Skip to main content

Why Are Firms With Ties to Wall Street Buying Power Plants, Then Closing Them Down?

 "The real answer is simple," writes journalist David Cay Johnston, who says we could see a return of Enron-style price gouging. "Under the rules of the electricity markets, the best way to earn huge profits is by reducing the supply of power."

ENRON-STYLE PRICE GOUGING IS MAKING A COMEBACK

The price of electricity would soar under the latest scheme by Wall Street financial engineers to game the electricity markets.

If regulators side with Wall Street — and indications are that they will — expect the cost of electricity to rise from Maine to California as others duplicate this scheme to manipulate the markets, as Enron did on the West Coast 14 years ago, before the electricity-trading company collapsed under allegations of accounting fraud and corruption.

The test case is playing out in New England. Energy Capital Partners, an investment group that uses tax-avoiding offshore investing techniques and has deep ties to Goldman Sachs, paid $650 million last year to acquire three generating plant complexes, including the second largest electric power plant in New England, Brayton Point in Massachusetts . . .

The real answer is simple: Under the rules of the electricity markets, the best way to earn huge profits is by reducing the supply of power. That creates a shortage during peak demand periods, such as hot summer evenings and cold winter days, causing prices to rise. Under the rules of the electricity markets, even a tiny shortfall between the available supply of electricity and the demand from customers results in enormous price spikes.

With Brayton Point closed, New England consumers and businesses will spend as much as $2.6 billion more per year for electricity, critics of the deal suggest in documents filed with the Federal Energy Regulatory Commission.

That estimate will turn out to be conservative, I expect, based on what Enron traders did to California, Oregon and Washington electricity customers starting in 2000. In California alone the short-term market manipulations cost each resident more than $1,300, a total burden of about $45 billion.


http://america.aljazeera.com/...
EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

skybluewater, SME in Seattle, fly, paradox, Joe Bob, Mimikatz, Sylv, chuck utzman, murphy, teacherken, Subterranean, Gooserock, Shockwave, Caniac41, Wintermute, cotterperson, genethefiend, eeff, Do Something, gjohnsit, DrSpike, hubcap, eyeswideopen, Gustogirl, TracieLynn, cskendrick, whenwego, chimpy, Ignacio Magaloni, vmckimmey, jalbert, ctsteve, Iberian, Cedwyn, emmasnacker, laughingriver, defluxion10, Calidrissp, lcrp, stringer bell, zerelda, solesse413, sebastianguy99, Gowrie Gal, kbman, Bluesee, marina, Tinfoil Hat, UncleCharlie, Alice Marshall, Simplify, YucatanMan, where4art, lotlizard, Sandino, Yamara, deepsouthdoug, snoopydawg, Jim R, CJnyc, Jim P, golem, Kingsmeg, Mr Bojangles, emeraldmaiden, cardboardurinal, HoundDog, Gorette, KenBee, blueoasis, MJ via Chicago, StrayCat, twigg, The Hindsight Times, Rosaura, el cid, onionjim, IL clb, blueoregon, kurt, Statusquomustgo, bstotts, bartcopfan, markthshark, krwheaton, Cronesense, Habitat Vic, Haningchadus14, camlbacker, Dartagnan, yoduuuh do or do not, HCKAD, bobswern, millwood, Timmethy, JML9999, spearfish, keyscritter, on the cusp, rmonroe, jwinIL14, Andy Cobb, JeffW, 6412093, OleHippieChick, Ronald England, elwior, Buckeye Nut Schell, treesrock, mikeconwell, Lujane, tofumagoo, Jeff Y, elpacifico66, BYw, JamieG from Md, billybam, Bule Betawi, Ravenstream, Softlanded, The Dead Man, bobatkinson, Carol in San Antonio, JesseCW, dRefractor, asym, sfarkash, Words In Action, Just Bob, FogCityJohn, flitedocnm, piers, Crabby Abbey, samanthab, Kristina40, DiegoUK, Jaimas, ban48, Betty Pinson, DrTerwilliker, ericlewis0, nosleep4u, slice, Pakalolo, Bluefin, allenjo, Sal Bovoso, ozsea1, Liberal Capitalist, slowbutsure, vahana, cv lurking gf, anyname, FarWestGirl, cama2008, boomerchick, mrsgoo, Haf2Read, marleycat, sethtriggs, Santa Susanna Kid, MuskokaGord, Vatexia, Hayate Yagami, Sunspots, DRo, Auriandra, DEMonrat ankle biter, No one gets out alive, Laurel in CA, Rejoinder, greenbastard, Mindful Nature, oldcrow, Lonely Texan, peachcreek, TBug, radical simplicity, doroma, New Minas, Glen The Plumber, George3, ZatCSU, Windowpane, TheMeansAreTheEnd, countwebb, jbob, goodpractice, northerntier, notevenclosetoonepercent, duhban, maregug, skepticalcitizen, RUNDOWN, patbahn, occupystephanie, lehman scott, hbk

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site