because they could afford ALEC’s premium membership fees. The utility companies got outbid in ALEC’s lawmaking auction. “It’s a situation where you buy a seat at the table, and then you have the opportunity to vote and drive policy,” an exasperated utility lobbyist named Tim Kichline later told the Austin American-Statesman. “We don’t have enough votes. . . . If they are going to do something we like, they don’t need our votes; and if they are going to do something we do not like, we can’t stop them.”
After Koch and Enron won the fight, ALEC crafted “model bills” for electricity deregulation. In states like Mississippi and South Carolina, ALEC’s model bills were introduced almost verbatim. In California, the Republican state senator and ALEC member Jim Brulte was on hand to help guide the legislative efforts alongside Steve Peace. Without pressure from groups like ALEC, it’s not at all clear that deregulation would have happened at all. The general voting public certainly wasn’t pushing for it—people weren’t taking to the streets with placards and banners demanding electricity trading. Even under the best circumstances, the benefit of deregulation to consumers was likely to be minimal. Consumers would have to shop between electricity providers only to gain a savings of a few dollars, or even a few cents, on their electricity bills.
Even though he drove the legislative effort to deregulate, Peace remained uneasy. He remained skeptical of the free-market advocates. He knew markets might be more efficient in the long run, but they also created a lot of volatility. The market didn’t care if an average family in San Diego could afford to keep their lights on, or if customers wanted a predictable cost of electricity from month to month. The industry lobbyists and trade groups didn’t seem to fully appreciate this. But Peace saw that there was no stopping the train.
“I realized that this all was in motion and was many years in the works,” Peace said.
Peace and Brulte passed the bill in August of 1998. The law was radical in nature. It instantly broke apart the state’s big utility companies. The utilities became glorified middlemen, buying energy on an open market from traders at Koch and Enron and then selling it to the utility’s customers. The utilities had to sell their power plants to outside companies—many of them in Texas—that operated the plants as independent companies. The utilities also lost their transmission lines, which were taken away and turned into something that resembled a railroad or a pipeline. Anybody could now schedule power to run across the transmission lines, making them the common carrier of power. The world of electricity trading, in other words, was starting to look a lot like the world of natural gas trading that made Brenden O’Neill’s team so rich.
It would take two years for the bill to take full effect. But by 2000, the markets were open, and the gold rush had begun. Koch Industries was one of the few companies ready to capture the opportunity.
* * *
Koch Industries had constructed its own intelligence network, from the ground up, to support its new team of traders as they bought and sold electrons.
Traders on the electricity desk analyzed the new marketplace with an internally developed tool called the West Power Clearing Model. It used a software program that sucked in and synthesized huge amounts of data to determine the supply and demand for electricity in places like California. The model considered how high electricity reserves were at key nodes in Southern California, the “Desert Southwest,” and Northern California. It also considered the cost of electricity transmission along power lines and the different price of power at several locations. This helped traders start to make “basis plays,” as they did in the oil markets, exploiting the changing prices within fractured markets. The model also integrated published information about upcoming power plant outages, expected gas prices, and anticipated demand for energy.
Darrell Antrich helped lead the small team of traders who started using the West Power Clearing Model when California markets were open for business. One of the star traders on his team was a young woman named Melissa Beckett, a graduate of Fort Hays State University in Kansas. She was a small-town girl with the work ethic to prove it. The trading floor was dominated by young white men, but Beckett managed to hold her own among them. She gained respect for her trading acumen and had a no-frills air about her, wearing her hair in a shoulder-length