known as megawatt laundering, wholesalers bought up electricity in California at below cap price to sell out of state, creating shortages. In some instances, wholesalers scheduled power transmission to create congestion and drive up prices.
After extensive investigation The Federal Energy Regulatory Commission (FERC) substantially agreed in 2003:
“…supply-demand imbalance, flawed market design and inconsistent rules made possible significant market manipulation as delineated in final investigation report. Without underlying market dysfunction, attempts to manipulate the market would not be successful.”
“…many trading strategies employed by Enron and other companies violated the anti-gaming provisions…”
“Electricity prices in California spot markets were affected by economic withholding and inflated price bidding, in violation of tariff anti-gaming provisions.”
The major flaw of the deregulation scheme was that it was an incomplete deregulationhat is, “middleman” utility distributors continued to be regulated and forced to charge fixed prices, and continued to have limited choice in terms of electricity providers. Other, less catastrophic energy deregulation schemes, such as Pennsylvania’s, have generally deregulated utilities but kept the providers regulated, or deregulated both.
New regulations
In the mid-90’s, under Republican Governor Pete Wilson, California began changing the electricity industry. Democratic State Senator Steve Peace, the chair of the energy committee and the author of the bill that put these changes into effect, is often credited as
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