They aren't allowed to do that, but Davis was in a war with the power companies and he felt it was necessary to use the tactics he was accusing them of.
To nobody's surprise, government bureaucrats aren't very shrewd when it comes to the markets, and they shot themselves in the foot several times. There was a story here last week about Cal-ISO demanding more power than it really needed just to make sure that the power companies could deliver it. When they acquired it, they then sold it for a huge loss out of state. Brilliant.
Yep, it is starting to get so thick all the people that probably were guilty you will need a score card pretty soon. Again, I hope that Feinstein is happy with asking Ashcroft and FERC to throw the book at Enron. I think the book will end up being thrown at the Cal-ISO.
I feel it is far worse for a quasi government body (the Cal-ISO and DWR) to game the market than for companies like Enron. A free market needs to be free of illegal and hidden government control or nobody will want to participate in the market.
-------some background information-----------
(1) CMS's CEO Steps Down Amid 'Round-Trip' Probe Wall Street Journal | May 28, 2002 | Chip Cummins
CMS Energy Corp. said its longtime chief executive stepped down, following disclosures that the energy concern's trading business had conducted large-scale transactions that artificially boosted its trading volumes and revenue.
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(2) Now for the latest CEO stepping down from CNN:
Dynegy CEO resigns
Former Enron suitor the latest energy trader to undergo management shake-up
. May 28, 2002: 11:04 AM EDT
NEW YORK (CNN/Money) - Dynegy Inc.'s shares jumped 5 percent in Tuesday morning trading after the company announced the resignation of company Chairman and CEO Chuck Watson, and also said it had appointed an executive of ChevronTexaco to replace him temporarily as chairman.
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(3) Documentation that Cal-ISO and DWR were gaming the market price of electricity in California:
- - - - (4) Documentation that Cal-ISO asked Enron to game the market price of electricity in California:
- - - - - (5) Documentation that Sacramento Municipal Utility District may have been involved with AEP to game the market price of electricity in California & that they were talking with Enron about mutual advantages.
------- (6) Did Portland General Electric and PacifiCorp game California power markets unwittingly?
Portland Utilities May Have Aided 'Ricochet' Trading by Enron, Others
Wall Street Journal | May 24, 2002 | Robert Gavin
Two utilities based in Portland, Ore., said they may have unwittingly aided schemes to manipulate electricity prices during the Western energy crisis of 2000.
In filings with the Federal Energy Regulatory Commission on Wednesday, PacifiCorp, a unit of Scottish Power PLC, and Portland General Electric, a unit of Houston-based Enron Corp., said they may have been unknowing intermediaries in so-called megawatt-laundering trades designed to avoid California price caps.
Megawatt laundering, also known as "ricochet" trading, is a practice described in Enron memos, in which power in California was bought at capped prices, moved out of the state, and then resold to California at higher uncapped rates.
Portland General also said it may have aided Enron traders in the so-called Death Star strategy in which Enron scheduled fictitious electricity deliveries on overburdened transmission lines, in order to receive congestion relief payments from the California Independent System Operator, which manages the state's power grid.
Portland General Electric, which serves about 730,000 customers in the Portland metropolitan area, declined to comment and referred inquiries to its corporate parent. An Enron spokesman said the company is cooperating with FERC's investigation into possibly market-manipulation practices during the energy crisis in 2000.
In its filing, PacifiCorp with 1.5 million customers in six Western states, identified about 767 transactions in July through November 2000 in which it would accept power from a customer in California, only to return it them shortly afterward for a small fee.
PacifiCorp officials note that these back-and-forth deals were small, amounting to just 40,376 megawatt hours out of about 63 million megawatt hours traded during this period, and just a tiny fraction of the 45,000 transactions the company conducted.
Initially, PacifiCorp officials said, these transactions appeared similar to deals occasionally struck between buyers and sellers of power to avoid transmission bottlenecks. But as their frequency increased during the energy crisis, PacifiCorp officials became suspicious of megawatt laundering, and stopped participating in such transactions after mid-November.