuing the truth.
I've been following the energy situation in California for over two years now, and collect many of these articles on my hard drive. I guess you could call me a "calpowercrisis groupie".Anyway, I was very impressed with your article "CAISO Report Sees Little Revenue Reaped From Mkt Gaming" - you were the only reporter out there who wrote of the minuscule amounts that the energy companies "might" have manipulated from California.
It is fascinating that the only outlet which picked up your story was Yahoo!, and they put it in the "International News" section. I'm not sure what that means, since your article was certainly newsworthy, if not politically correct.
Keep up the good work, and thanks again for telling the truth.
Mirant, other energy firms prevail in fighting Washington suit
AJC wires report
Mirant Corp., Williams Cos. and seven other energy companies won the dismissal of a suit by a Washington state public utility that claimed the companies colluded to create artificially high electricity prices.
A federal judge in San Diego ruled that the claims made by the Snohomish County Public Utility District, north of Seattle, should instead be considered by the Federal Energy Regulatory Commission.
The generators have faced similar market manipulation suits since the disclosure of Enron Corp. documents that said traders may have artificially increased energy prices.
The judge's decision indicates that the companies also may be able to dismiss claims filed in San Francisco by California officials and consumers. Snohomish plans to appeal.
Also I think you are correct in that the courts and FERC seem to be getting tired of all the whinning power companies. Actually, depending on the utility, I feel that many of the legal challenges were more to provide "cover" to politicians for the bad choices made on "their watch" than they were viable legal arguments. Kind of the poltiical equivalent to "spray & pray." I guess the elected officials felt that if they filed enough law suits using different legal theories, one might stick and even if the chanees were remote, it was worth the money (especially since it would provide political sound bites indicating it wasn't the politician's fault that bad things happened.) Got to love the American Legal system.
As a society we need to get serious about Tort Reform.
I just got a nice "you made my day" thank you note from Ms. Jessica. Eat your heart out, my friend.
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