Energy companies have systematically manipulated U.S. electricity and natural gas markets for decades, extracting tens of billions from consumers through sophisticated fraud schemes that continue today despite enforcement efforts. The California energy crisis alone cost $40-45 billion, while recent manipulation during Winter Storm Uri saw natural gas prices spike 300 times normal levels, and FERC just proposed its largest-ever penalty of $722 million against a single company in 2024.
This manipulation isn’t just about numbers on spreadsheets—it’s about elderly people dying during engineered blackouts, families choosing between food and electricity bills, and hospitals running on backup generators while traders celebrate. The infamous Enron tapes captured the callousness perfectly when traders joked about “Grandma Millie” and how they “stole from those poor grandmothers in California,” later celebrating forest fires that shut down transmission lines with chants of “Burn, baby, burn!” These weren’t isolated incidents but part of a culture where extracting maximum profit trumped human consequences.
The California catastrophe revealed systematic fraud
The 2000-2001 California electricity crisis exposed the dark underbelly of energy deregulation when Enron and other companies deployed manipulation schemes with names that sound like video game cheat codes. “Death Star” created phantom congestion on power grids to collect payments for relieving problems that didn’t exist. “Fat Boy” artificially inflated demand by scheduling power to subsidiaries that didn’t need it, creating fake shortages that drove prices up 800%. “Get Shorty” sold backup power services that companies never intended to provide. “Ricochet” bought California electricity at capped prices of $250/MWh, exported it out-of-state, then sold it back at $1,200/MWh.
Timothy Belden, who masterminded Enron’s West Coast trading operation from Portland, received a $5 million bonus in 2001 for his “success” in California before eventually pleading guilty to conspiracy to commit wire fraud. When internal Enron lawyers Stephen Hall and Christian Yoder documented these schemes in December 2000 memos, they explicitly warned that the practices were “deceptive” and potentially criminal. Hall wrote that he advised traders “that such practices were deceptive and that they should stop such practices immediately.” The response from management? No disciplinary action—the schemes continued until Enron’s collapse.
The scale of coordinated manipulation extended far beyond Enron. El Paso Corporation paid the largest settlement of $1.625 billion, while companies dubbed the “Four Horsemen of the Apocalypse” by California’s Attorney General—Enron, Reliant Energy, Dynegy, and El Paso—collectively faced over $4 billion in settlements. Court documents revealed systematic coordination between power plant operators who accepted payments to shut down facilities during peak demand, with one recorded conversation capturing a trader asking, “If you took down the steamer, how long would it take to get it back up?” followed by “Well, why don’t you just go ahead and shut her down.”
Natural gas manipulation cost billions through “banging the close”
The natural gas markets saw equally brazen manipulation, with the most spectacular case being Amaranth Advisors’ $6.6 billion collapse in 2006—the largest hedge fund failure at that time. Head trader Brian Hunter accumulated over 3,000 futures contracts before market close, then dumped them in the final 30 minutes to artificially depress settlement prices. This “banging the close” strategy was so blatant that Hunter described it in messages to colleagues as “a bit of an expirment [sic].”
The day before executing his February 2006 manipulation, Hunter sent a message instructing another trader to “Make sure we have lots of futures to sell MoC [Market on Close] tomorrow.” When questioned why he would do this unless he was “huge bearish” on natural gas, Hunter’s casual response revealed the arrogance of manipulators who believed they were untouchable. Despite Amaranth issuing an internal compliance memo on March 10, 2006, explicitly prohibiting “banging the close” and stating the firm banned “trading for the purpose of artificially causing the price of a commodity to move up or down,” management continued paying Hunter bonuses while the manipulation continued.
From 2003 to 2008, the CFTC brought unprecedented enforcement actions that revealed industry-wide fraud. Companies systematically submitted false data to price indices like Inside FERC Gas Market Report, Gas Daily, and Natural Gas Intelligence, which determined prices for billions in transactions. The enforcement wave netted 42 companies and 31 individuals, with penalties including Reliant Energy’s $18 million, Duke Energy’s $28 million, and Shell/Coral Energy’s $30 million. Recorded phone calls and instant messages provided smoking-gun evidence, with traders discussing how they would “crap on” markets and coordinate false reporting.
Criminal prosecutions sent executives to prison but most escaped justice
The government’s response to energy manipulation has resulted in significant criminal prosecutions, though many executives escaped with relatively light sentences compared to their crimes’ magnitude. Jeffrey Skilling, Enron’s CEO, received the harshest sentence of 24 years and 4 months (later reduced to 14 years) plus a $45 million penalty for 19 counts of securities fraud and wire fraud. Kenneth Lay, Enron’s chairman who had handed Vice President Cheney a memo opposing price caps while manipulation was ongoing, was convicted but died before sentencing.
More recently, Glencore Ltd paid a $341.2 million criminal fine plus $144.4 million forfeiture in 2022 for conspiracy to engage in commodity price manipulation. The Corporate Fraud Task Force, operating from 2002-2007, secured $2.3 billion in total fines and restitution from energy sector prosecutions. Yet for every executive imprisoned, dozens more escaped with civil penalties that represented a fraction of their manipulation profits. Timothy Belden, despite masterminding schemes that cost California billions, received only two years of supervised release and had to forfeit $2.1 million—less than half his 2001 bonus.
The pattern of settlements reveals how companies treat massive penalties as a cost of doing business. Between California crisis settlements and ongoing enforcement, energy companies have paid over $7 billion to California alone, with total nationwide penalties exceeding $4 billion. Yet these amounts pale compared to the estimated $40-45 billion in total economic damage from just the California crisis, suggesting that crime literally paid even after accounting for penalties.
Sophisticated manipulation continues with record penalties in 2024
Energy market manipulation hasn’t stopped—it’s evolved to exploit new market structures and technologies. The 2018 GreenHat Energy scandal showed how sophisticated modern schemes have become, with the company acquiring an 890 million MWh Financial Transmission Rights portfolio with only $559,447 in collateral, then extracting $13.1 million in cash for founders before defaulting on $179.6 million owed to PJM. Founder Andrew Kittell’s suicide in 2021, which his lawyers attributed to FERC’s investigation, added a tragic dimension to the case.
JPMorgan’s 2013 settlement of $410 million for manipulating California and Midwest electricity markets from 2010-2012 demonstrated that even post-financial crisis, major banks continued energy manipulation. The bank’s JP Morgan Ventures Energy Corporation used 12 different “manipulative bidding strategies” to charge grids up to 80 times prevailing power prices, extracting “tens of millions of dollars at rates far above market prices.” Barclays faced an even larger $488 million penalty for 655 separate manipulation events from 2006-2008, with internal messages showing traders gleefully discussing how they would “crap on the NP light” market.
Winter Storm Uri in February 2021 revealed that crisis exploitation remains a go-to manipulation strategy. Natural gas prices jumped to $1,250/MMBtu—over 300 times normal levels—while electricity hit $9,000/MWh in Texas. FERC’s investigation reviewed over 2,000 transactions and referred two companies for formal investigation, with lawsuits alleging pipeline companies diverted gas before the storm to create artificial scarcity. BP was found liable in Oklahoma court for breaking gas supply contracts during the crisis, and multiple utilities are suing for price manipulation, with Energy Transfer Partners alone estimated to have made $2.4 billion in storm profits.
Cryptocurrency mining creates new manipulation opportunities
The intersection of cryptocurrency mining and electricity markets has created novel manipulation risks, as demonstrated by Stronghold Bitcoin Mining’s 2025 FERC settlement for $678,635 disgorgement plus $741,365 civil penalty. The company understated power generation capacity to PJM while directing output to Bitcoin mining, purchased excessive “Station Power” for crypto operations, and violated capacity market obligations when Bitcoin prices made mining more profitable than grid participation.
FERC’s proposed $722 million penalty against American Efficient LLC in 2024—the agency’s largest ever—shows how “energy efficiency” programs can become vehicles for massive fraud. The company allegedly operated fraudulent programs that saved no actual energy while extracting $473.7 million in capacity payments from PJM and MISO since 2014. This case exemplifies how manipulators exploit green energy initiatives and capacity markets designed to ensure grid reliability.
Virtual trading manipulation has also become increasingly sophisticated, with techniques including “Up-To Congestion” trading designed solely to collect Marginal Loss Surplus Allocation payments without market risk, cross-market manipulation using positions in one market to benefit another, and Financial Transmission Rights auction manipulation using inside information. These schemes often involve algorithmic trading systems that can execute thousands of transactions to manipulate indices in ways that are difficult for regulators to detect.
Vulnerable populations bear the heaviest burden
Energy manipulation’s human cost falls disproportionately on society’s most vulnerable members. One in four U.S. households struggle to pay energy bills, with one in five reporting they forego food expenses to keep the lights on. During California’s engineered blackouts, elderly residents dependent on electronic medical equipment faced life-threatening situations. Hurricane Maria’s aftermath showed the deadly consequences when 9.5% of 4,645 deaths resulted from inability to access electricity for respiratory equipment.
Low-income families, particularly Black and Latino households, experience disproportionately high disconnection rates and energy burden. Mobile home residents are twice as likely to face power shutoffs. The California crisis saw 97,000 customers lose power in rolling blackouts that forced hospitals onto backup generators, schools to close, and businesses to shut down. When Winter Storm Uri hit Texas in 2021, over 4 million households lost power, with communities having higher Black and Hispanic populations bearing a disproportionate burden of outages and price spikes.
The ongoing impact extends beyond immediate crises. California utilities raised rates 110% (PG&E), 90% (SCE), and 82% (SDG&E) over the past decade, with $27 billion in wildfire-related costs passed to ratepayers from 2019-2024. These rate increases compound the burden on families already struggling with energy insecurity, creating a vicious cycle where those least able to afford higher prices face the greatest risk of disconnection.
Regulatory capture enables continued manipulation
The revolving door between energy regulators and industry creates systematic conflicts of interest that undermine consumer protection. FERC Commissioner Colette Honorable left the agency in 2017 to join lobbying firm Reed Smith LLP within one week. Philip Moeller departed FERC in 2015 to join Edison Electric Institute, the utility industry’s main lobbying group. Current FERC Chair Willie Phillips previously worked for companies he now regulates.
This regulatory capture extends to funding mechanisms, with utilities spending $91.6 million annually on trade association dues that fund lobbying—costs passed directly to ratepayers. Edison Electric Institute’s $58.9 million core budget, with up to 56% spent on legislative and regulatory advocacy, comes largely from customer bills. Florida Light & Power charged customers $9 million for EEI dues from 2015-2018 alone. Fourteen states are now urging FERC to classify these political expenses as non-recoverable from ratepayers.
Whistleblower Rich Heidorn Jr.’s case against FERC revealed how political pressure allegedly caused the agency to abandon enforcement against Southern Company’s anticompetitive practices, with evidence of ex-parte communications between the company and senior FERC management. A 2003 GAO report found that 74% of FERC employees believed the agency’s ability to monitor markets had improved “little or no extent” despite the California crisis. The agency’s original penalty authority of just $10,000 per day was woefully inadequate compared to daily manipulation profits measured in millions.
Market design flaws persist despite reforms
While the Energy Policy Act of 2005 enhanced FERC’s enforcement authority and the Dodd-Frank Act added whistleblower protections, fundamental vulnerabilities remain. FERC’s anti-manipulation rule still covers only fraud, not all forms of manipulation. The majority of U.S. electricity markets lack dedicated monitoring units, and limited real-time surveillance capabilities mean manipulation often goes undetected until long after damage is done.
The complexity of the federal-state regulatory split creates enforcement gaps that sophisticated manipulators exploit. Market designs still create opportunities for manipulation during scarcity events, as Winter Storm Uri demonstrated. With climate change increasing extreme weather frequency, these vulnerabilities become more dangerous. Limited coordination between FERC, CFTC, and state regulators allows cross-market manipulation to flourish, while informal processes at FERC and continued reliance on industry self-reporting leave consumers exposed.
California’s recent SBX1-2 legislation enhancing petroleum market oversight and the establishment of FERC’s Office of Public Participation in 2021 represent incremental progress. However, with active investigations into Winter Storm Elliott manipulation, ongoing virtual trading schemes, and cryptocurrency mining’s grid impacts, it’s clear that manipulators continue evolving faster than regulators can respond.
Conclusion
Energy market manipulation in the United States represents one of the most successful and persistent corporate crime waves in history, extracting tens of billions from consumers while causing blackouts, bankruptcies, and deaths. From Enron’s traders mocking “Grandma Millie” to modern algorithmic manipulation and cryptocurrency mining schemes, the evidence reveals an industry where sophisticated fraud is not an aberration but a business model. Despite over $4 billion in penalties and some criminal prosecutions, the profits from manipulation far exceed the costs of getting caught.
The human toll—elderly people dying in blackouts, families choosing between food and electricity, businesses destroyed by engineered price spikes—demonstrates that this isn’t just financial crime but violence enacted through market mechanisms. With regulators captured by industry through revolving doors and lobbying funded by ratepayers themselves, and with new manipulation techniques emerging faster than enforcement can adapt, American consumers remain vulnerable to exploitation. Until structural reforms address regulatory capture, close market design loopholes, and impose penalties that actually deter manipulation, energy companies will continue treating fraud as a profitable investment strategy subsidized by the very people they harm.
