Enron Corp.’s manipulation of the California energy market in 2000 and 2001 is notorious. Electricity bills soared and blackouts affected hundreds of thousands of people as contemptuous traders with Enron, a power wholesaler, delighted in their scheme. Tapes of traders released in 2004 contained infuriating nuggets like this: “Just cut ’em off… They should just bring back f—— horses and carriages, f—— lamps, f—— kerosene lamps.”
After investigating the scandal, the Federal Energy Regulatory Commission (FERC) concluded that “supply-demand imbalance, flawed market design and inconsistent rules made possible significant market manipulation,” and that many of Enron’s trading strategies violated FERC regulations.
Enron is long gone. But could such a market ruse happen again? Tyson Slocum, director of Public Citizen’s Energy Program, believes so. For this reason, his group and five others, including the American Public Power Association, have petitioned FERC to make wholesale electricity prices more transparent. “We think there is rampant price-gouging going on,” Slocum said. “We feel this is because bidders do not have to make their bids public.”
Slocum was referring to power generators — or banks holding the rights to generators’ output — that offer to sell electricity on regional wholesale markets to utilities or industrial plants. Secrecy surrounding the bidding process can lead to inflated bills for consumers, he said. “Our goal is to lower prices for households.”
FERC spokeswoman Barbara Connors said that bid amounts are disclosed after three months but “the identity of the bidder is masked.” There are no plans to change this policy, Connors said.
John Shelk, president and CEO of the Electric Power Supply Association, which represents power wholesalers, said that market operators like Pennsylvania-based PJM Interconnection post on their websites, at five-minute intervals, the final prices paid by local utilities like Washington, D.C.’s PEPCO. “There’s a lot of transparency from our perspective,” Shelk said.
But the actual bids that resulted in the final price are not posted. This, Shelk said, “prevents people from colluding — if not directly then indirectly — by seeing what everybody else is bidding. It preserves the integrity of the bidding process.” He added that bids are disclosed to those who need to know: FERC, independent market monitors and operators.
Nonetheless, Slocum is calling for public disclosure of bids as quickly as possible, with names. “After three months this information is largely useless,” he said, “and the whole point of transparency is to identify the bidder.”
For those who believe that the Enron debacle can’t happen again, Slocum points to the $12 million settlement the Department of Justice reached with KeySpan Corp. in February. KeySpan violated antitrust laws by “restraining competition in the New York City electricity capacity market,” the department said in a statement. KeySpan’s manipulation of the market happened “right under FERC’s nose,” Slocum said.
ABOUT THE DATA:
What: Bids by wholesale power generators
Where: Federal Energy Regulatory Commission
Availability: Bid amounts, but not bidder names, released after three months
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