1 "Staff Report to the Federal Energy Regulatory Commission on Western Markets and the Causes of the Summer 2000 Price Abnormalities," Nov. 1, 2000. Available on FERC website, www.ferc.gov. Hereinafter cited as Ferc Staff Report on California.

2 Source: Energy Security Analysis Inc. power databases using EIA form F900 and F759 data.

3 Price data for this analysis were the real-time market in NEPOOL and PJM (up to June 1, 2000; thereafter, the PJM prices are from the day-ahead market), and the day-ahead prices for 59th Street Station in New York. 59th Street Station and SP-15 prices (rather the reference bus price) were used because the reference bus prices are not traded. Spark spreads were calculated using the hourly prices and the Henry Hub spot price for natural gas. Significantly different results would obtain if we used Transco Zone 6 prices, which incorporate transportation costs to the East Coast and thus reflect local circumstances better. But Henry Hub has the advantage of being a liquid market and has a price for gas that everyone can agree on.

4 "California has a large number of natural gas fired plants. Natural gas steam plants make up most of this capacity and constitute 36 percent of the total generating capacity in the state. The steam plants are old and hence prone to outages; 82 percent of these plants are over 30 years old , and 37 percent are over 40 years old." FERC Staff Report on California citing RDI Powerdat, pp. 2-19.

5 "Report Links Mass Power Plant Shutdowns, High Rates; No Wrongdoing Is Alleged, But Scientists' Group Says Opportunity Existed For Price Manipulation," Boston Globe, Jan. 7, 2001.

6 State of the State Address on Jan. 8, 2001, 5:00 p.m., see http://63.196.102.6/
state/govsite/gov_htmldisplay.jsp?BV_SessionID=@@@@0914240388.0979555519@@@@
&BV_EngineID=caljlekmfikbemfcfkmchcgi.0&sCatTitle=Speeches&sFilePath=/govsite/selected_
speeches/20010108_sos.html&sTitle=2001.

7 FERC report, pp. 4-6. See also Market Surveillance Committee of the California Independent System Operator, "Analysis of Order Proposing Remedies for California Wholesale Electric Markets" (Issued Nov. 1, 2000), Dec. 1, 2000.

8 See, for example, Edward N. Krapels, "Guide to Crude Oil Hedging" (London: Risk Publications, 1998); Edward N. Krapels, et al, "Guide to Natural Gas Hedging" (London: Risk Publications, 1999); Edward N. Krapels, "Electricity Trading and Hedging" (London: Risk Publications, 2000).

9 There is a rich literature on the MG case, including Christopher L. Culp and Merton H. Miller, "Corporate Hedging in Theory and Practice: Lessons from Metallgesellschaft" (1999, Risk Publications, London).