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FTR #420 The Destabilization of California Pt. 2

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Sup­ple­ment­ing FTR 280, this pro­gram high­lights the cyn­i­cal, con­spir­a­to­r­i­al machi­na­tions of major ener­gy com­pa­nies, the Bush admin­is­tra­tion and the Cal­i­for­nia Repub­li­can estab­lish­ment in effect­ing Cal­i­for­ni­a’s “ener­gy cri­sis” of 2000–2001. High­light­ing the inter­play of Bush crony Ken Lay’s now dis­graced Enron firm, an advi­so­ry task force head­ed up by Bush asso­ciate James Bak­er and the Bush admin­is­tra­tion ener­gy com­mis­sion head­ed by Dick Cheney, the pro­gram access­es a very impor­tant paper authored by Kather­ine Yuri­ca. Be sure to check out this work at her web site. There are strong indi­ca­tions that Cal­i­for­ni­a’s “ener­gy cri­sis” was delib­er­ate­ly engi­neered in order to under­mine Demo­c­ra­t­ic gov­er­nor Gray Davis, enrich the ener­gy indus­try, and pro­vide the ratio­nale for the Bush admin­is­tra­tion’s for­eign pol­i­cy.

Pro­gram High­lights Include: For­mer gov­er­nor Pete Wilson’s chair­man­ship of Arnold Schwarzeneg­ger’s cam­paign; a very sus­pi­cious (prob­a­ble) test of the Cal­i­for­nia elec­tric­i­ty-bro­ker­ing infra­struc­ture; the Bak­er advi­so­ry group’s cit­ing of the Cal­i­for­nia “cri­sis” as the basis for domes­tic and for­eign pol­i­cy rec­om­men­da­tions; the Cheney group’s sus­pi­cious cit­ing of the Cal­i­for­nia ener­gy cri­sis; high­ly sus­pi­cious and con­tra­dic­to­ry word­ing of the “Nation­al Ener­gy Pol­i­cy” drawn up by the Cheney com­mis­sion; the Project for a New Amer­i­can Cen­tu­ry’s dis­cus­sion of the poten­tial use­ful­ness of “a new Pearl Har­bor”; the desta­bi­liza­tion of Jim­my Carter’s pres­i­den­cy by the oil indus­try, George H.W. Bush’s CIA and the Saud­is.

1. A major con­tribut­ing fac­tor to incum­bent gov­er­nor Gray Davis’ unpop­u­lar­i­ty is the enor­mous increase in elec­tric­i­ty prices due to the dereg­u­la­tion leg­is­la­tion effect­ed by for­mer gov­er­nor Pete Wil­son. Wil­son is “out­sider” Arnold Schwarzeneg­ger’s cam­paign man­ag­er, giv­ing the lie to Schwarzeneg­ger’s claim that he will kick the spe­cial inter­ests out of Sacra­men­to. He is, in fact, a tool of those very same spe­cial inter­ests.

“Admon­ished by his advis­ers not to make news out of the box, Mr. Schwarzeneg­ger left his cam­paign chair­man, Pete Wil­son, the for­mer Cal­i­for­nia gov­er­nor, to attack Mr. Davis as an incom­pe­tent spend­thrift, and less­er polit­i­cal min­ions to explain his per­son­al finances to a press corps demand­ing details, any details.”

(“In Full Field, It’s All About Schwarzeneg­ger” by Char­lie LeDuff and Alan Feuer; The New York Times; 8/11/2003;.)

2. Bush’s Sven­gali Karl Rove was appar­ent­ly among those who helped to anoint Schwarzeneg­ger as the stan­dard bear­er for Cal­i­for­nia.

“. . . From what we’ve heard, the Repub­li­can hierarchy—especially those close to for­mer Gov. Pete Wilson—would favor Schwarzeneg­ger. At least that’s the word that came out of the Bohemi­an Grove this past week­end, where a num­ber of state and nation­al GOP­ers, includ­ing pres­i­den­tial advis­er Karl Rove, hap­pened to have gath­ered at a club get­away . . .”

(“Mati­er & Ross: Schwarzeneg­ger to Decide”; San Fran­cis­co Chron­i­cle; 7/23/2003; p. A21.)

3. Begin­ning the dis­cus­sion of the delib­er­ate manip­u­la­tion of Cal­i­for­ni­a’s dereg­u­lat­ed elec­tric­i­ty mar­ket, the pro­gram chron­i­cles a star­tling fluc­tu­a­tion of rates in 1998. The author of this impor­tant, inci­sive arti­cle observes that this was appar­ent­ly a test of the “pow­er lift­ing” that desta­bi­lized Davis and boost­ed Schwarzeneg­ger in a posi­tion to move to Sacra­men­to. “This sto­ry begins with the Cal­i­for­nia ener­gy cri­sis, which start­ed in 2000 and con­tin­ued through the ear­ly months of 2001, when elec­tric­i­ty prices spiked to their high­est lev­els. Prices went from $12 per megawatt hour in 1998 to $2000 in Decem­ber 2000 to $250 in Jan­u­ary 2001, and at times a megawatt cost $1,000.” (“Fraud Traced to the White House: How Cal­i­for­ni­a’s Ener­gy Scam Was Inex­tri­ca­bly Linked to a War” by Kather­ine Yuri­ca; The Yuri­ca Report; p. 1; avail­able online at www.yuricareport.com/PoliticalAnalysis/FraudinWhiteHouse.htm .)

4.

“One event occurred ear­li­er. On July 13, 1998, employ­ees of one of the two pow­er-mar­ket­ing cen­ters in Cal­i­for­nia watched incred­u­lous­ly as the whole­sale price of 41 a megawatt hour spiked to $9,999, stayed at that price for four hours, then dropped to a pen­ny. Some­one was test­ing the sys­tem to find the lim­its of mar­ket exploita­tion. This inci­dent was the ear­li­est indi­ca­tion that the peo­ple and the state could become vic­tims of fraud. The Sacra­men­to Bee broke the sto­ry three years lat­er, on May 6, 2001. Today, Cal­i­for­ni­ans are still pay­ing the costs of the deba­cle while accord­ing to state offi­cials the pow­er com­pa­nies who manip­u­lat­ed the ener­gy mar­kets reaped more than $7.5 bil­lion in unfair prof­its.”

(Idem.)

5. Cal­i­for­ni­a’s “ener­gy cri­sis” appar­ent­ly served as a foun­da­tion for dis­graced Enron chair­man Ken­neth Lay’s piv­otal rec­om­men­da­tions to Vice-Pres­i­dent Dick Cheney’s ener­gy pol­i­cy task force.

“In April of 2001, Ken Lay hand­ed Dick Cheney a two-page mem­o­ran­dum rec­om­mend­ing nation­al ener­gy pol­i­cy changes. The memo con­tained Enron’s posi­tions on spe­cif­ic, rather tech­ni­cal issues, which were pre­sent­ed as a ‘fix’ for the Cal­i­for­nia cri­sis. (Enron brazen­ly advised the admin­is­tra­tion not to place price caps on ener­gy, which would be pre­cise­ly the request Cal­i­for­nia offi­cials made to the pres­i­dent, and which the Pres­i­dent and the Vice Pres­i­dent would just as brazen­ly deny until pub­lic pres­sure forced them to capit­u­late.)”

(Ibid.; p. 2.)

6. For­mer Bush (Senior) sec­re­tary of state James Bak­er presided over an advi­so­ry report that also appears to have been cen­tral to Cheney’s ener­gy direc­tives.

“On Octo­ber 6, 2002, a news­pa­per in the UK pub­lished a lit­tle known arti­cle about Mr. Cheney’s advis­ers. Accord­ing to Neil MacK­ay, an award-win­ning jour­nal­ist, writ­ing for Scot­land’s Sun­day Her­ald, Dick Cheney com­mis­sioned an ener­gy report from ex-Sec­re­tary of State James Bak­er III. The time of this ‘com­mis­sion’ is not report­ed, but since the mem­bers of the appoint­ed task force held three video­con­fer­ences and tele­con­fer­ences in Decem­ber, Jan­u­ary, and Feb­ru­ary 2000–2001, Cheney there­fore log­i­cal­ly con­tact­ed Bak­er some time pri­or to the Decem­ber 2000 meeting—during the pres­i­den­tial tran­si­tion peri­od.”

(Ibid.; p. 3.)

7. Bak­er’s law firm is the legal coun­sel for the Bin Laden-con­nect­ed Car­lyle Group. In addi­tion, the firm is rep­re­sent­ing Sau­di Prince Sul­tan in a tril­lion-dol­lar suit filed by the sur­vivors of the vic­tims of 9/11.

“James Bak­er was unique­ly sit­u­at­ed to ful­fill Cheney’s com­mis­sion, for among the many hats he wears, he is legal coun­sel to the Car­lyle Group, one of the nation’s largest defense invest­ment firms whose board con­sists of for­mer high lev­el gov­ern­ment offi­cials, includ­ing George Bush, Sr. Bak­er was also the ‘hired gun’ for George W. Bush’s cam­paign in Flori­da, along with Karl Rove. But among the hats he wears, none is more valu­able than his abil­i­ty to become invis­i­ble and leave no fin­ger­prints behind. James Bak­er courts the press and is hailed a states­man; he also serves as the hon­orary chair­man of the James Bak­er III Insti­tute for Pub­lic Pol­i­cy at Rice Uni­ver­si­ty, a think tank that was involved in aid­ing the George W. Bush pres­i­den­tial tran­si­tion teams.”

(Idem.)

8.

“Equal­ly intrigu­ing is the fact that Bak­er has ties with both the Bush­es and Ken Lay. Years ear­li­er, in 1993, after Bak­er stepped down from his stint as Sec­re­tary of State, he and Robert A. Mosbacher—Bush senior’s com­merce secretary—signed a joint con­sult­ing and invest­ing agree­ment with Enron. The two men began a lucra­tive career mak­ing joint glob­al invest­ments with Enron on nat­ur­al gas projects. Bak­er Botts LLC, James Bak­er’s law firm, flour­ished in its spe­cial­ty of inter­na­tion­al oil and gas coun­sel­ing.”

(Idem.)

9. Ken Lay was not the only ener­gy-indus­try high roller to par­tic­i­pate in the Bak­er task force.

“Since Bak­er walked in their cir­cles, when he set out to select an ener­gy team to advise the White House, he filled it with lead­ers of the oil, gas, and pow­er indus­tries. Three appointees stand out: Ken­neth Lay from Enron, who was work­ing on the Bush ener­gy Tran­si­tion team under Dick Cheney at the time; Chuck Wat­son, the then Chair­man and CEO of Hous­ton’s Dyn­e­gy Inc., and Dyn­e­gy’s Gen­er­al Coun­sel and Sec­re­tary, Ken­neth Ran­dolf. Both firms were deeply involved in ille­gal­ly manip­u­lat­ing the Cal­i­for­nia ener­gy mar­ket at the time and even­tu­al­ly faced crim­i­nal inves­ti­ga­tions.”

(Ibid.; pp. 3–4.)

10. The Cal­i­for­nia “ener­gy cri­sis” appears to have played a key part in the rec­om­men­da­tions of the Bak­er ener­gy advi­so­ry group.

“The Bak­er ener­gy task force pro­duced a report titled, Strate­gic Ener­gy Pol­i­cy Chal­lenges for the 21st Cen­tu­ry, dat­ed April 2001. There is no mis­tak­ing the fact that rea­son­able, detailed and impor­tant expert advice is met­ed out to the new pres­i­dent. How­ev­er, this amaz­ing 107-page report strikes a drum­beat for action that grabs the read­er as it pro­pels a pic­ture of a naked, ener­gy-scarce nation, sub­ject to ener­gy short­ages and price fluc­tu­a­tions, across its pages. Con­trast­ing the state of what is, against what should be, and mer­ci­ful­ly mak­ing pow­er­ful rec­om­men­da­tions that will ‘save our econ­o­my,’ it offers warn­ings such as: a sharp rise ‘in oil prices pre­ced­ed every Amer­i­can reces­sion since the late 1940’s.’ ”

(Ibid.; p. 4.)

11.

“The Cal­i­for­nia ener­gy cri­sis is raised again and again, along with the prophe­cy that Amer­i­ca can expect ‘more Cal­i­for­nia-like inci­dents’ in the future. There’s even a con­nec­tion made between the Cal­i­for­nia cri­sis and the Mid­dle East, which accord­ing to the report, ‘will remain the world’s base-load sup­pli­er and least expen­sive source of oil for the fore­see­able future.’ With that prophet­ic utter­ance, the stage is now set for a new actor, a new vil­lain, and a new ener­gy pol­i­cy. . . .”

(Idem.)

12. Although it is not cov­ered in detail in the broad­cast, the Bush ener­gy pol­i­cy also had pro­found for­eign pol­i­cy rec­om­men­da­tions, focus­ing on Iraq, among oth­er issues. The broad­cast reviews the dis­turb­ing obser­va­tions about the poten­tial use­ful­ness of “A New Pearl Har­bor” in a paper by the Bush-con­nect­ed Project for a New Amer­i­can Cen­tu­ry.

“ ‘The his­to­ry of the 20th Cen­tu­ry should have taught us that it is impor­tant to shape cir­cum­stances before crises emerge and to meet threats before they become dire.’ In fact, on pages 51 and 67 of the insti­tu­tion’s intel­lec­tu­al cen­ter­piece, Rebuild­ing Amer­i­ca’s Defens­es, the authors lament that the process of trans­form­ing the mil­i­tary would most like­ly be a long one, ‘absent some cat­a­stroph­ic and cat­alyz­ing event—like a new Pearl Har­bor.’ (How unfor­tu­nate for Amer­i­cans, they got their need­ed event on Sep­tem­ber 11, 2001.)”

(Ibid.; p. 5.)

13.

“One of the most strik­ing facts about the nation­al report is that it makes 110 ref­er­ences to Cal­i­for­ni­a’s ener­gy cri­sis, which was nine­ty-nine more than the Bak­er report makes. Clear­ly, some­one in the White House need­ed an impres­sive ener­gy cri­sis to tout. How unfor­tu­nate that the cri­sis cit­ed was fraud­u­lent­ly induced. Like the Bak­er report, the nation­al report states, ‘The Cal­i­for­nia expe­ri­ence demon­strates the crip­pling effect that elec­tric­i­ty short­ages and black outs can have on a state or region.’ Warn­ings abound: ‘Amer­i­ca in the year 2001 faces the most seri­ous ener­gy short­age since the oil embar­goes of the 1970’s.’ The 110 rep­e­ti­tions of the word ‘Cal­i­for­nia’ linked with words like ‘ener­gy cri­sis,’ and ‘ener­gy short­ages and price spikes,’ could turn the nation­al ener­gy report into an ad man’s prized primer.”

(Ibid.; p. 6.)

14. Revers­ing direc­tion, the author (s) of one of the pas­sages in the report reveals the he (or she) is aware of the true nature of Cal­i­for­ni­a’s man­u­fac­tured ener­gy cri­sis.

“Notwith­stand­ing its impor­tance as an exam­ple of what could hap­pen to oth­er states, the author of a pas­sage (at page 5–12) of the nation­al report sud­den­ly yields to an impulse to relate what real­ly hap­pened in Cal­i­for­nia. In doing so, he com­plete­ly con­tra­dicts at least 105 ref­er­ences to Cal­i­for­nia through­out the report. The sig­nif­i­cance of this con­tra­dic­to­ry entry into the Nation­al Ener­gy Pol­i­cy must not be under­es­ti­mat­ed.”

(Idem.)

15.

“In the process of revers­ing the care­ful­ly con­strued ‘Cal­i­for­nia expe­ri­ence,’ the author’s grasp exceeds his knowl­edge in that his under­stand­ing of the events in Cal­i­for­nia go beyond what he should have rea­son­ably known at the time of its writ­ing. For he wrote, ‘The risk that the Cal­i­for­nia expe­ri­ence will repeat itself is low, since oth­er states have not mod­eled their retail com­pe­ti­tion plans on Cal­i­for­ni­a’s plan.’ This is an astound­ing state­ment. If the Cal­i­for­nia cri­sis was caused by a sup­ply short­age as the author claims a line above this sen­tence, sure­ly oth­er states could suf­fer sim­i­lar short­ages. But no, the author is actu­al­ly mak­ing an admis­sion here: he is admit­ting the ener­gy cri­sis in Cal­i­for­nia can’t be repli­cat­ed in oth­er states because cer­tain mar­ket means do not exist in the oth­er states. How could the author know this? The writer of that sen­tence would have to be some­one inti­mate­ly involved in the Cal­i­for­nia sys­tem; know the real cause of the state’s cri­sis; and be famil­iar with all the oth­er state rules and mar­ket infra­struc­tures.”

(Idem.)

16. Ms. Yuri­ca dis­cuss­es yet anoth­er reveal­ing rever­sal of direc­tion by the author of the report.

“But our knowl­edge­able author is not done. In try­ing to ampli­fy what he just revealed, he tried to hide the true actors in the next sen­tence by mis­di­rect­ing the read­er away from the cul­prits to blame the state. This is a for­mu­la for inco­her­ence. Nonethe­less, the writer’s sen­tence found its way into the nation­al ener­gy report where it spoke for the Bush admin­is­tra­tion: “Cal­i­for­ni­a’s fail­ure to amend its rules, along with the flawed rules them­selves, some­how had an inde­pen­dent pow­er to ‘dri­ve up whole­sale prices,’ with­out an inter­ven­ing act­ing agent. The only sen­si­ble read­ing left to us is that the flawed rules allowed pow­er bro­kers to manip­u­late the sys­tem. But how could our author and his admin­is­tra­tion edi­tors know this to be true with­out being in col­lu­sion with the wrong­do­ers? If they were not in col­lu­sion they would have report­ed the crime. But if they remained silent when they had a duty to report or stop the com­mis­sion of a crime, they became acces­sories.”

(Ibid.; pp. 6–7.)

17.

“Con­tin­u­ing his unex­pect­ed analy­sis, the author tells us, ‘Actions such as forc­ing util­i­ties to pur­chase all their pow­er through volatile spot mar­kets, impos­ing a sin­gle-price auc­tion sys­tem, and bar­ring bilat­er­al con­tracts all con­tributed to the prob­lems that Cal­i­for­nia now faces.’ This is noth­ing more than the author, and through him the White House, attempt­ing to throw respon­si­bil­i­ty for any wrong­do­ing by ener­gy com­pa­nies in Cal­i­for­nia square­ly at the feet of the state.”

(Ibid.; p. 7.)

18. Philoso­pher George San­tayana stat­ed that, “Those who for­get the past are con­demned to repeat it.” Fore­shad­ow­ing the actions of George W. Bush’s ener­gy-indus­try cronies in Cal­i­for­nia, the petro­le­um indus­try, the Saud­is and George H.W. Bush’s CIA helped to desta­bi­lize Jim­my Carter’s Pres­i­den­cy.

“The sources we inter­viewed for this chap­ter say that the oil indus­try had a well thought out scheme to deceive the pres­i­dent and con­trol U.S. pol­i­cy in the Mid­dle East. The first part involved intel­li­gence fal­si­fi­ca­tion on a grand scale. This was no small-time Angle­ton Ves­sel forgery. This time, our sources insist, the pres­i­dent of the Unit­ed States was to have his ‘pants scared right off him.’ The CIA was used to pro­duce pho­ny oil data to show that the world’s two great­est oil pro­duc­ers, the Sovi­et Union and Sau­di Ara­bia, were run­ning out of oil. The Sovi­ets would be forced to fight the Unit­ed States for con­trol of Mid­dle East­ern oil.”

(The Secret War Against the Jews; by John Lof­tus and Mark Aarons; Copy­right 1994 by Mark Aarons; St. Mar­t­in’s Press; [SC] ISBN 0–312-15648–0; p. 332.)

19.

“It is hard to recall why he [Jim­my Carter] was so despised when he ws in office. Much of it has to do with the secret his­to­ry of oil pol­i­tics. Even dur­ing the 1976 elec­tion cam­paign, the oil com­pa­nies viewed the Demo­c­ra­t­ic can­di­date as Pub­lic Ene­my Num­ber One. Carter cer­tain­ly had some rad­i­cal ides about ener­gy pol­i­cy, which made the oil com­pa­nies fear­ful for the future and their prof­it lev­els.”

(Ibid.; p. 333.)

20.

“ ‘The whole pho­ny scheme—the oil short­ages, the pre­dic­tions about Sovi­et troops in the Mid­dle East, the Sau­di arms buildup—all of that crap start­ed com­ing out of the agency back in ’76. The CIA told their boss what he want­ed to hear, and in those days, the head of the CIA was an oil man.’ ”

(Ibid.; p. 334.)

21.

“Accord­ing to sev­er­al of our sources, the scheme to man­u­fac­ture pho­ny CIA esti­mates and push them on Carter began in the last days of Ger­ald Ford’s term. They claim that a cabal with­in the CIA real­ized that Carter would be the new pres­i­dent, pro­duced the first pho­ny report, and then prompt­ly gave it to Carter as soon as he won, know­ing how it would affect his view of the ener­gy cri­sis. It should be recalled that George Bush was the direc­tor of the CIA at the time the oil scam was put in place in 1976. There is some evi­dence to sug­gest that it was Bush him­self who passed the fake oil esti­mates to Carter. In the imme­di­ate after­math of Carter’s win, Bush trav­eled to Plains, Geor­gia, to brief the incom­ing pres­i­dent.”

(Ibid.; pp. 334–335.)

22.

“ ‘Don’t you get it?” asked one of our sources. ‘The gas short­age dur­ing the Carter admin­is­tra­tion was as pho­ny as the CIA’s pre­dic­tion about the Sovi­et oil short­age. The god damn Mid­dle East was swim­ming in oil dur­ing the Carter admin­is­tra­tion, but less and less of it ws shipped to Amer­i­ca. For chris­sakes, there was so much oil in South Amer­i­ca that they had to shut down refiner­ies I the Caribbean to keep it away from the U.S.”

(Ibid.; p. 353.)

23.

“Under the Repub­li­cans, lucra­tive arms fac­to­ries sprout­ed in what had pre­vi­ous­ly been rur­al demo­c­ra­t­ic states. The votes went where the jobs were. In the course of the Rea­gan-Bush admin­is­tra­tions, the defense bud­get was increased to a point where more mon­ey was spent on arms than in all the wars in U.S. his­to­ry com­bined. To accom­plish this mas­sive defense buildup, the Rea­gan-Bush admin­is­tra­tions bor­rowed three times more mon­ey than all U.S. pres­i­dents com­bined The largest debt in Amer­i­can his­to­ry was based on the faulty premise that the Sovi­et Union was going to attack the Mid­dle East.”

(Ibid.; p. 355.)

Discussion

6 comments for “FTR #420 The Destabilization of California Pt. 2”

  1. Is Schwazi tied in with the Haps­burg boy’s UNPO.... did he get Maria through the Dalai Lama gim­mick, or seek her for the Dalai Lama politi­ciza­tion gim­mick? Maybe you noticed how one of Schwaz­i’s first trips was to Tai­wan to thank his EEa­sia-Under­world alliance back­ers who are rid­ing pret­ty in Cal­i­for­nia now, as they did under Chica­go Mafia Peet Wil­son. Did you already cov­er Schwaz­i’s con­nec­tions to Fritz Com­pa­nies who pup­peteered Wal­mart for sev­er­al years, and whose HQ was in Ger­many and which is now tied with the Naz­i­fy­ing Cal Green Par­ty along with the Ger­man CIIS pro­fes­sor who played Bluebird/Ultra with Tim­o­thy Leary?
    Isn’t it like­ly that Pres Schwazi is the Haps­burg’s man in Sac­to? He was at one time try­ing to buy the state’s new green tech­nol­o­gy from Ger­man man­u­fac­tur­ers for a bloat­ed price.

    Posted by Blake | January 30, 2009, 11:44 pm
  2. Ah, ener­gy-mar­ket fraud: The Gen­tle­man’s choice for stick­er shock:

    Finan­cial Times
    Novem­ber 15, 2012 2:55 am
    JPMor­gan pow­er trad­ing rights restrict­ed

    By Tom Braith­waite in New York

    The US ener­gy reg­u­la­tor has banned JP Mor­gan Chase from trad­ing elec­tric­i­ty at mar­ket rates for six months, accus­ing the bank of sub­mit­ting false infor­ma­tion to a con­tin­u­ing inves­ti­ga­tion into alleged mar­ket manip­u­la­tion.

    JPMor­gan, which has had run-ins with reg­u­la­tors all year includ­ing over its out­sized loss­mak­ing deriv­a­tives trades in Lon­don, was hit by an order from the US Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion on Wednes­day evening relat­ed to its activ­i­ties in Cal­i­for­nia.

    The reg­u­la­tor has been new­ly zeal­ous in recent months in levy­ing large fines against mar­ket play­ers includ­ing Bar­clays.

    The order bars JPMor­gan from sell­ing elec­tric­i­ty at mar­ket rates in Cal­i­for­nia for six months from April 1 2013. How­ev­er, the bank will still be able to trade elec­tric­i­ty at prices deter­mined by coun­ter­par­ties and it can con­tin­ue to trade oth­er ener­gy prod­ucts and deriv­a­tives. In essence, the order lim­its the bank’s prof­its while allow­ing it to con­tin­ue oper­at­ing in pow­er mar­kets.

    Whole­sale elec­tric­i­ty has attract­ed height­ened reg­u­la­to­ry atten­tion since the Cal­i­for­nia ener­gy cri­sis of 2000-01, when Enron and oth­er traders were accused of rig­ging sup­plies and caus­ing black­outs. In the past year, Ferc has alleged that Bar­clays and Deutsche Bank manip­u­lat­ed elec­tric­i­ty mar­kets, and has com­pelled Con­stel­la­tion Ener­gy to pay $245m to set­tle anoth­er case.

    Last month Ferc pro­posed a fine of $435m and dis­gorge­ment of $34.9m for Bar­clays for vio­lat­ing the anti-manip­u­la­tion rule in the pow­er trad­ing mar­ket from late 2006 to 2008.
    ...

    Posted by Pterrafractyl | November 15, 2012, 9:17 am
  3. Oh no!!!! There’s a oil glut com­ing due to new refiner­ies open­ing up around the world. No wor­ries, though. The mar­ket is expect­ed to ‘cor­rect’ this prob­lem with a series of refin­ery shut­downs:

    Oil prod­uct glut com­ing as refiner­ies mush­room: IEA

    By Dmit­ry Zhdan­nikov and Christo­pher John­son

    LONDON | Wed Jun 12, 2013 5:41am EDT

    (Reuters) — The world is head­ing for a glut of refined prod­ucts as new Asian and Mid­dle East refiner­ies increase oil pro­cess­ing in a move like­ly to force less advanced com­peti­tors in devel­oped coun­tries to close, the West­’s ener­gy agency said on Wednes­day.

    The Inter­na­tion­al Ener­gy Agency said in its month­ly report it expect­ed 9.5 mil­lion bar­rels per day (bpd) of new crude dis­til­la­tion capac­i­ty, rep­re­sent­ing more than a 10th of glob­al demand, to come on stream in 2013–2018, sub­stan­tial­ly more than the fore­cast increase in crude pro­duc­tion capac­i­ty and glob­al demand growth.

    “While Europe’s eco­nom­ic woes are tak­ing a toll on demand, there are mount­ing signs that Chi­na’s oil use, like its econ­o­my, may have shift­ed to a low­er gear. Slow­er growth in demand than in runs could lead to prod­uct stock builds,” the IEA said.

    The agency said changes would be already felt from the third quar­ter of 2013 as glob­al refin­ery runs may rise by more than 2 mil­lion bpd on the back of increased pro­cess­ing by Chi­na, Sau­di Ara­bia and Venezuela.

    This spike in crude runs would exceed fore­cast prod­uct demand growth of 1.7 mil­lion bpd, the IEA said.

    It also added glob­al crude sup­ply could strug­gle to keep up with refin­ing demand because of sea­son­al main­te­nance to North Sea pro­duc­tion, Sudan’s strug­gle to resume pro­duc­tion, the annu­al hur­ri­cane sea­son in the U.S. Gulf and risks to Mid­dle East­ern out­put due to the Syr­i­an civ­il war.

    Short­er-than-expect­ed crude sup­ply and large refin­ing vol­umes would under­mine refin­ing mar­gins.

    “While that would nor­mal­ly prompt refin­ers to drop their through­puts, mar­ket par­tic­i­pants may not be equal­ly recep­tive to such price sig­nals. New refin­ing capac­i­ty would like­ly be the last to cut back on runs if refin­ing eco­nom­ics turned south,” the IEA said.

    “On the oth­er hand, old­er plants in mature mar­kets, sad­dled with com­par­a­tive­ly high costs, might feel the heat. That those plants should find it increas­ing­ly tough to com­pete is a wide­ly antic­i­pat­ed out­come of the cur­rent down­stream restruc­tur­ing,” the IEA added.

    ...

    Prob­lem solved.

    Posted by Pterrafractyl | June 14, 2013, 2:35 pm
  4. But, but, but they did noth­ing wrong!

    The Wall Street Jour­nal
    Updat­ed July 17, 2013, 3:19 p.m. ET

    J.P. Mor­gan, Ener­gy Reg­u­la­tor Near Record Set­tle­ment
    Bank Set to Pay Hun­dreds of Mil­lions of Dol­lars Over Alle­ga­tions of Elec­tric­i­ty-Mar­ket Manip­u­la­tion

    By DAN FITZPATRICK And RYAN TRACY

    J.P. Mor­gan Chase & Co. and U.S. ener­gy-mar­ket reg­u­la­tors are close to a set­tle­ment that could involve the largest pay­out in the his­to­ry of the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion, said peo­ple famil­iar with the con­ver­sa­tions.

    A deal isn’t final and could still fall apart. But the bank and the reg­u­la­tor, known by the acronym FERC, are exchang­ing drafts of an agree­ment that would resolve alle­ga­tions that the largest U.S. bank manip­u­lat­ed elec­tric­i­ty mar­kets in Cal­i­for­nia and the Mid­west, these peo­ple said.

    A final amount to be paid by J.P. Mor­gan was­n’t known, but pre­vi­ous dis­cus­sions involved a fig­ure that was close to $1 bil­lion, these peo­ple said.

    The con­ver­sa­tions high­light an increas­ing­ly aggres­sive stance tak­en by a lit­tle-known fed­er­al agency that over­sees trans­mis­sion lines, nat­ur­al-gas pipelines and the pow­er trad­ing mar­kets that set util­i­ty bills for mil­lions of busi­ness­es.

    On Tues­day FERC levied a record $435 mil­lion fine against British bank Bar­clays PLC over alle­ga­tions it manip­u­lat­ed Cal­i­for­nia ener­gy mar­kets from 2006 to 2008. FERC also asked for $18 mil­lion in fines from four for­mer traders and the return of $34.9 mil­lion in “unjust prof­its.” Bar­clays on Wednes­day said it would­n’t pay the fines and intend­ed to fight the mat­ter in court.

    J.P. Mor­gan has dis­put­ed FER­C’s alle­ga­tions and some exec­u­tives argued pri­vate­ly the bank should­n’t set­tle because it did noth­ing wrong, said peo­ple famil­iar with the bank’s con­ver­sa­tions with reg­u­la­tors. Blythe Mas­ters, who runs J.P. Mor­gan’s com­modi­ties unit, resist­ed an ear­li­er offer from FERC that involved ban­ning three of her traders from the com­modi­ties mar­kets, these peo­ple said. Her view was these employ­ees and the bank did noth­ing wrong, these peo­ple added.

    ...

    FERC noti­fied the New York bank in March that it intend­ed to rec­om­mend an enforce­ment action against its pow­er-trad­ing unit, J.P. Mor­gan Ven­tures Ener­gy Corp. The notice alleged the bank mis­rep­re­sent­ed the prices of elec­tric­i­ty con­tracts with Cal­i­for­nia and the Mid­west that result­ed in over­pay­ments and that Ms. Mas­ters and three oth­er traders had made false rep­re­sen­ta­tions under oath, accord­ing to a per­son famil­iar with the doc­u­ment.

    J.P. Mor­gan has said it dis­putes the alle­ga­tions and defend­ed its behav­ior aggres­sive­ly in a for­mal response to FERC that ran hun­dreds of pages long, said a per­son famil­iar with that doc­u­ment.

    In the course of its inves­ti­ga­tion, FERC stripped the bank of its abil­i­ty to sell pow­er from three South­ern Cal­i­for­nia pow­er plants where it had agree­ments to pro­vide fuel and sell the out­put. J.P. Mor­gan inher­it­ed the elec­tric­i­ty rights with its 2008 pur­chase of invest­ment bank Bear Stearns Cos. It recent­ly agreed to sell these rights to South­ern Cal­i­for­nia Edi­son.

    The accu­sa­tions against J.P. Mor­gan sur­faced in ear­ly 2011 when the Cal­i­for­nia Inde­pen­dent Sys­tem Oper­a­tor, which over­sees the dai­ly trad­ing that sets elec­tric­i­ty prices in the state, saw bid­ding strate­gies it believed allowed J.P. Mor­gan’s ener­gy-trad­ing unit to extract exces­sive prof­its from the mar­ket, accord­ing to reg­u­la­to­ry fil­ings that FERC has said describe the alle­ga­tions against J.P. Mor­gan.

    The fil­ings don’t men­tion J.P. Mor­gan, but they show that mar­ket mon­i­tors in Cal­i­for­nia and the Mid­west focused on the alleged manip­u­la­tion of “make-whole” pay­ments that elec­tric­i­ty providers are sup­posed to receive in the event that their rev­enue on a giv­en day does­n’t cov­er the fixed costs for start­ing up a pow­er plant.

    The fil­ings describe the strat­e­gy this way: traders would sub­mit a rel­a­tive­ly low bid to deliv­er elec­tric­i­ty in the “day-ahead” mar­ket, ensur­ing that sys­tem oper­a­tors would sched­ule their pow­er plant to turn on the fol­low­ing day. Then the traders would make an offer the next day to deliv­er elec­tric­i­ty from that same plant at a rel­a­tive­ly high price, caus­ing the sys­tem oper­a­tor to instead ask the pow­er plant to deliv­er sub­stan­tial­ly less elec­tric­i­ty than sched­uled.

    While the traders might lose mon­ey on bids to deliv­er pow­er at high or low prices, they would also be eli­gi­ble for a “make-whole” pay­ment because their pow­er plant had been sched­uled to deliv­er a sub­stan­tial amount of elec­tric­i­ty that was­n’t actu­al­ly need­ed. The “make-whole” pay­ment would cov­er any trad­ing loss­es and also gen­er­ate a prof­it, accord­ing to the fil­ings.

    ...

    The agen­cy’s cur­rent capa­bil­i­ties are more robust than at the time of the Cal­i­for­nia ener­gy cri­sis, in 2001, and the sub­se­quent col­lapse of big ener­gy trad­er Enron Corp. At the time, Con­gress lam­bast­ed the agency for lax enforce­ment. Fol­low­ing the ener­gy cri­sis, FERC moved to explic­it­ly pro­hib­it manip­u­la­tive behav­ior and it got author­i­ty from Con­gress to levy fines of up to $1 mil­lion per vio­la­tion, com­pared with $10,000 per vio­la­tion before the Cal­i­for­nia mar­ket melt­down.

    In a recent inter­view, Mr. Welling­hoff, who for­mer­ly was a con­sumer advo­cate for the state of Neva­da, said his goal was to levy fines against manip­u­la­tors that “hurt enough, so they don’t do it again.”

    Maybe JP Mor­gan felt it was jus­ti­fied rip­ping off the pub­lic using an ener­gy trad­ing firm that it acquired dur­ing the Bear Stearns col­lapse giv­en what a rip off that whole deal was? Not that it would revenge for the deal. Quite the oppo­site. Just busi­ness as usu­al.

    Posted by Pterrafractyl | July 17, 2013, 12:50 pm
  5. This is exact­ly the kind of bold reg­u­la­to­ry enforce­ment that makes cor­rupt banksters every­where shake in their boots. With glee:

    The New York Times
    JPMor­gan Exec­u­tive May Escape Penal­ty
    By JESSICA SILVER-GREENBERG
    July 18, 2013, 8:40 pm

    Even as the nation’s top ener­gy reg­u­la­tor is poised to extract a record set­tle­ment from JPMor­gan Chase over accu­sa­tions that it manip­u­lat­ed pow­er mar­kets, the agency is expect­ed to spare a top bank lieu­tenant who fed­er­al inves­ti­ga­tors ini­tial­ly con­tend­ed made “false and mis­lead­ing state­ments under oath,” accord­ing to peo­ple briefed on the mat­ter.

    Blythe Mas­ters, a sem­i­nal Wall Street fig­ure who is known for devel­op­ing exot­ic finan­cial instru­ments, emerged this spring at the cen­ter of an inves­ti­ga­tion by the Fed­er­al Ener­gy Reg­u­la­to­ry Com­mis­sion into accu­sa­tions of ille­gal trad­ing in the Cal­i­for­nia and Michi­gan elec­tric­i­ty mar­kets.

    The reg­u­la­tor found that JPMor­gan designed trad­ing “schemes” that con­vert­ed “mon­ey-los­ing pow­er plants into pow­er­ful prof­it cen­ters,” a com­mis­sion doc­u­ment said.

    While the com­mis­sion and JPMor­gan are nego­ti­at­ing a set­tle­ment for about $500 mil­lion, the peo­ple briefed on the mat­ter said, Ms. Mas­ters is not expect­ed to face a sep­a­rate action. The move sig­nals a piv­ot for the agency, which has been increas­ing­ly flex­ing its enforce­ment mus­cle, accord­ing to the peo­ple briefed on the mat­ter, who spoke on the con­di­tion they not be named.

    Months ear­li­er, inves­ti­ga­tors planned to rec­om­mend that the reg­u­la­tor find Ms. Mas­ters, who holds a pow­er­ful posi­tion with­in JPMor­gan as the head of its com­modi­ties busi­ness, “indi­vid­u­al­ly liable.” But as the inves­ti­ga­tion pro­gressed, these peo­ple said, top ener­gy reg­u­la­to­ry offi­cials have been lean­ing toward not pur­su­ing any civ­il charges against Ms. Mas­ters.

    The deci­sion — which could change, accord­ing to the peo­ple briefed on the mat­ter — would mean that Ms. Mas­ters would escape the agency’s sweep­ing crack­down against big banks. After gain­ing enforce­ment author­i­ty because of a change in 2005 that allowed it to impose fines of $1 mil­lion a day for each vio­la­tion, the ener­gy reg­u­la­tor has tak­en a tougher stance with Wall Street.

    ...

    With­in Wall Street, Ms. Mas­ters is wide­ly con­sid­ered a pio­neer for her use of cred­it deriv­a­tives, the com­plex finan­cial prod­ucts that played a cen­tral role in the 2008 finan­cial cri­sis. Ris­ing through the ranks of JPMor­gan — she was the youngest man­ag­ing direc­tor at 28 — Ms. Mas­ters became one of the most pow­er­ful exec­u­tives on Wall Street, pro­pelled by a vision that the prod­ucts could rad­i­cal­ly remake the bank­ing indus­try.

    ...

    JPMor­gan has argued that its trad­ing was legal. In an ear­li­er state­ment, a bank spokes­woman said the “bid­ding strate­gies were in full com­pli­ance with applic­a­ble rules.”

    But the ener­gy inves­ti­ga­tors dis­agreed, the doc­u­ment shows. Duped by the manip­u­la­tion, the inves­ti­ga­tors said, author­i­ties in Cal­i­for­nia and Michi­gan gave rough­ly $83 mil­lion in “exces­sive” pay­ments to JPMor­gan.

    When JPMor­gan traders worked to sys­tem­i­cal­ly “cov­er up” the strat­e­gy, inves­ti­ga­tors ini­tial­ly found, Ms. Mas­ters aid­ed the obfus­ca­tion. Ms. Mas­ters “per­son­al­ly par­tic­i­pat­ed in JPMorgan’s efforts to block” the state author­i­ties “from under­stand­ing the rea­sons behind JPMorgan’s bid­ding schemes,” the doc­u­ment said.

    ...

    Posted by Pterrafractyl | July 19, 2013, 6:47 am
  6. Here’s an arti­cle about the ongo­ing drought cri­sis across the US South­west that rais­es a very chill­ing pos­si­bil­i­ty: The increas­ing­ly hands off nature of the pri­vate mar­ket for water sales is cre­at­ing the kind of sit­u­a­tion that is eeri­ly rem­i­nis­cent of Enron:

    In dry Cal­i­for­nia, water fetch­ing record prices
    In bone dry Cal­i­for­nia, water fetch­ing record prices as sell­ers cash in on drought
    Asso­ci­at­ed Press
    By Garance Burke, Asso­ci­at­ed Press Writer 7/2/2014

    SAN FRANCISCO (AP) — Through­out Cal­i­for­ni­a’s des­per­ate­ly dry Cen­tral Val­ley, those with water to spare are cash­ing in.

    As a third parched sum­mer forces farm­ers to fal­low fields and lay off work­ers, two water dis­tricts and a pair of landown­ers in the heart of the state’s farm­land are mak­ing mil­lions of dol­lars by auc­tion­ing off their pri­vate caches.

    Near­ly 40 oth­ers also are seek­ing to sell their sur­plus water this year, accord­ing to state and fed­er­al records.

    Econ­o­mists say it’s been decades since the water mar­ket has been this hot. In the last five years alone, the price has grown ten­fold to as much as $2,200 an acre-foot — enough to cov­er a foot­ball field with a foot of water.

    Unlike the pre­vi­ous drought in 2009, the state has been hands-off, let­ting the mar­ket set the price even though severe short­ages prompt­ed a statewide drought emer­gency dec­la­ra­tion this year.

    The price spike comes after repeat­ed calls from sci­en­tists that glob­al warm­ing will wors­en droughts and increase the cost of main­tain­ing Cal­i­for­ni­a’s strained water sup­ply sys­tems.

    Some water econ­o­mists have called for more reg­u­la­tions to keep aquifers from being deplet­ed and ensure the mar­ket is not sub­ject to manip­u­la­tion such as that seen in the ener­gy cri­sis of sum­mer 2001, when the state was besieged by rolling black­outs.

    “If you have a real­ly scarce nat­ur­al resource that the state’s econ­o­my depends on, it would be nice to have it run effi­cient­ly and trans­par­ent­ly,” said Richard Howitt, pro­fes­sor emer­i­tus at the Uni­ver­si­ty of Cal­i­for­nia, Davis.

    Pri­vate water sales are becom­ing more com­mon in states that have been hit by drought, includ­ing Texas and Col­orado.

    In Cal­i­for­nia, the sell­ers include those who hold claims on water that date back a cen­tu­ry, pri­vate firms who are extract­ing ground­wa­ter and landown­ers who stored water when it was plen­ti­ful in under­ground cav­erns known as water banks.

    “This year the mar­ket is unbe­liev­able,” said Thomas Gre­ci, the gen­er­al man­ag­er of the Madera Irri­ga­tion Dis­trict, which recent­ly made near­ly $7 mil­lion from sell­ing about 3,200 acre-feet. “And this is a way to pay our bills.”

    All of the dis­tric­t’s water went to farms; the city of San­ta Bar­bara, which has its own water short­ages, was out­bid.

    Local TV crews and jour­nal­ists flocked to the dis­tric­t’s office in Feb­ru­ary to watch as man­ag­er Mau­rice Etchechury unveiled bids enclosed in about 50 sealed envelopes before the cam­eras.

    ...

    Dur­ing the last drought, the state Depart­ment of Water Resources ran a drought water bank, which helped bro­ker deals between those who were short of water and those who had plen­ty. But sev­er­al envi­ron­men­tal groups sued, alleg­ing the state failed to com­ply with the Cal­i­for­nia Envi­ron­men­tal Qual­i­ty Act in approv­ing the sales, and won.

    This year, the state is stand­ing aside, say­ing buy­ers and sell­ers have not asked for the state’s help. “We think that buy­ers and sell­ers can nego­ti­ate their own deals bet­ter than the state,” said Nan­cy Quan, a super­vis­ing engi­neer with the depart­ment.

    Quan’s depart­ment, the U.S. Bureau of Recla­ma­tion and the State Water Resources Con­trol Board have tracked at least 38 sep­a­rate sales this year, but the agen­cies are not aware of all sales, nor do they keep track of the price of water sold, offi­cials said.

    The max­i­mum vol­ume that could change hands through the 38 trans­ac­tions is 730,323 acre-feet, which is about 25 per­cent of what the State Water Project has deliv­ered to farms and cities in an aver­age year in the last decade.

    That fig­ure still does­n’t include the many pri­vate water sales that do not require any use of gov­ern­ment-run pipes or canals, includ­ing the three chron­i­cled by the AP. It’s not clear how­ev­er how much of this water will be sold via auc­tions.

    Some of those in the best posi­tion to sell water this year have been able to store their excess sup­plies in under­ground banks, a tool wide­ly embraced in the West for mak­ing water sup­plies reli­able and mar­ketable. The area sur­round­ing Bak­ers­field is home to some of the coun­try’s largest water banks.

    The drought is so severe that aggres­sive pump­ing of the banked sup­plies may cause some wells to run dry by year’s end, said Eric Averett, gen­er­al man­ag­er the Rosedale Rio Bra­vo Dis­trict, locat­ed next to sev­er­al of the state’s largest under­ground caches.

    Far­ther north in the long, flat Cen­tral Val­ley, oth­ers are drilling new wells to sell off ground­wa­ter.

    ...

    “The max­i­mum vol­ume that could change hands through the 38 trans­ac­tions is 730,323 acre-feet, which is about 25 per­cent of what the State Water Project has deliv­ered to farms and cities in an aver­age year in the last decade”. 38 trans­ac­tions could trans­fer 25 per­cent of what the State Water Project deliv­ers annu­al­ly. That’s a rather huge chunk of a mar­ket a for an absolute­ly vital nat­ur­al resource to be oper­at­ing with less and less over­sight, espe­cial­ly when entire towns are com­pet­ing for that resource. So are rolling ‘blue­outs’ going to replace the rolling ‘black­outs’ of yes­ter­year in Cal­i­for­nia? Maybe, although the blue­outs won’t exact­ly be replac­ing the black­outs...

    Posted by Pterrafractyl | July 2, 2014, 9:17 am

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