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
One would think this would be news, but apparently not. This was published yesterday, but not one outlet ran it.
And the only outlet running it today is Yahoo!, but it's in their International News section.
I'm really impressed with the ability of the media to quash this story. If it weren't for Free Republic, nobody would ever see it.
...spread out over four years.
Liar liar pants on fire.
Testimony of California Public Utilities Commission President Loretta Lynch Before the U.S. Senate Commerce, Science & Transportation Committee March 15, 2002
Mr. Chairman, Senators, thank you for the opportunity to discuss the Enron memos and what must be done to stop the further plundering of the California economy...
With the publication of the Enron memos, none of us can hide from a basic truth: the California energy crisis has never been about supply demand or any other set of economic fundamentals. It has been about a complete lack of appropriate enforcement, and lax or nonexistent federal regulation. The Enron memos describe some of the means by which California was plundered.
If this is true, how come it didn't happen in other states?
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.
Didn't Davis and most the the national Democratic Party leaders complain about the BILLIONS that were stolen from the people of California by the evil Texas power energy companies!
Do you suppose that was just politics? (/sarcasm)
Even with his California Budgets, it is becoming very clear that Davis and most democrats can't do math! No wonder they so believe in tax & spend, they don't comprehend what they are doing.
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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
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I'm really impressed with the ability of the media to quash this story. If it weren't for Free Republic, nobody would ever see it.
That's because it's old news and only a few people hoping to see bad things happening to good people are still interested.
The article points out the fallacy of the market and there was in fact price gouging yet you (like Gray Davis) can't see past the dollar amount...pathetic.
California (Wilson etc.) set out to open the electricity market and the crooks running "the electricity market" with their new found freedom couldn't help themselves, they just had to find a way to screw people.
BTW, the article was in the Houston Chronicle 1-6-03.
Ahhh, the last retort of a liberal when he or she wants to ignore the facts. Pretty lame, my friend.
...only a few people hoping to see bad things happening to good people are still interested.
Gee, seems to me that you are the one who dances with glee whenever an energy company goes bankrupt and their stock becomes worthless.
Think of all the retired people and little old widow ladies that have been hurt by demagogues like you who blame energy companies for their own policy failures.
The Houston Chronicle article lewislynn mentioned is not the same article, but does contain a hilarious quote:
The ISO report lists the energy companies that made trades that showed the same potential pattern as Death Star, Fat Boy and other questionable -- and possibly illegal -- strategies outlined in Enron memos made public in May. The report says, however, that ISO investigators were unable to determine with certainty when or if the strategies were actually used.
Translation: "After spending much more on our investigation than the $14 million in question, we know absolutely nothing. But we have a strong hunch that some companies may or may not have done things which might or might not have been crimes, but we can't be sure."
Other states build powerplants. California, like all parasite socialist states, leeches off others and then complains that the blood they sucked wasn't sweet enough.
You might enjoy the following SacBEE Article
A California state senator plowing through boxes of subpoenaed Enron Corp. documents has finally unearthed a smoking gun, the first tangible proof that energy traders tried to manipulate the price of electricity amid short supplies last summer.
One problem: The evidence doesn't implicate Enron so much as the managers of California's electricity grid, whose Folsom-based trader was caught red-handed trying to game the market. In a bizarre twist, it turns out that the state-created Independent System Operator, or ISO, was the one rigging the price of power, not the evil private generators who everyone suspected.
Just in case you are not sure what you read. Here is another version of the same event. The Cal ISO called Enron so that the Cal ISO could "game" the system against others. This is reported as news along with the firing of the dispatcher in this SacBEE article
Then there was the time the Cal-ISO asked the Dept of Water Resources to falsify records to game the system. Again Reported in the SacBEE
Dunn and Hidalgo say the incident unfolded Nov. 14, 2001, when the ISO asked the state to buy more power. This is their account:
Even though the state had enough power, the ISO was anticipating repairs on a transmission line would make it essential to draw electricity from two plants -- one run by Duke Energy Corp. and one by Reliant Energy Inc.
Those plants were not prepared to make themselves available, the ISO reportedly told the Department of Water Resources, and it needed the state to promise to buy their power.
When the state objected to the expense, the ISO offered a variation. If the state would submit a "fictitious load" -- falsely inflate future power needs -- then the department wouldn't have to sell power at a loss.
Remember the Cal ISO was the "cop on the beat." The ISO was created to perform "arm's length control of the transmission system and make sure that the market rules were followed. Yet the Cal ISO was guilty as sin in trying to rig the market.
Finally we have the evil SMUD trying to talk Enron into doing evil price manipulation. Documented right here SacBEE article
... the Sacramento Municipal Utility District, which revealed that, just days before the first rolling blackouts struck California, it had conversations with Enron traders about ways that Enron could profit by dealing with SMUD.
SMUD did not take Enron up on any of its offers, said district lawyer Arlen Orchard, although the utility (i.e. SMUD) did engage in what he called "legitimate arbitrage," a trading practice profiting from price differences between markets.
The tangled webs of explanations, definitions and counter-definitions will now be left to FERC to sift through and reach conclusions about what went wrong in California in 2000 and 2001.
"My guess is that everybody is going to say they didn't break rules. You can say that about almost anything," said Kellan Fluckiger, former chief operating officer of the Independent System Operator, which runs most of the state's power grid.
"We have a structure that is inherently so flawed that the number and scope of these opportunities is staggering," he said. The rules are loose that nothing is specifically outlawed, and there are few consequences for misbehavior, he said.
Finally there is my favorite article (that I can't link to) in the May 27, 2002 issue of Clearing UP (article 20) "I didn't Do It," Traders Tell FERC in Trading Inquiry. "Cal-ISO is increasingly taking criticism for allegedly manipulating its own market for the sake of ensuring reliability." That article was also the first I had heard that Mirant had done some improper things at the request of Cal-ISO.
I had been looking for some of those old articles and wanting to get them near the top of discussions again.
I found an old e-mail to a newspaper reporter where I lost it and told him he really needed to do research and not re-arrange spin pieces handed to him by politicians. In the email, I provided these cross references as to what was going on, but not being reported in any great depth by the mainstream media.
I can't help but wonder how many careers have been destroyed by Davis's political machinations. I'm sure that most of the folks at the Cal-ISO (upper management accepted) are honest people just trying to do a job.
What are they thinking now that they realized that Davis has used them for whores?
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