These practices have come under a grand jury investigation by the US Attorney's Office in San Francisco into an alleged conspiracy to manipulate the California power market during the last energy crisis. California agencies are trying to convince the Federal Energy Regulatory Commission (FERC) that it should force energy companies to return about $9 billion to California ratepayers.
The ISO report lists the energy companies that made trades that showed the same potential pattern as Death Star and other questionable - and possibly illegal - strategies outlined in Enron memos made public in May 2002. However, ISO investigators were unable to determine with certainty when or if the strategies were actually used.
The report also indicates that the improper trading strategies could have been used during 2002. and suggests that the energy crisis cost the state $45 billion over two years in higher electricity costs, lost business due to blackouts and a slowdown in economic growth. It concluded that a shortage of electricity capacity, a flawed market design from the state's attempt at deregulation, the grip energy companies had over wholesale electricity prices and regulatory missteps all contributed to the cause. The state was also hit by a rise in the cost of natural gas and air quality credits, and a drought in the northwest limiting the supply of electricity from hydropower.
The report also stated that the newly deregulated market was "ripe for the exercise of market power", in which energy companies acquire enough market share to be able to drive wholesale electricity prices. Utilities also relied too heavily on the volatile spot market, rather than buying long-term contracts with steady prices. This led to a "full-blown financial fiasco". Policy makers were hampered in trying to respond to the crisis because of the rift between federal authorities, which oversee the wholesale market, and state regulators, which oversee the utilities and retail operations.
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