MUNIS INVOLVED IN MARKET MANIPULATION?

According to this Associated Press story and this Reuters story, a California Senate investigation has found email evidence that the Los Angeles Department of Water and Power, the largest municipal utility in the country, may have engaged in some of the same trading practices that have been called “market manipulation” when performed by independent generators. The role of the munis in the California “market” is potentially quite interesting, and the California Senate committe has been looking into it for the past year. The thing that I find the most striking is the completely inconsistent treatment and rhetoric between independent generators and the munis. Public power generators, such as LADWP and BC Hydro (from British Columbia), charged some of the highest hourly prices in the California “market” in late 2000 and early 2001, selling into the ISO in peak hours when the ISO was willing to pay almost anything to keep the juice flowing. My primary interest in this is that the actions of the independent generators and the actions of the munis should be treated consistently. If we’re not going to castigate the munis for selling when the need was greatest and profiting from it, or for using arbitrage strategies that were legal (although potentially questionably ethical), then we shouldn’t castigate the independent generators. And vice versa.