2000–2001 California electricity crisis
[12]: 1 In addition, rolling blackouts adversely affected many businesses dependent upon a reliable supply of electricity, and inconvenienced many retail consumers.
Enron took advantage of this partial deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.
Manipulation strategies were known to energy traders under names such as "Fat Boy", "Death Star", "Forney Perpetual Loop", "Wheel Out", "Ricochet", "Ping Pong", "Black Widow", "Big Foot", "Red Congo", "Cong Catcher" and "Get Shorty".
Prices doubled in two months due to a hot summer, and people protested by not paying their full bills and calling the power company.
[23] When the electricity demand in California rose, utilities had no financial incentive to expand production, as long term prices were capped.
For example, in a market technique known as megawatt laundering, wholesalers bought up electricity in California at below cap price to sell out of state, creating shortages.
[24] After extensive investigation, the Federal Energy Regulatory Commission (FERC) substantially agreed in 2003:[14] In the mid-1990s, under Republican Governor Pete Wilson, California began changing the electricity industry.
The International Energy Agency estimates[33] that a 5% lowering of demand would result in a 50% price reduction during the peak hours of the California electricity crisis in 2000/2001.
[34] Most notably, the city of Los Angeles was unaffected by the crisis because government-owned public utilities in California (including the Los Angeles Department of Water & Power) were exempt from the deregulation legislation and sold their excess power to private utilities in the state (mostly to Southern California Edison) during the crises.
[36] According to a 2007 study of Department of Energy data by Power in the Public Interest, retail electricity prices rose much more from 1999 to 2007 in states that adopted deregulation than in those that did not.
[39] S. David Freeman, who was appointed Chair of the California Power Authority in the midst of the crisis, made the following statements about Enron's involvement in testimony[39] submitted before the Subcommittee on Consumer Affairs, Foreign Commerce and Tourism of the Senate Committee on Commerce, Science and Transportation on May 15, 2002: Some critics, such as Arianna Huffington, alleged that Davis was lulled to inaction by campaign contributions from energy producers.
[40] In addition, the California State Legislature would sometimes push Davis to act decisively by taking over power plants which were known to have been gamed and place them back under control of the utilities, ensuring a more steady supply and punished the worst manipulators.
They advised suspending environmental studies to build power plants and a small rate hike to prepare for long-term power contracts (Davis eventually signed overpriced ones, as noted above), while Davis supported price caps, denounced the other solutions as too politically risky, and allegedly acted rudely.
In the Spring of 2001, House Government Affairs Energy Policy and Regulatory Affairs Subcommittee Chairman Doug Ose held a series of field hearings in California and Nevada, receiving testimony from Public Utilities Commission Chair Loretta Lynch, FERC General Counsel Kevin Madden, California ISO President and CEO Terry Winter and Central Valley farmers.
On August 17, 2013, the British Columbia company Powerex agreed to a $750 million refund as a settlement over charges of manipulating electricity prices during 2000.
