Con Ed customers and electricity users across the state were scammed out of hundreds of millions of dollars – and New Yorkers were put at risk of a blackout – by an elaborate plan to sell power out of state, explosive documents filed with federal regulators charge.
And some of the estimated $240 million in consumer losses probably wound up in the pockets of companies that had no idea they were gaining from the scheme, experts say.
Documents filed with the Federal Energy Regulatory Commission suggest the scheme began in January and ended July 22, when it was shut down by the New York Independent System Operator, which runs the state’s power grid.
The plot involved contracts to sell electricity from upstate power plants to buyers in the mid-Atlantic grid, which includes New Jersey, Pennsylvania and other states.
The contracts provided for the electricity to be transmitted north through Ontario, south through the Midwest, and then eastward to the mid-Atlantic grid – a circuitous route that probably let traders profit from the different grids’ price differences, said a source familiar with the matter.
But when the contracts took effect, much of the power actually moved south straight across New York to New Jersey and Pennsylvania.
That clogged New York’s grid, making it harder for generating companies to transmit power within the state.
Because its lines were clogged, the New York ISO imposed extra fees on utilities buying power from plants far away.
“That hurt consumers predominately in New York City and on Long Island,” the source said.
The congestion also challenged grid engineers’ ability to control the large amounts of electricity bouncing around the eastern United States, boosting the risk of an outage – although it was unlikely the problem would have caused a 2003-style blackout, the source said.
Whatever happened, it’ll take months or years to unravel – and Gerald Norlander of the Albany-based Public Utility Law Project says consumers can probably forget about getting their money back.
“What we are talking about here could be a crime,” Norlander said. “It’s unlikely there is going to be any loose talk on who did what. Nobody has taken credit for it.”
Some out-of-state utilities that claim they were hurt by higher prices from the scam say it began earlier than the ISO admits, and they want a federal probe. A spokeswoman for the Federal Energy Regulatory Commission declined to comment on how the agency might handle the case.
“This is complex. The details will be emerging,” said Con Ed spokesman Bob McGee. “We’re concerned about this, too. We are working with the New York ISO to get to the bottom of this.”
People in the electricity industry appear frightened and angry over what happened.
“Something is clearly wrong here,” a group of municipal utility companies said jointly in papers demanding that federal regulators investigate.