Sense on Cents

Market manipulation is certainly not restricted to Wall Street.

In fact, I believe the most egregious case of market manipulation goes back to the early years of this century when traders in a Houston based firm known as Enron — you remember the names Lay, Fastow, and Skilling, right — manipulated the California electricity market. While Enron rolled in the dough, the only things rolling through the California countryside were blackouts.

Well, how interesting that ten-plus years later we revisit Houston to see the name Enron invoked once again in a case alleging manipulation of the electricity markets right there in Texas. Let’s navigate as the Courthouse News Service recently reported:  

HOUSTON (CN) – GDF Suez illegally manipulates the Texas market by taking its power plants offline during times of tight supply, which drives up electricity prices and creates havoc for commodities traders, two traders claim in Federal Court.

Aspire Commodities and Raiden Commodities sued GDF Suez Energy North America Inc., claiming its price fixing scheme violates the Commodities Exchange Act.

The lawsuit accuses GDF Suez and others of using the same scheme that Enron et al. used to create the 2001-2001 California electricity crisis. During periods of peak demand, taking even a small amount of power offline, or threatening to do so, can send the market over the edge.

Based in Houston, GDF Suez North America boasts 13,863 megawatts of generating capacity from its dozens of power plants, and has market stakes in Texas, New England, Canada and Mexico.

GDF Suez North America is part of the French multinational utility GDF Suez S.A. The lawsuit focuses on GDF Suez’s role in the Texas market, which is controlled by The Electrical Reliability Council of Texas – a nonprofit regulated by the Public Utility Commission of Texas – which manages the grid for most of the state.

While GDF Suez would maintain that it is a relatively ‘small fish’ in the Texas electricity market and seemingly not able to impact the broader market, plaintiffs maintain otherwise and that GDF Suez is violating the Commodities Exchange Act.

This case bears watching for a variety of reasons including: implications on electricity markets elsewhere especially in New England where GDF Suez also has a market presence; how rigorous the court will be in applying the rules as laid out in the Commodities Exchange Act; the impact on people’s pocketbooks in the Lone Star state.

For those who may care to review the entire complaint, I welcome providing it: Aspire Commodities, LP and Raiden Commodities LP v GDF Suez Energy North America et al.

Sense on Cents will be watching.

Larry Doyle

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The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

This entry was posted on Wednesday, May 7th, 2014 at 8:58 AM and is filed under General, market manipulation. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.