Indian carrier IndiGo does not expect to be profitable until 2022

Indian carrier IndiGo does not expect to be profitable until 2022

IndiGo’s parent-company reported a pre-tax loss of 28.42 billion rupees ($379 million) in the three months that ended in June, compared to a 15.09 billion rupee-profit a year earlier. (Bloomberg) — A month-long rally in emerging-market stocks came to a halt last week as the Federal Reserve expressed concern about the path of the recovery, while renewed tension between the U.S. and China weighed on risk appetite. Even so, signs of progress toward a coronavirus vaccine limited declines As just posted, the lockdown restrictions in the country’s largest city of Auckland have been extended another week
The NZD has not done a lot today, just a touch on the weak side as of now:
By Eamonn Sheridan (Kitco News) – The gold market is starting a new trading week on the back foot as the U.S. dollar continues to find new buyers. While prices fluctuate wildly, advocates worry that state power officials are not doing enough to control costs

Indian low-cost carrier IndiGo does not expect to be profitable in the next 18 months, according to the CEO of InterGlobe Aviation, which operates the airline. 

At the moment, the airline is flying at about 32% of its capacity, Ronojoy Dutta said on Friday.

IndiGo is one of the largest carriers in the country, with a fleet size of 274 aircraft as of June. It also operates international flights. 

“It’s going to be very hard to get profitable at this low levels of flying. But our plan is that we should be at 75% of capacity by early next year. Once we hit that number, we see a better shot at getting profitable,” Dutta told CNBC’s “Street Signs Asia.”

“We won’t be profitable for the next 18 months is my guess,” he said, adding that the focus right now is getting to positive cash flow.

The company earlier this month said it will raise up to 40 billion rupees ($534 million) in funds through a qualified institutions placement, which allows publicly-listed firms in India to raise funds from accredited investors by issuing shares without undergoing a lengthy regulatory process. 

“Our expectation is by mid-next-year, we should be at about 85% of capacity and India’s a little different from other mature economies,” Dutta said.

He explained that chances are the top-end customer segment, which mainly involves business travel, will take a hit long term. But that is likely to offset by an increased demand in commercial air travel.

An undelivered Airbus passenger jet, operated by IndiGo, on the tarmac at Toulouse-Blagnac airport on May 15, 2016.

Bloomberg | Getty Images

Indians mostly travel out of state by train, which can take days to reach their destinations. That provides an opportunity for low-cost carriers like IndiGo and others to sell cheap flights that can cut down travel time. 

The coronavirus pandemic has led to a near-total collapse in air travel demand, forcing airlines to cut costs by suspending flight routes, laying off staff and reducing their fleets. 

Last month, InterGlobe Aviation reported a pre-tax loss of 28.42 billion rupees ($379 million) in the three months that ended in June, compared to a 15.09 billion rupee-profit a year earlier. Revenue fell more than 91% for the quarter after flights were grounded for almost two months as India went into a national lockdown. 

IndiGo also announced it would lay off 10% of its workforce and the senior management, including Dutta, has taken a pay cut. 

“We are continuously looking at our cost structure. We have taken some painful steps in employee costs. At the moment, we don’t have any plans to go further,” Dutta said. That could change if business conditions further deteriorate due to the pandemic, according to the CEO. 

India is one of the worst-affected countries in the world, with more than 3 million reported cases. The health ministry says a sizable percentage of affected individuals have been discharged. 


Author: Saheli Roy Choudhury

EM Review: Stock Rally Pauses as Fed, Trade Weigh on Sentiment

EM Review: Stock Rally Pauses as Fed, Trade Weigh on Sentiment

(Bloomberg) — A month-long rally in emerging-market stocks came to a halt last week as the Federal Reserve expressed concern about the path of the recovery, while renewed tension between the U.S. and China weighed on risk appetite. Even so, signs of progress toward a coronavirus vaccine limited declines. Developing-nation currencies and bonds were mixed.

The following is a roundup of emerging-market news and highlights for the week through Aug. 21:


Fed minutes for July showed policy makers backed off from an earlier readiness to set a clearer bar for raising interest rates, a step that would underscore their commitment to an extended period of ultra-loose monetary policyPfizer Inc. and BioNTech SE said the Covid-19 vaccine they are jointly developing is on track to be submitted for regulatory review as early as October, as they released additional data from an early-stage studyPresident Donald Trump said he called off trade talks with China, raising questions about the future of a deal that is now the most stable point in an increasingly tense relationship. China later said it plans to talk with U.S. officials soon to review progress on their preliminary trade dealThe U.S. Commerce Department announced further restrictions on Huawei Technologies Co. aimed at cutting the Chinese company’s access to commercially available chipsThe U.S. State Department is asking colleges and universities to divest from Chinese holdings in their endowmentsOracle Corp.’s bid for the U.S. operations of TikTok received the backing of President TrumpThe U.S. suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment on shipping with the former British colonyDemocratic and Republican leaders are hinting that they are looking for a path toward reviving stalled negotiations on the next round of pandemic relief for the U.S. economySoutheast Asia is facing a strain of the new coronavirus that the Philippines, which faces the region’s largest outbreak, is studying to see whether the mutation makes it more infectiousTurkey left interest rates unchanged, risking greater volatility in the lira as the central bank looks for a back door way of containing the currency’s weakness

President Recep Tayyip Erdogan said Turkey has found 320 billion cubic meters of natural gas in the biggest ever discovery in the Black Sea, and hopes to begin production by 2023

The lira and benchmark share index both gave up ga

Belarus President Alexander Lukashenko took a more aggressive stance toward the biggest protests in his 26-year rule as the leaders of the European Union refrained from calling for new electionsU.S. Secretary of State Michael Pompeo formally notified the United Nations of the American demand to reinstate global sanctions against Iran and slammed European allies who oppose the move, accusing them of a failure to lead and appeasing the Iranian regimeEarly South Korean trade figures show the slump in exports easing in August, buoyed by growing demand from the U.S. and other economies reopening from pandemic lockdowns


China’s central bank supplied liquidity to commercial lenders to help them manage upcoming government bond sales, while leaving the price of the money unchanged as the economy recoversA new national campaign against food waste in China has sparked a rare bout of speculation over the government’s ability to safely feed its 1.4 billion citizenChina’s top banking watchdog cautioned that U.S. dollar dominance combined with the massive stimulus unleashed by the Federal Reserve could push the world to the edge of another financial crisisThe Cold Chain Association of China’s southern coastal city of Guangzhou ordered all member companies to suspend imports of frozen meat and seafood from coronavirus-hit areasChina’s latest anti-corruption campaign appears to be picking up speed after Shanghai’s police chief became the latest senior law enforcement official targeted by investigatorsChinese households are putting more of their savings into property but still holding back on discretionary spendingIndia’s interest rate-setting panel turned cautious about a recent surge in inflation, preferring to wait for price pressures to wane before unleashing more steps to address a sharp slowdownThe country’s state-run banks have three more months to buy bonds and commercial paper issued by the local shadow lenders, with such purchases being partially guaranteed by the government, the finance ministry saidFirst-time bond issuers are rushing into India’s debt market as unprecedented stimulus pushes borrowing costs to the lowest since 2005The Reserve Bank of India’s first Monetary Policy Committee completed its four-year term with a mixed recordTaiwan accused Chinese hackers of infiltrating government agencies in an effort to glean citizens’ sensitive information

South Korea temporarily banned all offline church services and events in greater Seoul area as concern over the second wave of coronavirus infections are growing on spiking cases related to churches

President Moon Jae-in’s approval rating rose for the first time in three months after he took on a church at the center of a new coronavirus waveSouth Korea offered its first bond linked to a Libor alternative, joining the global move away from the debt-pricing benchmarkNew U.S. restrictions against Huawei threaten to weigh on South Korea’s economy, which is counting on chip exports to China to drive its rebound from the coronavirus pandemicKim Jong Un acknowledged that North Korea’s development goals have been seriously delayed; he issued a dire warning for North Korea’s economy amid reports that he delegated some power to his sister, including responsibility for relations with the U.S.Indonesia’s central bank left its key interest rate unchanged to shore up support for the sagging currencyThailand’s economy contracted the most in more than two decadesm, deepening its recession as the nation’s key drivers of trade and tourism remain hobbled by the coronavirus pandemicThailand is considering an extension of its state of emergency through Sept. 30 to prevent a second wave of coronavirus cases amid mounting anti-government protestsAt least four more activists have been arrested for holding anti-government demonstrations

The Philippine capital returned to a looser lockdown as the government tries to support the economy while curtailing the spikes in coronavirus cases, President Rodrigo Duterte said

The Philippine central bank kept its key interest rate unchanged as it watches how previous easing steps filter their way through the economyThe Philippines filed a diplomatic protest to Beijing over the Chinese Coast Guard’s move to confiscate equipment used by Filipino fishermen in the disputed South China SeaOverseas remittances unexpectedly rose in JuneMalaysia’s stock exchange is preparing measures to curb excessive speculation on share pricesGoldman Sachs Group Inc. and Malaysia signed an agreement to finalize the bank’s $3.9 billion settlement over the 1MDB scandalSri Lanka’s central bank kept borrowing costs unchanged after cutting rates five times this year


Russia opted against holding a scheduled auction of government securities after borrowing costs jumped on speculation about geopolitical fallout from the turmoil in neighboring Belarus

Thousands of migrant workers from Central Asia are stuck in Russia because of travel bans, leading some to rely on money from home in a painful reversal of one of the biggest remittance flows in the worldBelarus President Alexander Lukashenko deployed the military to the country’s borders with the European Union as he complained of unspecified security threatsDebt securities issued in Ukraine’s 2015 restructuring rose the most since March after the finance ministry purchased 10% of the notes outstanding and Morgan Stanley advised investors to buyThe Polish central bank’s bond purchases may have run its course just five months after its launch, signaling new measures may be needed to help revive the European Union’s largest eastern economyPoland amended its 2020 budget, dropping plans to keep it balanced as a resurgence of coronavirus cases brings about a record deficitTurkey dispatched a drilling ship to an area off the southwestern coast of Cyprus in a move that could stoke territorial disputes with EU member states in the eastern Mediterranean

Fitch Ratings downgraded Oman for the second time this year, citing the continued erosion of the country’s fiscal and external balance sheets

Potential assistance for Oman from wealthier neighbors in the Gulf may not be quite the turning point it was for Bahrain two years agoOman replaced its finance minister and central bank chairman, consolidating ministries as it’s headed for one of the biggest budget deficits in the GulfBahrain received its first downgrade in over two years from Fitch Ratings, which said it will likely “require further Gulf backing” as the government’s finances remain under strainBahrain and Sudan will probably be first to follow the United Arab Emirates’ lead and agree to make peace with Israel, the Israeli intelligence minister said, as momentum toward normalized relations grew on diplomatic and economic frontsKuwait has 2 billion dinars ($6.5 billion) of liquidity in its Treasury and not enough cash to cover state salaries beyond October, Finance Minister Barak Al-Sheetan saidEskom Holdings SOC Ltd. shuffled some senior managers weeks after missing its own target for restricting power outagesSouth African towns and cities are in increasingly dire financial straits, with a National Treasury report showing they are likely to collect less than a fifth of their outstanding debtGhana plans to go ahead with an initial public offering in a gold royalty fund next month to benefit from soaring pricesBank of Zambia reduced its key interest rate for the second time in as many meetings to safeguard the stability of the financial sector and counter the impact of Covid-19Malian President Ibrahim Boubacar Keita resigned after being detained by a military junta, prompting immediate international criticism despite the group’s pledge to shepherd a democratic transitionSouth Sudan plans to increase its budget by 29% to fund a government that was expanded under a peace deal to end six years of armed conflictMozambique’s central bank held its key interest rate as inflation is expected to accelerate in the short- to medium term

Latin America:

Brazil’s lower house maintained a freeze on public sector wages that had been unexpectedly voted down by the senate, concluding an episode that revealed cracks in President Jair Bolsonaro’s congressional base

Bolsonaro is said to plan extending emergency payments for informal workers through the end of the year, before launching a new social program that will continue to provide assistance to poor familiesBolsonaro came to Economy Minister Paulo Guedes’ defense after speculation that he could leave the post amid pressure to increase spendingThe collapse of Mexican lender Banco Famsa is spurring concern about risks for the banking system just as the country sinks into its deepest recession in almost a centuryMexico’s banks aim to have a plan to deal with deferred payments by the time the current program ends in September, Mexican Banking Association President Luis Nino de Rivera saidLuis Videgaray, a former finance minister implicated in the bribery scandal of ex Pemex CEO Emilio Lozoya, said the allegations attributed to Lozoya against him are false and inconsistent

Argentina’s opposition leaders called on President Alberto Fernandez to drop his proposal for justice reform a day after mass anti-government protests

In the next few weeks, if all goes as scripted, Argentine officials will put the finishing touches on a bond restructuring deal and bring an end to the ninth default in the country’s historyArgentina’s economy continued to show early signs of recovery in JuneEcuador received the consent of a majority of bondholders to extend the deadline to settle its $17.4 billion debt restructuring to Sept. 1Former President Rafael Correa aims to become vice president in the 2021 election with Andres Arauz as a presidential candidateColombia sold two-thirds of its gold reserves in a single month just as investors seeking havens against global turmoil were about to drive the metal to a record highChile is touting generous tax breaks for investors, lower taxes for small and mid-sized businesses and delayed implementation of electronic receipts in its effort to rebuild its economy from the coronavirus pandemicPeru’s coronavirus crisis is the worst in the world by several measures on a per-capita basisPeru’s economy collapsed at a record pace in the second quarterThe Trump administration is considering additional sanctions on Venezuela aimed at halting the remaining fuel transactions permitted with the South American nation, according to people familiar with the matter

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Author: Livia Yap, Netty Ismail and Maria Elena Vizcaino

NZD losing a few points, NZ 10 yr bond yield hits a record low

NZD losing a few points, NZ 10 yr bond yield hits a record low

All the biggest trading floors in the world have screens locked on ForexLive™. We provide real-time forex news and analysis at the highest level while making it accessible for less-experienced traders.

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Gold price starting the week under pressure, market looks vulnerable

Gold price starting the week under pressure, market looks vulnerable

(Kitco News) – The gold market is starting a new trading week on the back foot as the U.S. dollar continues to find new buyers.

December gold futures last traded at $1,942 an ounce, down 0.26% on the day. Meanwhile, the U.S. dollar index last traded at 93.15, roughly unchanged on the day.

Gold’s selling pressure comes after it was unable to hold $2,000 an ounce last week.

According to some analysts, after an historic drive since the start of the year, gold has entered into a necessary consolidation period. Analysts have said that they see this as a healthy correction that will help gold maintain its long-term uptrend.

In a recent interview with Kitco News, Ole Hansen, head of commodity strategy at Saxo Bank, said that new momentum in the U.S. dollar could be gold’s most significant headwind in the near-term.

Last week speculative bearish interest in the U.S. dollar fell slightly after hitting its highest level in nine years. Hansen said that this trend probably has more room to unwind.

“We are seeing dollar short positioning at extreme levels and these positions right now are squeezable,” he said. “That makes bullish gold position squeezable in the near-term,” he said.

While gold looks vulnerable to lower prices in the short-term, many investors wonder just how low they could go as it trades near critical support levels.

In a report on Sunday, Christopher Vecchio, senior currency strategist at, said that it will be important to watch if gold prices can hold initial support at $1,921 an ounce, the yellow metal’s previous all-time high, set in 2011.

“Gold prices failing through the former yearly high at 1921.07 would be a major warning sign for gold bulls,” he said.

After that, Vecchio said that investors should keep an eye on the August lows.

“A loss of the August low at 1862.90 would be a very important development insofar as redefining the recent consolidation as a topping effort rather than a bullish continuation effort,” he said.

In a recent interview with Kitco News, Daniel Ghali, commodity strategist at TD Securities, said that the gold market could see a considerable correction as the momentum trade, which carried prices above $2,000 an ounce, starts to fade.

He added that there could still be room for prices to go higher, but he compared the price action to a rubber band being stretched.

“The rubber band is really being stretched to the limit and some point it’s going to give and then we will see some pain.”

As to how significant the correction could be, Ghali said that a drop of 17% or more than $300 could be possible. However, he added that once the correction is over, he expects that the fundamental issues that ignited gold’s rally, should continue to support prices.

Some analysts have said that gold prices could fall as low as $1,800 an ounce and remain in a long-term bullish uptrend.



Rolling blackouts raise questions about potential for market manipulation

Rolling blackouts raise questions about potential for market manipulation

After rolling blackouts hobbled California nearly 20 years ago and helped push the sitting governor out of office, state energy officials and political leaders vowed to never again be victimized by the vagaries of electric power — or the markets that drive them.

But their best efforts were not enough last weekend. The state’s big three power monopolies — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — cut service to hundreds of thousands of customers by order of the California Independent System Operator, the Folsom nonprofit that manages most of the state‘s power grid.

Just after 6:30 p.m. on Aug. 14, the lights went off from San Diego to the Bay Area to the Sierra foothills. More than 400,000 homes and businesses were without power for up to several hours. The next day, just after 6 p.m., more than 300,000 customers were shut off for 20 minutes or longer.

Officials from the agency, known as CAISO or Cal ISO, said there was not enough electricity to meet demand due to an historic heat storm that afflicted much of the West and some unexpected deficiencies. They also said winds died down, reducing the amount of electricity available from wind turbines, and a 470-megawatt plant was out of service.

Steve Berberich, the Cal ISO president and CEO, said warnings to consumers to curtail their power use were critical to containing the blackouts to that Friday and Saturday.

“Loads are going to continue to be very high,” he told reporters during a Wednesday conference call. “The conservation efforts are the reason, and probably the only reason, we were able to get through.”

But according to their own data, and analyses from independent experts and energy consultants, state grid managers should have had more than enough power in reserve to keep the lights on.

“All of these (demand) levels are below the projected average-year forecast peak,” said Bill Powers, a San Diego energy consultant who over the years has challenged utilities in expert testimony submitted to state regulators.

“This was just another day in Southern California,” he said. “Friday (Aug. 14) should have been invisible. It should not have led to stage alerts. It should not have led to blackouts.”

More than a week after the emergency shut-offs, Cal ISO officials have yet to explain in detail why they did not have — or did not use — thousands of megawatts that were supposed to be held in reserve.

Gov. Gavin Newsom has demanded an investigation into what went wrong, calling the service interruptions unacceptable.

The grid managers, along with the California Energy Commission and the California Public Utilities Commission, said in an initial response to the governor that they lacked advance warning of supply deficiencies but a more thorough review will take more time.

“Each of our organizations has more work to do in order to be fully responsive to your letter and to ensure that we are taking every measure necessary to guarantee the events of this past week will not be repeated,” they told Newsom.

Soaring prices

When Cal ISO issued its second-stage alert, at about 3:20 p.m. that Friday, the system had an operating reserve of up to 12 percent — nearly double the 6 percent margin cited in the agency’s 2020 annual assessment, according to independent energy consultant David Marcus.

By 6:36 p.m., when grid operators issued their Stage 3 alert, the data showed operating reserves at about 9 percent, almost three times the 3 percent standard for ordering blackouts, said Marcus, who regularly tracks power supply and demand in real time.

The following day, when Cal ISO issued its second-stage alert at about 6:15 p.m., the system had an operating reserve near 10 percent. When grid operators issued the Stage 3 alert a short time later, the data showed operating reserves above 8 percent, Marcus said.

Cal ISO cited excessive demand across the West for the unexpected surge in demand, as well as the loss of some expected supplies.

But “it appears that actually lowered (reserves) from something like 10 to 9 percent,” said Marcus, who also works as an expert witness for groups that challenge utility projects. “That shouldn’t be the reason for a blackout if your stated practice for going to a blackout is 3 percent.”

The peak demand that Friday was just shy of 46,800 megawatts, according to Marcus — far below the 50,270 record the state set in 2006. The next day’s high demand was even lower, at 44,947 megawatts, he said.

A Cal ISO spokeswoman said Thursday that grid managers had no choice but to order the “load-shedding” across California for the first time in almost two decades.

“We are required to keep energy reserves in case an unexpected outage causes supply shortages leading to an unstable grid and uncontrolled blackouts,” spokeswoman Anne Gonzales wrote by email.

The blackouts do more than wreak havoc for residents and businesses that rely on a steady supply of power. They also contribute to wild price fluctuations in the electricity markets that Cal ISO oversees.

During the worst of the emergency more than a week ago, megawatt hours were selling for 40 and 50 times the typical rate.

Through the first half of last week, as temperatures continued to soar across the West and Cal ISO urged strict conservation efforts, megawatt hours in various parts of San Diego County were selling on what’s called the day-ahead market for $1,500 or more.

During the Wednesday media call, Cal ISO vice president Mark Rothleder acknowledged the escalating electricity costs.

“We do see those high prices,” he said. “They are indicative of the high system energy prices but also the local constraints into the area.”

The rising costs are paid by customers of PG&E, Edison and SDG&E, but the costs are impossible to discern in public filings or monthly power bills because of confidentiality rules established by Cal ISO and the California Public Utilities Commission.

Meanwhile, municipal utilities like those in Los Angeles and Sacramento were able to deliver electricity without deliberate service interruptions. The Los Angeles Department of Water and Power even provided Cal ISO more than 9,000 megawatt hours during the emergency.

“L.A. has not had to institute rolling blackouts as we have maintained adequate supplies and transmission,” spokeswoman Ellen Cheng said by email. “We provided (Cal ISO) 5,834 (megawatt hours) from Friday through Tuesday and are providing another 3,178.”

A governor’s recall

Nineteen years ago, the forced blackouts across California were largely due to a market-rigging scandal that eventually diverted tens of billions of dollars from California to out-of-state producers and traders.

They also prompted the recall in 2003 of then-Gov. Gray Davis and landed action-hero actor Arnold Schwarzenegger in the Governor’s Office.

Within several years, Cal ISO, the California Energy Commission and the California Public Utilities Commission adopted reforms that were supposed to ensure the state always had enough power on hand.

The joint effort included the creation of a 15 percent reserve above “resource adequacy” obligation set by state regulators.

Among other requirements, utilities must provide regulators a yearly plan showing that they secured 90 percent of their power needs for summer months in advance. They also have to file monthly plans showing they procured 100 percent of the electricity they need.

But state utility regulators routinely grant waivers to the investor-owned utilities, allowing them to comply with state resource-adequacy rules even though they cannot certify that they will meet the expected demand for power.

Two months ago, for example, the Public Utilities Commission granted a request from SDG&E to waive its requirement to meet state resource adequacy rules.

“In this case, Energy Division finds that SDG&E held solicitations and pursued all commercially reasonable efforts to acquire the resources needed to meet the (utility’s) local procurement obligation,” Director Edward Randolph ruled on June 2.

Short-term traders

The majority of electricity provided by PG&E, Edison and SDG&E is procured through long-term contracts that stretch for months or even years.

But because power needs fluctuate due to weather and other factors, Cal ISO has established various markets allowing traders to buy and sell needed electricity on what’s known as the day-ahead market, the 15-minute market and the real-time market.

These short-term trades often involve much higher prices and transmission costs.

Last Monday afternoon, for example, one megawatt hour in Del Mar was selling on the day-ahead market for $1,078. Twenty-four hours later, the price was $1,535. By Friday morning, the same hour of electricity was being offered for $38.

The same price fluctuations happened across San Diego County and beyond, as Cal ISO worked to keep the lights on across California.

The reforms enacted in the wake of the 2001 blackouts not only required all three major utilities to have sufficient power supplies on hand, they sought to prevent energy traders from manipulating electricity prices in the future.

Some experts suspect major banks and other traders are once again illegally profiting from California’s lax energy policies and Cal ISO’s complicated power markets.

“The biggest traders are Wall Street banks,” said Loretta Lynch, who served as president of the California Public Utilities Commission during the 2001 state power crisis and is now a critic of the state’s current energy policies.

“They can make more money in the power markets than they can on Wall Street because there are fewer rules,” she said. “The protections I negotiated with the Bush administration have now all expired. There are no protections.”

Marcus, the independent consultant who routinely tracks state power supplies and demand, said the trading markets set up by Cal ISO do not always protect consumers.

“The trouble is, when the incentive for doing things is money, people will not necessarily do what’s good for society,” he said. “We learned in 2001 that people would intentionally withhold (power) plants from the market in order to get a higher price.”

Gonzales, the spokeswoman for the state grid operator, said the agency works to identify any manipulation in the short-term power markets to make sure consumers are not subjected to improper charges.

“CAISO’s market also has a market-power mitigation process for the identification and mitigation of market power,” she said by email. “Currently, there is an ongoing policy effort to further improve the mechanism for market power identification and mitigation.”

Rigging the market

But oversight efforts implemented after the 2001 power crisis have not always worked.

In 2013, the Wall Street investment bank JPMorgan Chase agreed to pay $410 million to settle a federal investigation into bid-rigging in the Cal ISO power market.

In barely two years, the investment bank took in $125 million in illegal profits, federal regulators said. JPMorgan had expected to collect up to $2 billion through 2018 if it was able to continue the illegal trades through 2018.

As a result of the federal investigation, the Wall Street bank sold its interest in the 12 Los Angeles-area power plants known as BECA.

In its application to the Public Utilities Commission to take control of the power generated by the L.A. plants from JPMorgan, Edison acknowledged the potential for manipulating power supplies to increase profits.

“Although BECA is not the only marketer of LA Basin (power supplies), it is the only marketer with such a significant percentage of the requirement within its control,” the company wrote. “Approval of the BECA contract would effectively eliminate this potential risk for SCE’s customers.”

Months later, state utility regulators agreed to the Edison request without the benefit of a public hearing. The company told the Union-Tribune that it did not make any profit from the arrangement.

But Oakland attorney and former California Energy Commission executive director John Geesman said it is all but impossible to figure out whether — or how much — utilities may be earning from their own power contracts because of confidentiality rules.

“One of the dangers of these contracts being negotiated in the dark is that nobody ever sees whether the structure builds in a margin for Edison or whether it’s purely a public service Edison is performing,” he said.

“Being a monopolist is a very attractive business opportunity — always has been,” said Geesman, whose home lost power in the recent blackouts. “This is the way the system works.”

The 2001 electricity crisis cost taxpayers some $42 billion after the state became the buyer of last resort and committed to long-term power contracts to keep the lights on, according to a 2003 study by the Public Policy Institute of California.

Electricity consumers may not be out of the woods. The peak load-hour demand forecast for Monday is 46,779 megawatt hours.


Author: By Jeff McDonald

Indian carrier IndiGo does not expect to be profitable until 2022

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