Market Manipulation

Conclusion

The investigations with respect to market manipulation are ongoing. To date, some charges have been dismissed and in others, penalties have been paid without admission of guilt. The process is not complete. Therefore, it is not possible to reach a final conclusion.

That said, two things seem relatively certain. First, the root causes of California’s electricity crisis remain: market forces, climate, and design flaws. Market manipulation accusations, while troublesome, were mostly related to individual traders seeking to game the rules or to cheat. These actions work best when undetected. If the market moves, as it does with underscheduling, losers in the market will respond and regulators will identify and attempt to fix the problem.

Second, energy markets need a strong and fast-acting market monitoring program. California recognized this need. However, the previous discussion and the fact that years later the investigation continues suggest that California’s monitoring function was not initially up to the task. We take up this subject in Chapter 14.