The systematic withholding of pipeline capacity, particularly on the coldest days, has cost New England electricity consumers $3.6 billion…
…
On the worst days, including during the Polar Vortex of 2013-2014, up to seven percent of Algonquin’s capacity could be artificially constrained.
“When you relate that back to gas-fired generators, that’s about 28 percent of the gas that would be demanded,” Zaragoza-Watkins said.
This “capacity withholding,” researchers wrote, “increased average gas and electricity prices by 38 percent and 20 percent, respectively, over the three year period we study.”
These sorts of manipulations are always ongoing in any sphere where they can be done with a reasonable chance of success. This is similar to Enron’s price manipulation in the California market, yes, but it is typical of any industry where a few people can finangle prices. The LIBOR (London Interbank Rates) scandal was similiar: A few people could manipulate the rate and cost ordinary people billions of dollars.
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There are always key points in the economy where a few people have disproportionate power. Anything that people must have, that someone else controls, is a leverage point which can be used to extract disproportionate profits.
People must have heating during the polar vortex. People must have loans and credit (and money). People must have houses (during the housing bubble and, indeed, various housing bubbles happening right now.)
If people must, and there is a resource bottleneck, that bottleneck can be squeezed. A pipeline is an obvious bottleneck, but that only some people can create money out of thin air is also a bottleneck. That some people set effective interest rates and profit from them is a bottleneck, and so on.
Careful construction of an economic system limits resource bottlenecks, and assures that those who control the remaining resources can’t profit from squeezing them, if possible, and regulates and inspects the hell out of those bottlenecks that remain profitable to squeeze.
We do not live in such an economy. Rather, our economy has mostly been constructed to encourage such squeezing. Cases where it is genuinely punished are rare (as with virtually all the financial executives getting off in the financial crisis).
This pipeline squeeze looks like it might be the rare exception. But only maybe. Remember, if the executives come out clean, and richer than they would have been otherwise, any fines or punishments will not stop it happening again.
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