FERC approves Google Energy -- Keep an eye on this one...

"U.S. energy regulators approved a request by Google Inc. to become an electricity marketer, allowing the Internet giant to buy and sell bulk power like a utility" per the WSJ.

My www.GoogleMonitor.com site will keep watch over Google on Google Energy's trading in energy derivatives because it is ripe for abuse, as I explained in my earlier post: "Google's Energy trading proposal sounds eerily like Enron's disastrous derivative scheme".

Per the WSJ: "A spokeswoman for the company has said Google has no plans to sell its energy management service or speculate in energy markets. But she acknowledged the company isn't completely sure how it will proceed."

The concern here is that Google publicly has given itself wide latitutde here to speculate in energy markets in the future... because of their statement above... and because the FERC approved in its order Feb 18th  "blanket authorization... to issue securities and assume obligations or liabilities as guarantor, indorser, surety, or otherwise in respect of any security of a another person..."

  • In laymans terms, Google now can engage in the derivatives/futures activity that got Enron Broadband into trouble and that led to Enron's disastrous bankruptcy.

Will Google be humble, responsible and not abuse this new power? Or will they be entranced with the computer algorithmic math involved and all the energy-related data that Google alone can collect/analyze to try and game/corner energy markets much like they currently game their ad auctions with impunity?

  • My fear from my long experience tracking Google, is that they won't be able to resist gaming the system because they believe they are smarter than others, just like the Enron guys thought they were the smartest guys in the room. 
  • Hopefully, the FERC, SEC, and CFTC regulators will be more vigilant than they were before the Enron Broadband debacle and again before the systemic derivative unaccountability that greatly contributed to the financial crisis of 2008.
  • Moreover, hopefully regulators won't be lulled into a false sense of security here, i.e. "out of sight out of mind," because of Google's extreme secrecy in everything they do.

Wrapping up, Google is an enormous consumer of energy, and they are very motivated to, and adept at hiding that fact.

  • Energy trading should be public and auditable. 
  • With more transparency and accountabilty, hopefully we will be able to better derive how much energy Google uses, and more importantly ensure they don't manipulate energy markets to their advantage.  


An interesting tidbit: Google is extremely secretive about where its data centers are.

  • The FERC's public filing has a footnote, #4, which provides at least some glimpse of where some of them are, as Google asked for and got ancillary authority to trade energy in New York, New England, the Midwest, in addition to the obvious California.