![]() At such times, Cal-ISO would make “congestion payments” to market participants that would either schedule transmission in the opposite direction of the clog or would reduce their generation-load schedule.Įnron would sometimes file schedules for power for which it had no need, simply to collect congestion fees when Cal-ISO asked it to decrease its power use. * Sometimes, the amount of power scheduled for delivery into California exceeded the capacity of some of the system’s transmission lines. Of course, the memo acknowledged, exporting power at a time when Californians were screaming for it posed “a public relations risk arising from the fact that such exports may have contributed to California’s declaration of a Stage 2 Emergency yesterday.” 6, 2000, Enron memo provides a powerful example: “Yesterday Enron realized that it could reap easy profit by buying power at the capped price in California and selling it out of state.Ī Dec. However, the crisis had spilled over to other states, where there was no state-mandated price ceiling. In December 2000, as the crisis intensified, the capped price was $250 a megawatt-hour. * When prices started to soar in 2000, officials responded by capping electricity prices in the California market. Since the utilities often needed more power than they had scheduled, Cal-ISO often found itself having to offer premiums, and Enron, which did not need all the power it had scheduled, was ready to scoop up the premiums. When supplies were tight, Cal-ISO paid participants a premium when they provided more power than they required. Traders called the technique “inc-ing the load,” meaning increasing the load. Realizing that California’s utilities, for reasons of their own, were habitually understating their “load,” or the amount of electricity they needed to use, Enron saw a profit opportunity in overstating its load. The two components were supposed to be in balance. * In one specialized part of the market, Cal-ISO required participants to submit daily schedules stating how much power they intended to supply the next day and how much they intended to use. Here, according to the memos released Monday and interviews with trading experts, are some of the methods it used to try to profit from the unique characteristics of the California market: The biggest and arguably the savviest of the traders was Enron. One of their functions, which Wall Streeters call arbitrage, was to try to buy power at a low price in one place and sell it at a higher price somewhere else. In the new market, traders-often pure middlemen who did not own power plants-began to ply their trade. Under deregulation, utilities sold many of their generating plants and became giant consumers, bidding for electricity from power producers, some from out of state, some running the same California plants that used to belong to the utilities. Before that, regulated utilities with state-granted monopoly territories generated the power and distributed it directly to consumers. ![]() Power trading came into being in California with the advent of energy deregulation in 1998. Wolak, said Wednesday that most of the schemes described in the memos were garden-variety trading strategies common to any market-whether for stocks, natural gas or used cars. But the senior member of Cal-ISO’s market surveillance committee, Stanford University economist Frank A.
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