Possible market manipulation? (sales, leasing, lawyer)

[elnina]

https://www.morganlewis.com/blogs/po...of-texas-storm

Is there a possible evidence that some natural gas market sales during the historic winter storm that hit the state and nation last week may have violated state price-gouging laws? There’s supply and demand, and that’s certainly part of this phenomenon, but is there an evidence that there’s been market manipulation that’s gone on?
Hopefully it will be investigated and the results transparent, and published.
We shall see...

[jackalope48]

In state law price gouging is a fact question that gets decided by juries. I do know that after hurricanes people selling ice or other essentials get their product impounded and given out for free and are prosecuted for price hikes much lower than what we saw with electricity and natural gas.

I know if I were those guys I wouldn't want to face a jury in this state on whether they price gouged.

[Trainwreck20]

I doubt there is a case - they did not change their pricing structure due to the storm. In fact, the prices often get that high for a few hours in the summer when the system is near capacity; however, the winter storm went on for days AND there is a lower capacity in the winter due to scheduled maintenance during the typically 'low demand' season. The failure of equipment is the logical consequence of how the system is structured.

There were some small operators who shut down, but it was because they did not have the cash to play the energy market when it gets to those levels. Again, unfortunate in regards to power available, but exactly what should happen the way the market is set up.

In fact, all of this pricing would be a non-issue except for the people on wholesale contracts. Every end user on a set price contracts is protected, and the big companies with deep pockets would have suffered the losses and no normal citizen would have cared. Power would be a bit more expensive next year, perhaps, as they tried to cover their losses, but not too much as it is still a free market.

[jackalope48]

Originally Posted by Trainwreck20

I doubt there is a case - they did not change their pricing structure due to the storm. In fact, the prices often get that high for a few hours in the summer when the system is near capacity; however, the winter storm went on for days AND there is a lower capacity in the winter due to scheduled maintenance during the typically 'low demand' season. The failure of equipment is the logical consequence of how the system is structured.

There were some small operators who shut down, but it was because they did not have the cash to play the energy market when it gets to those levels. Again, unfortunate in regards to power available, but exactly what should happen the way the market is set up.

In fact, all of this pricing would be a non-issue except for the people on wholesale contracts. Every end user on a set price contracts is protected, and the big companies with deep pockets would have suffered the losses and no normal citizen would have cared. Power would be a bit more expensive next year, perhaps, as they tried to cover their losses, but not too much as it is still a free market.

There is no free market for necessities during a declared disaster, that's the statute. Contracts don't waive consumer protections(including price gouging) except under extremely limited circumstances. One of the criteria for a waiver is that the consumer had a lawyer review the contract on their behalf and separately signs a bolded provision waiving consumer protections. I'm 100% sure that didn't happen in any of the cases we are talking about.

[Trainwreck20]

The providers (in this case, pretty much the wholesalers) did not change their prices after the disaster hit, they explicitly state that prices can go up to $9000/MWh. When that contract was signed with any given customer, there was no disaster declaration and they agreed to the pricing.

Now, the state may walk back the costs somehow, but there was no gouging by state law definition (imho). The state may deem those contracts null and void for the duration of the disaster, but there is no criminal behavior.

By the way, no where does the statue eliminate the free market. Nor does it prohibit you from increasing prices, you just can't raise them to 'exorbitant' levels.

(1) “selling or leasing fuel, food, medicine, lodging, building materials, construction tools or another necessity at an exorbitant or excessive price;” or
(2) “demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, lodging, building materials, construction tools or another necessity.”

[jackalope48]

Originally Posted by Trainwreck20

The providers (in this case, pretty much the wholesalers) did not change their prices after the disaster hit, they explicitly state that prices can go up to $9000/MWh. When that contract was signed with any given customer, there was no disaster declaration and they agreed to the pricing.

Now, the state may walk back the costs somehow, but there was no gouging by state law definition (imho). The state may deem those contracts null and void for the duration of the disaster, but there is no criminal behavior.

By the way, no where does the statue eliminate the free market. Nor does it prohibit you from increasing prices, you just can't raise them to 'exorbitant' levels.

You can't contract away your consumer protections unless you sign a specific statement doing so on the advise of a lawyer who read the contract for you. That's in the statute as well. No one did that I'm sure.

Like I said it's not a defined price increase so is a fact question for a jury. I can tell you people get convicted of gouging for selling things at 5 times their normal price all the time.

I think the easy solution is the AG and DA's do a non prosecution agreement where they set a defined maximum kw/h charge of some reasonable level to teach wholesale buyers a lesson (double or triple) and the generators who pass that along to retailers and retailers that pass that along to customers don't get prosecuted. Legislature can go ahead and grant them civil immunity as well if they go for the deal.

[Trainwreck20]

The problem was that the 9k kWh was set to 'force' the system to buy natural gas and force the generators to operated. If prices get wonky, the generators may shut down instead of produce fuel. Nothing requires them to operate if they feel there is too much of a discrepancy between what they have to pay for fuel and what they can sell power for. It is a bit of a mess, really, but yes, the prices are not realistic and not likely to stand up to the billing. But that is the way the system was set up and how it works.