Are regulators managing market manipulation?
Ken Silverstein is editor-in-chief of Public Utilities Fortnightly. Contact him at firstname.lastname@example.org.
Enron's collapse stands perhaps as the most the indelible bankruptcy in US history - one that not only triggered a recession but also caused lawmakers and regulators alike to remake the rules by which corporations must live. A key question remains, however: Are markets today better insulated from manipulation?
In their book "Market Power and Market Manipulation in Energy Markets," the Brattle Group examines this question. On one hand, the authors cite the virtues of capitalism as a means to growth and prosperity - which depends on free markets. On the other, they say that ethical and legal violations that lead to fraud betray the trust of consumers, necessitating clear rules and regulations.
"Although the recent wave of manipulation investigations involved behavior in disparate parts of the United States and were separated from the California Crisis by more than a decade, in both old and new cases [the] wholesale electric markets were suspected of failing to deliver effective competition and fair prices," write Gary Taylor, Shaun Ledgerwood, Romkaew Broehm and Peter Fox-Penner.
In all cases, "regulators confronted market participants who argued that market manipulation was too subjective to be prohibited" - that the energy traders were simply profiting within the confines of an imperfect system, the authors add. Their book is published by Public Utilities Reports, Inc., parent company of the Fortnightly.