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January 15, 2016
Shaun Ledgerwood and Gary Taylor Co-Author Article on Lasting Effects of Enron’s Power Market Schemes on the U.S. Anti-Manipulation Agenda

Brattle Principals Shaun Ledgerwood and Gary Taylor recently published an article on Risk.net discussing how failures of the first liberalized power market in the U.S. continue to shape the Federal Energy Regulatory Commission’s (FERC) anti-manipulation agenda fifteen years after the California energy crisis.

The article, “Enron’s California Schemes Haunt Regulators 15 Years Later,” discusses the lasting implications of damages caused by Enron’s manipulative schemes, including the FERC’s enhanced authority to combat fraud-based market manipulation, staffing increases, and development of advanced screening techniques to identify suspicious trading behavior.

The authors claim that, ironically, these enhanced enforcement actions do not clearly delineate the boundaries between acceptable and unacceptable behavior, and may even undermine the benefits of liberalizing energy markets in the first place. Dr. Ledgerwood and Mr. Taylor warn that while it is important to curb manipulative trading behavior, it is possible for the FERC to be overly aggressive and discourage legitimate trading behavior that promotes efficiency. Therefore it is important for the commission to exercise restraint to avoid diminishing the efficiency benefits its manipulation rule is supposed to protect.

The full article can be read on the Risk.net website.