Yves here. No doubt, many here remember how Enron drove up electricity prices massively in California. If you don’t think that will happen with AI hyperscalers becoming energy traders, I have a bridge I would like to sell you. It is a virtual certainty that, like most large corporate Treasury departments, that these new power traders will be profit centers and the traders’ pay will reflect how they perform.
The Los Angeles Times was one of many that chronicled the profitable games Enron traders played at the expense of California electricity customers. From the start of a 2002 account:
One of Enron Corp.’s favorite trading strategies during the California electricity crisis was like booking an airline ticket for a flight you don’t intend to board.
It’s a waste of time and money unless you’re sure the flight will be overbooked and the airline will have to dish out rewards to passengers who agree to stay home.
Enron-and, possibly, other energy traders-worked variations on this theme to collect special fees from the California Independent System Operator, the embattled traffic cop for the state’s power grid following deregulation.
Sometimes Cal-ISO would pay Enron premiums not to use power that the firm didn’t really need in the first place. Sometimes Enron would exploit California’s emergency price caps, buying power at the capped price and then selling it at huge profit out of state, where there were no price caps.
Enron’s trading strategies were described in memos released Monday by the Federal Energy Regulatory Commission. The memos, written by lawyers for Enron, detailed an array of trading methods that went by such swashbuckling nicknames as Death Star, Wheel Out, Fat Boy and Get Shorty.
California officials have pounced on the Enron memos as proof that energy traders and freelance power generators-mainly from out of state-were manipulating California’s energy markets, raising prices and even triggering blackouts.
Oh, and the attempted defense? These were common trading gimmicks, nothing to see here, move along. Which is even more reason to worry that these new hyperscaler traders will follow in Enron’s footsteps. Admittedly, California made it easier to be fleeced via its poorly-devised deregulation. But how well will the schemes across the US hold up when faced with very large traders who can push prices around?
