Posted on 13-5-2002

Power Lines

The rise and fall of Enron shows for all except those who will not see that
energy markets were and remain susceptible to manipulation at the hands of
traders doing what traders do — exploiting loopholes and inefficiencies to
maximum gain.

The `real-economique' is politicians gutting local and national regulations
and giving way to so-called free-markets, free-competition and the global
corps so that local and national authorities lack the tools to properly
manage the competitive power markets that have gradually supplanted tight
regulation, state and private utility monopolies over the last few years.
Under existing rules in the US (much tighter than those in New Zealand)
Enron's aggressive trading tactics — with names like Get Shorty, Fat Boy
and Death Star — were probably legal. And similar schemes, traders say,
remain in wide use, because energy markets remain flawed. "Energy trading
is a football game; it ain't bridge," said R. Martin Chavez, chief
executive of Kiodex, an energy risk management firm in New York. Mr. Chavez
was formerly the head of risk management for energy trading at Goldman,
Sachs. "If you want a nice game because electricity is an important public
good, then set up a nice game."

Defenders of the deregulation experiment respond with the unbelievably
over-used but still apparently useful spin ... be patient. "I think
gamesmanship is inherent in any new market, and the hard thing to convey to
consumers is that creating these markets is a long-term endeavor," said
Steven Sullivan, a spokesman for the agency overseeing New York's
electricity grid. "Just as babies stumble when they learn to walk, we are
in that same place."

Bull in a bear market. Winter is on its way in New Zealand and power
companies are poised to exploit that fact of nature and anything else that
increases their bottom line. Any other explanation of events can safely be
read as flannel, spin, PR - in short, lies.