05/06/2002 Archived Entry: "Enron Trading Strategies & California"

While reading through this, one thinks, where are our public servants? Or, would Gray Davis be insulted that he is actually the public's servant, looking out for their best interests? And George Bush and Bill Simon, GMAFB!?!

ser·vant Pronunciation Key (sûrvnt)
n.
One who is publicly employed to perform services, as for a government.

It's as if the states were mere cash cows for the energy traders to manipulate, similar to the market makers & specialists that accumulate and distribute Nasdaq & NYYSE stocks via market price manipulation.

From The Federal Energy Regulatory Commission (FERC)-- excerpts from the memos about Enron's trading strategy:

Inc'ing Load or Fat Boy
A slang term for artificially increasing or sending more electricity into the California market to receive a market premium from the California Independent System Operator (ISO). The trading strategy was intended to offset when utilities underestimated their load in the day-ahead market, which Enron said artificially lowered the day-ahead price. For example, Enron could submit a day-ahead schedule to the California ISO showing 1,000 megawatts of generation scheduled for delivery to one of its own subsidiaries. Then, Enron would send 1,000 megawatts of generation, but its subsidiary only used half that, generating a bonus payment for Enron from the California ISO.

Death Star
Enron traders developed the Death Star strategy to address electricity congestion between northern and southern California that the company blamed on utility PG&E Corp. underestimating its electricity load. The memos said the technique earned Enron money by scheduling transmission in the opposite direction of the congestion and then collecting congestion payments. No energy, however, was actually put on the grid or taken off. Enron lawyers defended the strategy, saying the company tried to increase supplies in southern California and "took on financial risks" and paid extra charges.

Get Shorty
Enron created the Get Shorty practice by agreeing to provide ancillary services -- or small amounts of power to keep the California grid level constant -- in the state's day-ahead market. The company then covered its position by buying those services in the hour-ahead market, the memos said. A profit was made by shorting the ancillary services, or selling high and buying back at a lower price. Enron characterized the strategy as "paper trading" because the company did not actually have the extra power to sell. "In order to short the ancillary services it is necessary to submit false information that purports to identify the source of the ancillary services," one Enron memo said.

Ricochet
Enron's Ricochet strategy was similar to a questionable industry practice known as megawatt laundering. Enron bought wholesale electricity and sold it to an out-of-state customer, who charged a small fee per megawatt, according to the memos. Enron then bought it back and sold the same electricity at a higher price in California.

Load Shift
In this strategy, Enron shifted electricity load from a congested zone to a less congested one, earning payments for reducing the strain on California's grid. "The effect of this action is to create the appearance of congestion through the deliberate overstatement of loads," one memo said. "Then, by reverting back to its true load in the respective zones, Enron is deemed to have relieved congestion
and gets paid by the California ISO for so doing."

Lieberman needs to get tough on getting information out of the WH, start some whip craking, as he's going no where (but maybe that's the intention). Wait, breaking,

(REUTERS)
SEN. FEINSTEIN TO SEEK JUSTICE DEPT PROBE OF ENRON POWER TRADES IN CALIF. -AIDE

"My suspicions have been high for some time that Enron was fraudulently manipulating the California energy market for its own benefit. In the wake of this new information from FERC, I am asking the attorney general to pursue a criminal investigation to determine whether in fact federal fraud statutes or any other laws were violated by Enron," Feinstein said.