Manipulation of California energy market gives consumers a jolt [1]

Los Angeles Times
By Michael Hiltzik
July 18, 2012

The California Independent System Operator estimates that JPMorgan Chase & Co. may have gamed the state's power market for $57 million in improper payments over six months in 2010 and 2011.
(AFP/Getty Images / July 17, 2012)

The next time your electricity bill prompts you to curse your local utility, here's another target where you should direct your anger: JPMorgan Chase [2] & Co., which has manipulated the California energy market for its own profit and at a cost to residents and businesses in the state that could be $100 million, $200 million or much more.

That's the accusation leveled by the California Independent System Operator, [3] which has jurisdiction over 80% of the state's electrical transmission. The ISO, a nonprofit corporation controlled by the state government, estimates that JPMorgan may have gamed the state's power market for $57 million in improper payments over six months in 2010 and 2011.

But that could be just the tip of the iceberg: The bank continued its activities past that time frame, according to the ISO. It also says JPMorgan's alleged manipulation could have helped throw the entire energy market out of whack, imposing what could be incalculable costs on ratepayers.

The Federal Energy Regulatory Commission, the regulator of the ISO and its trading markets, has started a formal investigation [4] into Morgan's allegedly manipulative energy deals in California and with the Midwest ISO, which covers 11 states from Michigan to Montana.

Forget JPMorgan's well-publicized multibillion-dollar trading loss in derivatives; this trade turned a handsome profit, and it came directly out of electric customers' hides. The toll may not have amounted to much for each of the 37 million men, women and children in California. But collectively it's a massive, illegitimate tax on the entire state.

What's worse, it shows that we haven't learned anything from Enron's bogus energy trading, [5] the disclosure of which helped destroy that firm in 2001 and land several of its executives in jail. To the extent it was designed to exploit loopholes in energy trading rules, experts say, the scheme allegedly perpetrated by JPMorgan Ventures Energy Corp. is cut from the same cloth as Enron's infamous "fat boy" swindle, which cost the state's ratepayers an estimated $1.4 billion in 2000.

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