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California pays the bill, but who gets the blame- the feds or the fundamentals?
Fortnightly Magazine - September 1 2000

such as "cost of other inputs, availability of units other than nuclear and coal, hydro conditions, or precipitation."

Eventually, when California and the FERC open their investigations of wholesale power markets, they must confront a vexing question. How does one spot a manipulated market? Must regulators first show that market prices diverge from economic fundamentals? Or, is it simply enough to show that prices fluctuate too much for comfort?

The PX itself alluded to this question in its report, in which it compared the opposing perspectives of the economic theorist and the market technician:

"From a technician's perspective, as opposed to an efficient-markets theorist's perspective, if all information is reflected in the price of a stock or commodity (a principle of the efficient-market hypothesis), why look for external fundamental information when an analysis of price activity is sufficient in understanding market behavior?"

Certainly the temptation has never been greater for regulators to "find" market abuses, show their indignation, and then craft a remedy-even if they're not entirely sure of what is really going on.

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