Tuesday, May 6, 2014
Enron comes back....at least in spirit
The price of electricity would soar under the latest scheme by Wall Street financial engineers to game the electricity markets. If regulators side with Wall Street — and indications are that they
will — expect the cost of electricity to rise from Maine to California
as others duplicate this scheme to manipulate the markets, as Enron did
on the West Coast 14 years ago, before the electricity-trading company
collapsed under allegations of accounting fraud and corruption. The test case is playing out in New England. Energy Capital Partners,
an investment group that uses tax-avoiding offshore investing
techniques and has deep ties to Goldman Sachs, paid $650 million last
year to acquire three generating plant complexes, including the second
largest electric power plant in New England, Brayton Point in
Massachusetts. Five weeks after the deal closed, Energy partners moved to shutter
Brayton Point. Why would anyone spend hundreds of millions of dollars to
buy the second largest electric power plant in New England and then
quickly take steps to shut it down?
The price of energy will soar because of the price fixing rules that Enron created for the energy market are still used. Regulatory agencies are supposed to stop this kind of behavior but so far, none have. Read the article at:
http://america.aljazeera.com/opinions/2014/5/new-england-electricitymarketwallstreetenron.html
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If we really want regulators to stop this kind of behavior, legislation must be stronger. For legislation to be stronger, legislators must start to care. For legislators to care, there needs to be some incentive for them to care. Voters, this incentive must come from you. If you care, speak up. As Stiglitz points out, policy isn't shaped by the median.
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