Customers of PG&E and other utilities may have thought that manipulation of the electricity markets was a sorry part of California history, one that ended when Enron, the thieving Texas energy giant, went bankrupt amid scandal and federal indictments.
But it has come back, if accusations leveled by the California Independent System Operator are true.
The ISO, which entered the lexicon a decade ago when California deregulated the electricity market and blackouts ensued, is a nonprofit corporation that oversees the state's electrical transmission system.
It has alleged that an energy trading subsidiary of banking giant JPMorgan Chase & Co. improperly obtained $57 million in ratepayers' money during a six-month period ending in about June 2011.
That's the same JPMorgan whose chairman, Jamie Dimon, has been appearing on Capitol Hill to explain to members of Congress how another arm of his massive bank lost $5.8 billion and counting in bad derivatives trades.
While the magnitude of the apparent manipulation hasn't reached levels of the energy crisis in 2001, the fundamental issues are similar, as explained by Los Angeles Times business columnist Michael Hiltzik earlier this month and by The Bee's Dale Kasler today.
JPMorgan Ventures Energy Corp. based in (where else?) Houston faces allegations it exploited crannies in the energy market for the traders' benefit, at a cost to ratepayers.
An ISO spokeswoman said the system worked because the alleged gaming was detected early. But experts also have said the $57 million loss could be a fraction of the money made by JPMorgan.
JPMorgan has said there was no misconduct. The Federal Energy Regulatory Commission is investigating.
JPMorgan doesn't own power plants, but instead holds power contracts with generators allowing it to deal on energy trading markets in various parts of the country, including California.
The ISO buys power from various energy producers. To encourage producers to keep their plants operating at a low boil in case their power is needed, the ISO guarantees that it will make minimum payments to generators, whether their power is needed or not.
JPMorgan is accused of offering to sell power at below cost in one part of the market, and at unusually high prices in another part. The goal was not necessarily to provide energy, but rather to receive what the ISO calls an "inequitable windfall" from the make-whole payments.
However the investigation turns out, the alleged manipulation should provide a warning to the California Air Resources Board, which is preparing to embark on an auction of pollution credits in a complex cap-and-trade auction system.
As sophisticated traders stand ready to buy and sell the credits, the air board says it will protect the state against manipulation.
We hope those brave words prove to be true. We also know that sophisticated traders have a history of making unreasonable profits at the expense of the rest of us.
The investigation into JPMorgan's energy trading comes as Sanford I. Weill, former chairman of Citigroup, has reversed himself by urging that big banks be broken up.
Weill is the Wall Street banker who led the lobbying effort in the 1990s that opened the way for plain vanilla retail banks to combine with investment banks and other financial services providers, becoming the too-big-to-fail behemoths.
In the wake of the 2008 crash, Weill argues, banks and investment banks should be separated. JPMorgan's exploits provide evidence of the need for what Weill proposes.