Less Government - Who Is Watching What You Eat?

Less government......... corporations are watching what I eat much more than the government.

Food additives on the rise as FDA scrutiny wanes

By Kimberly Kindy August 17, 2014 at 10:08 PM

The explosion of new food additives coupled with an easing of oversight requirements is allowing manufacturers to avoid the scrutiny of the Food and Drug Administration, which is responsible for ensuring the safety of chemicals streaming into the food supply.
And in hundreds of cases, the FDA doesn’t even know of the existence of new additives, which can include chemical preservatives, flavorings and thickening agents, records and interviews show.
“We simply do not have the information to vouch for the safety of many of these chemicals,” said Michael Taylor, the FDA’s deputy commissioner for food.
The FDA has received thousands of consumer complaints about additives in recent years, saying certain substances seem to trigger asthmatic attacks, serious bouts of vomiting, intestinal-tract disorders and other health problems.
At a pace far faster than in previous years, companies are adding secret ingredients to everything from energy drinks to granola bars. But the more widespread concern among food-safety advocates and some federal regulators is the quickening trend of companies opting for an expedited certification process to a degree never intended when it was established 17 years ago to, in part, help businesses.
A voluntary certification system has nearly replaced one that relied on a more formal, time-consuming review — where the FDA, rather than companies, made the final determination on what is safe. The result is that consumers have little way of being certain that the food products they buy won’t harm them.
“We aren’t saying we have a public health crisis,” Taylor said. “But we do have questions about whether we can do what people expect of us.”
In the five decades since Congress gave the FDA responsibility for ensuring the safety of additives in the food supply, the number has spiked from 800 to more than 9,000, ranging from common substances such as salt to new green-tea extracts. This increase has been driven largely by demand from busy Americans, who get more than half their daily meals from processed foods, according to government and industry records.
Within the past six months, top officials at the FDA and in the food industry have acknowledged that new steps must be taken to better account for the additives proliferating in the food supply. The Center for Food Safety, an advocacy group, has responded more aggressively; it sued the FDA this year, saying the agency has abdicated its oversight of the additives approval process. The Grocery Manufacturers Association also provided seed money this spring to create a research center at Michigan State University to deal with the rising concerns over additives.
For new, novel ingredients — or when approved additives are used in new ways — the law says companies should seek formal FDA approval, which must be based on rigorous research proving the additive is safe. The agency uses the phrase “food additive,” in a narrow legal sense, to apply to substances that get this approval.
But many other additives are common food ingredients — vinegar is considered a classic example. The law allows manufacturers to certify, based on research, that such ingredients are already Generally Recognized as Safe, or GRAS.
For both types of additives, FDA scientists initially conducted detailed reviews of the company’s research. The agency also published its own evaluation of that research in the Federal Register.
This oversight system shifted dramatically in 1997. In response to a shortage of staff members and complaints from industry that the process was too cumbersome and did not improve food safety, the FDA proposed new rules. The agency told companies that were going the GRAS route — which turned a years-long process into one of months — that they no longer would have to submit their research and raw data. The companies can share just a summary of their findings with the agency.
In part, FDA officials hoped that by streamlining the GRAS notification process, companies that previously avoided informing the agency of new additives would be encouraged to keep the government in the loop, current and former agency officials said.
The changes didn’t work out as planned.
For starters, most additives continued to debut without the FDA being notified.
Moreover, companies that did choose to go through the FDA oversight process largely abandoned the formal approval route, opting instead for the new, cursory GRAS process, even for additives that could be considered new and novel, according to agency documents and an analysis of those records by the Natural Resources Defense Council.
“They created a side door,” said Tom Neltner, a chemical engineer with the NRDC who has co-authored six academic articles about the FDA additives process over the past four years.
An average of only two additive petitions seeking formal approval are filed annually by food and chemical companies, while the agency receives dozens of GRAS notifications, according to an NRDC analysis of FDA data. Hundreds of other food chemicals and ingredients have been introduced without notifying the FDA at all, according to agency officials, trade journals and food safety groups.
FDA officials, food safety advocates and the food industry all agree there are problems. There are too many cases in which the agency is not notified of new additives or the science remains secret. But there’s no consensus about how to fix the system.
Industry trade groups say that the additives in today’s foods do not pose a public safety risk, but most agree improvements for better tracking and oversight are needed.
“It’s the right time to take a step back,” said Leon Bruner, the Grocery Manufacturers Association’s chief science officer. “There are problems with transparency. How can we be sure that the FDA is aware of ingredients?”

Safety claims not evaluated

When the manufacturer of a vegetarian line of foods called Quorn first approached the FDA in 1986, the company asked that the agency give formal additive approval for a protein-rich fungus the company makes in large fermentation vats.
Marlow Foods dubbed its new fungal ingredient “mycoprotein.”
Fifteen years passed without the FDA moving on the petition. Internal FDA documents, obtained through a Freedom of Information Act request, show no sign of the agency evaluating the safety claims made in the petition. Because the FDA declined interview requests about Quorn products, it is unclear why the petition sat for so long.
After the long delay and without withdrawing the original petition, Marlow filed a GRAS notification with the FDA in 2001, saying the firm had hired a group of experts who had determined that mycoprotein was safe. Under the rules, the notification did not — nor did it have to — cite every study the company had conducted.
A study that was not mentioned was an unpublished “large scale volunteer trial” from the late 1970s. During the trial, nearly 5 percent of the 200 participants reported feeling ill after eating several “test meals,” according to the study, which was obtained by The Washington Post. Four had “more severe reactions,” including two who started to “vomit violently,” another who became “violently sick” and another who “experienced nausea and vomiting” after eating Quorn products that contain mycoprotein. The study says that the “reactions” could have been caused by a response to mycoprotein.
In a prepared statement, Quorn said the study had been shared with the FDA but was not cited in the GRAS submission because “it was a small study and at that time nearly 25 years old and more recent data was relevant and important to the submission.” The statement also said “many research studies” had been undertaken, and all were shared with the FDA and other regulators.
Once Marlow filed its GRAS notification, the FDA acted quickly. Within six weeks, the FDA signed off on it, using its standard language, noting it was not vouching for the safety of mycoprotein and that it was the “continuing responsibility of Marlow to ensure that food ingredients that the firm markets are safe.”
Within months, the Center for Science in the Public Interest (CSPI) began alerting the FDA to complaints from consumers in the United States and Britain, where the products have been sold since 1985.
“They said they broke out in hives and had breathing difficulties — anaphylactic reactions,” said Michael Jacobson, the group’s executive director. “The GI episodes they described were violent. They would vomit so hard it could break the blood vessels in their eyes.”
Independent researchers also published three papers in academic journals, between 2003 and 2009, describing severe and even life-threatening allergic reactions to mycoprotein.
The FDA ultimately contacted hundreds of people that the advocacy center sent their way. In 2012, the agency wrote to the group agreeing that “individuals may experience adverse reactions” to Quorn products and that a “food allergy cannot be ruled out.” However, FDA officials said they believed “most of these reactions are due to non-life threatening food intolerance.”
The FDA said it would not challenge Marlow’s GRAS findings.
The CSPI said the FDA treated the concerns as an inconvenience more than a safety concern. It said the agency, at a minimum, should have issued a public warning to people who could be allergic or intolerant, or mandate warning labels. FDA officials strongly disagreed with this characterization, documents show.
In a statement to The Post, Marlow Foods said the fungal-based ingredient in its products is a “natural protein” that is “harvested and fermented in a similar way to beer, yeast or yogurt,” adding that claims that Quorn is unsafe “have been proven inaccurate and lack scientific credibility.” However, the company acknowledges on its Web site that some consumers may have a “true allergic reaction” to its products.

Bypassing the FDA

Companies often bypass the FDA altogether. Under the rules, companies may make their own GRAS determination. Sharing it with the agency and getting it to sign off is voluntary.
In 2007, Japan-based Kao Corp. tried to get the FDA to sign off on its GRAS determination for its extract containing the chemical Epigallocatechin-3-gallate (EGCG). The company planned to promote its qualities as an antioxidant and possible fat-burner in a line of diet and sports drinks, according to FDA e-mails obtained by the Natural Resources Defense Council through a Freedom of Information Act request.
But the FDA toxicologists first asked Kao to address the findings of more than a dozen scientific studies, including one that showed it could induce “toxicity in the liver, kidneys and intestine.” Another showed it could produce “defects in the brain and heart.” And still another said it may “contribute to infant leukemia,” the FDA e-mails show.
FDA told Kao Corp. to go back to the drawing board. Instead, in 2008, it withdrew its notification. Kao spokeswoman Billie Cole said the company believes its products, which are marketed in Japan, are healthy and safe.
Three years later, another company, Iowa-based Kemin, took out advertisements in trade publications, announcing its green-tea powder containing EGCG was Generally Recognized as Safe. Kemin did not share its GRAS findings with the agency.
The company began marketing the substance to the food and beverage industry for use in “cereal, nutrition and energy bars, soft drinks, sports and isotonic drinks, energy beverages, fruit and vegetable juices, meal replacement and soft candies.”
In a prepared statement, Anita Norian, president of Kemin’s human nutrition and health division, said the product is safe and that the company chose “not to participate in the FDA’s voluntary GRAS determination notification process.” Norian said to do so would potentially undermine the company’s work, allowing other firms to discover “proprietary” information about its product.
This is the opposite of what the overight law intended, the FDA’s Taylor said. Although informing the FDA is voluntary, he said, the law was meant to increase public scrutiny of additive safety by encouraging companies to publish their science in academic journals.
“The assessments need to be based on publicly available information where there is agreement among scientists,” he said. “It has got to be more than three employees in a room looking at information that is only available to them.”

Proliferation taking a toll?

Even when the FDA approves a new additive or signs off on a company’s GRAS determination, a safe ingredient can turn dangerous if its use becomes more widespread than the agency envisioned. And under the rules, the agency has little way of monitoring this threat after the initial introduction of the additive, called “post-market.”
“We do not know the volume of particular chemicals that are going into the food supply so we can diagnose trends,” Taylor said. “We do not know what is going on post-market.”
During the initial review, the FDA sets limits for how much of a chemical or ingredient can be used in a particular product. But the cumulative consumption can soar as the additive is used in more and more types of food and beverages.
This is what happened with caffeine. In 1959, the FDA approved it as GRAS, allowing soft drink manufacturers to add it to their products. But now food manufacturers are loading caffeine into energy drinks, maple syrup, jelly beans and marshmallows.
And what happened with caffeine is now taking place with lesser-known additives.
Carrageenan, extracted from red seaweed, was one of the first substances that the agency recognized as GRAS. The additive is a stabilizer that can help preserve the structure of foods and beverages and is used in products such as evaporated milk.
But as processed foods began to take off, and a demand for low-fat and tasty vegan processed foods became more popular, so did the use of carrageenan. A drop of it in a package of reduced-fat deli meat, a bundle of vegan cheese, a bottle of kefir or a carton of almond milk can keep ingredients blended together and give products a pleasant texture.
Companies sought and secured the FDA’s approval for its use as a food additive for a wider variety of functions — including as a thickener and an emulsifier, which keeps ingredients bound together. That approval further restricted the type of red seaweed that could be used as the source.
Scientists working for the carrageenan industry say the additive is safe.
“When it’s bound to food protein, it cannot interact with the cells; it can’t interact with the intestinal wall,” said James McKim, president of the toxicological research firm CeeTox, who was recently hired as a consultant to the carrageenan trade group, Marinalg. “It runs right through the animals.”
But doctors say the proliferation of carrageenan in the food supply is taking a mounting toll on health. As its uses have multiplied, so have gastrointestinal disorders such as diverticulitis, irritable bowel syndrome and Crohn’s disease, according to some doctors who specialize in treating patients with gastrointestinal tract problems.
Joanne Tobacman, a University of Chicago physician and professor, asked the FDA in 2008 to examine the additive’s safety, submitting five of her own studies concluding that carrageenan can cause inflammatory bowel disease and diabetes. The studies were financed with grants from the federal government.
The FDA denied her petition, citing several other industry-funded studies that contradicted her findings.
Melvyn Grovit, a clinical nutritionist who treats children with Crohn’s disease, said he started advising his clients to remove carregeenan from their diets with great success after reading Tobacman’s research.
“I’ve given up on the FDA protecting the public; they are protecting businesses,” said Grovit, who also has Crohn’s disease. “The only reason for its presence in so many food products today is that it’s cheap and it makes food processing easy.”

Kimberly Kindy is a government accountability reporter at The Washington Post.

http://www.washingtonpost.com/national/food-additives-on-the-rise-as-fda-scrutiny-wanes/2014/08/17/828e9bf8-1cb2-11e4-ab7b-696c295ddfd1_story.html?tid=trending_strip_6

Baseball In A Football Town - Mamie Johnson Takes On City Hall

  Baseball in the city...............

Negro Leagues' Female Star Takes On D.C. Government

Mamie Johnson has played with superstars and met presidents. Now all she wants is a little dirt.

By Alex Brown and Reena Flores

May 8, 2014

Mamie Johnson is not happy.

The Negro Leagues legend is sitting on a field named in her honor, blocks from the Northeast D.C. house where she grew up and still lives.

But Johnson—who talks about baseball the same way Billy Graham talks about Jesus—is sitting not on a baseball diamond, but on an artificial-turf field for football and soccer.

"Right now, I would be forming teams to play ball," says the 78-year-old, speaking of her yearly spring itch to teach kids the game she loves. But without a diamond, that ambition is on hold.

"I'm so pumped up about this dedication that I'm going to have," Johnson said, describing her reaction when she learned that the field would be named after her last April. "Then when I see what they did to it—and put my name on it. You give me a football field and a soccer field, and I'm a baseball player? I am so hurt, and I've never been so disappointed."

She's equally disappointed in the reaction from the powers that be. "When I said something to the mayor [Vincent Gray] about it, you know what he said? 'It's a football field.' But I'm a ballplayer. I'm a baseball player. (Read here for Johnson's thoughts on Bryce Harper, the designated hitter, and President Obama's throwing arm.)

But why is Johnson so intent on getting a diamond for neighborhood kids to play on? And how did she get a field named after her in the first place?

The answer starts some 61 years ago, when a 17-year-old Johnson was pitching in a local game—on that same plot on the corner of 17th and F Streets N.E. But in Johnson's day, a pair of baseball diamonds sat where the football field now lies.

The teenage Johnson was pitching when a scout for the Indianapolis Clowns—a Negro League club that had just lost star Hank Aaron to the recently integrated Major Leagues—saw her and offered her a spot in their lineup. Would she like to play for the Clowns? "Hell, yeah!" Johnson responded.

The next day, she was on a bus for spring training.

For a 5-foot-3 African-American woman in the 1950s, playing professional baseball was regarded as something on the far side of implausible. In fact, Johnson is the only woman to reach that level as a pitcher (the Clowns also had two female position players).

But was her signing just a publicity stunt? Well, a few batters may have thought that. But once Johnson started racking up wins, she quickly gained respect.

Over a three-year career, Johnson compiled a record of 33-8 and hit for a .257 average. "I felt like somewhere down the line I was gonna play pro ball somewhere," she said. "I became someone that no other woman has ever been, and that has been to pitch Major League Baseball with the fellas. Nobody else has done this. So that puts me in a category all of my own, and it makes me very proud."

Even her nickname, "Peanut," speaks to her defying-the-odds mentality. A rival batter, she says, asked how she expected to strike him out, given that she was "no bigger than a peanut." After strike three hit the catcher's mitt, Johnson laughed. "Well, the peanut's pretty good," she said.

Her best pitch? "All of them. Anything. Really. I had 'em all. All except the knuckleball—my hand was too little.… I had a fastball with a wrinkle."

Her best recollection? Making the All-Star team, then pitching three innings in a winning All-Star Game effort. "Just knowing that I was good enough to be there with some of the greatest ballplayers that you could ever think of. A whole lot of people don't realize it, but in the Negro Leagues, we had some of the best ballplayers that ever picked up a bat."

Johnson is all smiles when she talks about her career, her 30 years as a nurse in D.C., and her role in preserving the legacy of the Negro Leagues. And she doesn't shy away from a little name-dropping: legends Hank Aaron, Ernie Banks, and Buck O'Neil.

"I know them very well.… I sit back now sometimes, and I think about, 'Wow, look at who you are. Look where you've been. Look at the people you've met.' The presidents. Eating at the White House. These are the things that baseball has done for me."

But her mood darkens when she talks about baseball in the District today.

As she's watched the sport lose popularity in her neighborhood, that decline has been reflected in the major leagues as well. Where African-Americans once made up 27 percent of all MLB players, this season that number stands at 8 percent—and falling. "We're working in a population where baseball hasn't been a popular sport for some time," said Tal Alter, who directs the Washington Nationals' new youth facility in Southeast D.C.

But while the Nationals have poured millions into the Southeast fields, Johnson wishes D.C. would show that kind of commitment to baseball in the rest of the city. It's not just important for kids to have the same opportunities she had, but for the city's history with baseball to be preserved.

She cited baseball's role in moving the country forward on civil rights—overcoming long-standing prejudices, as black players showed they could compete. "Baseball moved a whole lot of things, believe me," she said. "Baseball moved segregation a great deal. We've come a long ways, baby, but we've got a long ways to go."

To her, the field at 17th and F—where her story began—is a big part of that legacy. "I have a field that I came from," she said.

Johnson says she'll still find a way to coach local youth teams this summer, as she has for decades. But she wishes she could do so in the neighborhood where she's lived for nearly 70 years. "I could find the kids to come out here," she said. "If I had a place for them to come, I'd have kids on this field."

http://www.nationaljournal.com/politics/negro-leagues-female-star-takes-on-d-c-government-20140508

Nelson Mandela Memorial Service, Washington, DC, December 11, 2013

Invitation to memorial service for Nelson Mandela in Washington, DC, USA, December 11, 2013 -

Love Your Enemies

Another bumper sticker -

Hot Money From Electricity Congestion

     Hard to lose when the system is rigged in your favor....... just the price of the world's best technology in the USA? Never mind my sarcasm - something is wrong with the system by any measure.
     The ironic thing is that roof top solar electricity can alleviate the congestion by providing power when and where it is needed. The local solar may not power all of a building's air conditioning on a hot day but it can power a significant amount which can alleviate spikes that push current generating capacity.


From The New York Times -  (check original link at bottom for a good chart) -

Traders Profit as Power Grid Is Overworked

By JULIE CRESWELL and ROBERT GEBELOFFAUG. 14, 2014

PORT JEFFERSON, N.Y. — By 10 a.m. the heat was closing in on the North Shore of Long Island. But 300 miles down the seaboard, at an obscure investment company near Washington, the forecast pointed to something else: profit.

As the temperatures climbed toward the 90s here and air-conditioners turned on, the electric grid struggled to meet the demand. By midafternoon, the wholesale price of electricity had jumped nearly 550 percent.

What no one here knew that day, May 30, 2013, was that the investment company, DC Energy, was reaping rewards from the swelter. Within 48 hours the firm, based in Vienna, Va., had made more than $1.5 million by cashing in on so-called congestion contracts, complex financial instruments that gain value when the grid becomes overburdened, according to an analysis of trading data by The New York Times.

Those profits are a small fraction of the fortune that traders at DC Energy and elsewhere have pocketed because of maneuvers involving the nation’s congested grid. Over the last decade, DC Energy has made about $180 million in New York State alone, The Times found. 

Across the nation, investment funds and major banks are wagering billions on similar trades using computer algorithms and teams of Ph.D.s, as they chase profits in an arcane arena that rarely attracts attention.

Congestion occurs when demand for electricity outstrips the immediate supply, sending prices higher as the grid strains to deliver power from distant and often more expensive locations to meet the demand. To help power companies and others offset the higher costs, regional grid operators, which manage the nation’s transmission lines and wholesale power markets, auction off congestion contracts, derivatives linked to thousands of locations on the grid. When electricity prices spike, contract holders collect the difference in prices between points from the grid operators. If the congestion moves in the opposite direction, holders pay the operators.

The contracts were intended to protect the electricity producers, utilities and industries that need to buy power. The thinking was that the contracts would help them hedge against sharp price swings caused by competition as well as the weather, plant failures or equipment problems. Those lower costs could reduce consumers’ bills.

But Wall Street banks and other investors have stepped in, siphoning off much of the money. In New York, DC Energy accounted for more than a quarter of the total $639 million in profits in the congestion markets between 2003 and 2013, The Times found. Some of DC Energy’s biggest paydays involved Port Jefferson, a village 60 miles east of Manhattan. Because of the geography of the grid, moving power from one point to another means demand often briefly outstrips supply here.

“Why aren’t we getting that money?” said Margot Garant, mayor of Port Jefferson. City officials, including the mayor, had not heard of DC Energy before they were told about it by The Times.

DC Energy — and its profits — are an unexpected result of the deregulation of the nation’s electric grid. The idea behind deregulation was to eliminate old monopolies and create robust, competitive markets that would encourage investment and ultimately lower costs for consumers. But in most places, electricity bills have been rising, not falling. While fuel prices, taxes and fees have added directly to the costs, Wall Street-style traders have contributed in subtle ways by turning new markets, like the trading of congestion contracts, to their advantage, The Times analysis found.

The contracts have attracted big money: More than $2 billion has been invested nationwide in the monthly auctions for contracts since 2011, according to Platts, a trade publication.

The Times examined 150,000 congestion contracts that have been auctioned since 2003 by the New York Independent System Operator, a nonprofit company that oversees the state’s transmission network. Under deregulation, system operators manage the nation’s transmission lines and run wholesale power markets where utilities like PSEG Long Island acquire power to sell to their customers. Using data made public by the company, The Times cataloged who bought the contracts and at what prices, and how much money was subsequently won or lost.

The data show how congestion and these contracts led to big profits in Port Jefferson on May 30, 2013.

Capitalizing on Math

DC Energy had bet there would be trouble. That spring, its traders bought a number of congestion contracts at a monthly Nyiso (pronounced NIGH-so) auction. Those derivatives entitled the firm to collect the difference in power prices between multiple points on the Long Island grid, including between Port Jefferson and Northport, 20 miles to the west.l

On that May morning, transmission lines near a power plant in Northport were down for maintenance just as the heat arrived. The Northport area had plenty of electricity for itself but could not send more to communities like Port Jefferson. So while prices in Northport climbed to more than $129 a megawatt hour, prices in Port Jefferson jumped to $324 — a boon for DC Energy, which held congestion contracts tied to price differences between the two points.

The derivatives were not primarily devised for Wall Street. But in New York and elsewhere, many power companies are smaller players in the market compared to Wall Street banks like Goldman Sachs, and trading firms like DC Energy.

It is unclear how much the activity in the markets, particularly by the banks, is speculation versus hedging on behalf of clients. Still, many of the most active participants are investment firms.

The utilities and power companies suggest they cannot win against trading outfits that employ math specialists, often called “quants,” to spot lucrative opportunities. With transmission contracts, there are tens of thousands of tradable combinations.

“The financial players have the resources, the smart people that discovered there is a great opportunity to make money here,” said Hany A. Shawky, a professor of finance and economics at the University at Albany who has studied the electricity markets. “The utilities are sometimes missing opportunities to hedge because of the competition coming in from financial players.”

Trading firms like DC Energy say they ultimately benefit consumers by bearing financial risks and fostering competition. They argue that power companies can hedge only if someone else is willing to speculate. Market forces, they say, can also help power companies determine where to invest in the grid.

“We believe this type of activity should cause prices to better reflect true costs and thus create a more efficient electricity infrastructure that should better serve the retail customer,” Andrew J. Stevens, a co-founder of DC Energy, said in an email. DC Energy executives declined to be interviewed for this article but answered questions by email.

For DC Energy, the derivatives seem close to a sure thing. Former employees said the executives had told staff members that the firm lost money for two months in its decade-long history. DC Energy bought the same Northport-Port Jefferson contracts on Long Island 47 times since 2005, earning $2 million, The Times found.

Dr. Stevens said via email that the firm was involved in markets across the country. “We invest in hundreds of thousands of contracts across the marketplace,” Dr. Stevens said. “Any subset of these contracts in some subset of time will show gains, while another subset will show losses.”

Yet in places like upstate New York or Long Island, the market is so small, and the participants for certain contracts so few, that knowledgeable traders can collect rich rewards. Frank A. Wolak, an economics professor at Stanford who studies commodities, said the congestion markets created perverse incentives because profits rise when grid congestion becomes worse.

"If traders are making money, then consumers are paying more,” Mr. Wolak said. “The money that these guys are making has to come from somewhere.”

A Winning Record

Little outside the offices of DC Energy hints at its rarefied position in the American power industry. The offices, in an upscale area 17 miles from downtown Washington, are sandwiched between outposts of Hermès and Tiffany.

Like top Wall Street banks, DC Energy stocks its trading desk with graduates of elite universities. Most have backgrounds in science and engineering — a doctorate in chemical physics from Harvard, for example, or a master’s degree in artificial intelligence from Stanford — rather than in finance. Their job is to develop computer-driven trading models to predict what will happen to electricity prices in different parts of the nation.

In this murky corner of the markets, DC Energy is powerful. Dean Wilde II helped found the firm in 2002; he is a business strategist and consultant who also heads Dean & Company, a corporate advisory firm housed in the same suburban offices. Mr. Wilde, who studied physics at Iowa State University and attended the M.I.T. Sloan School of Management, founded Dean & Company in the early 1990s after working for a management consulting company.

Mr. Wilde has given few interviews over the years and declined many requests to be interviewed for this article.

When it comes to trading in the electricity congestion market, few can touch DC Energy. While Wall Street banks like Morgan Stanley have placed bigger bets in New York, few have matched DC Energy’s consistent, winning record. Just how DC Energy achieved it is a closely guarded secret. The firm requires employees to sign nondisclosure agreements, and former employees spoke on the condition that they not be named to avoid exposing themselves to lawsuits. These people attributed DC Energy’s success to its focus on the engineering aspects of electricity trading — that is, on the physics behind how and where power flows on the grid.

Inside DC Energy, teams of six to eight analysts search through data for trends or disruptions before bidding on contracts through auctions held by the New York Independent System Operator and its counterparts elsewhere in the country.

“The message that was portrayed was, by doing this trading, we are making the markets more efficient,” said a former employee. “But there were people who got disillusioned and left because many of them aren’t finance people to begin with, and the focus is on making money and boosting the company’s bottom line.”

DC Energy goes to great lengths to protect its winning formula. After one of its top traders, Jason Miller, left for Saracen Energy, another trading firm, DC Energy sued. The reason was that Saracen, based in Houston, had begun playing the New York congestion market, just like DC Energy. DC Energy said Mr. Miller violated confidentiality and noncompete agreements he had signed, and misappropriated trade secrets.

A lawyer for Mr. Miller, who denied all of the allegations against him in court documents, declined to make him available for comment.

Kevin Kelley, the president of Saracen, said in an emailed statement that Saracen’s increased activity in the New York market was because of the hiring of three traders last year, including Mr. Miller. He added that Mr. Miller had not used any proprietary information of DC Energy’s to trade for Saracen’s benefit.

“Saracen also entered the Long Island congestion contracts markets for the first time as a result of Mr. Miller’s background and experience with these markets while at DC Energy,” DC Energy said in its lawsuit, filed in federal court in the Eastern District of Virginia in January. Saracen, DC Energy claims, made $1 million last November and December on Long Island — profits that came at DC Energy’s expense, the suit contends. “DC Energy had emerged as the only consistently profitable trader in the congestion markets on Long Island,” the suit says.

Risk of Manipulation

A major concern for federal regulators is that congestion contracts are one way to manipulate electricity prices. While trading by financial players is legal and DC Energy has not been accused of any wrongdoing, the Federal Energy Regulatory Commission has since 2012 proposed penalties or reached settlements with three large banks and several investment firms, accusing each of manipulation of some type.

In one of the cases, Louis Dreyfus Energy Services, an energy trading company, began buying contracts linked to the grid around Velva, N.D., where winds off the prairie spin the turbines of a wind farm, in spring 2009.

First, Xu Cheng, an employee at Louis Dreyfus Energy, which at the time was partly owned by a J. P. Morgan hedge fund, placed a bet that congestion would drive up electricity prices. Then, FERC later charged, Louis Dreyfus set out to make sure those bets would pay off. Trading in another corner of the electricity market, a second trader created the impression that congestion was hitting the Velva area, the commission concluded. Mr. Cheng had examined just such a situation in his doctoral dissertation at the University of Illinois at Urbana-Champaign, noting that traders could “make extra profit by creating nonreal congestion.”

The payoff for Louis Dreyfus was a quick $3.3 million in profits.

The commission smelled trouble and began to investigate. In February, Louis Dreyfus agreed to pay $7.4 million to settle allegations that it had manipulated prices. As is often the case in such settlements, the firm neither admitted nor denied wrongdoing.

The commission has been trying to crack down in the electricity market lately, but for years it has been outmaneuvered by the traders it is supposed to police.

Shaun D. Ledgerwood, a former economist for the commission’s Office of Enforcement and specialist on market manipulation, said that when he joined the commission in 2008, only a handful of people were analyzing possible manipulation in electricity markets. Today, that group is part of the Division of Analytics and Surveillance, which has more than 50 employees. The enforcement office has grown to about 200 people from 60 in the last 10 years or so, said Dr. Ledgerwood, who is now a consultant.

“Today, the FERC is getting access to important data on a more regular basis,” Dr. Ledgerwood said. “The goal is to get the data in real time.”

A spokesman for the commission declined to comment for this article.

But some observers fear the commission’s actions could discourage activity by financial players who they say are critical to the markets.

“They are making enforcement decisions that are striking at the basic core of the market’s design,” said William W. Hogan, a professor at the John F. Kennedy School of Government at Harvard and the intellectual father of congestion contracts. Dr. Hogan has been an outspoken critic of the commission’s recent manipulation investigations and has defended some of the firms that have come under scrutiny.

Back on Long Island, Mayor Garant of Port Jefferson has been urging the owner of the Port Jefferson and Northport plants to modernize them to reduce electricity costs. It has not done so.

“We, the ratepayers, should be getting the benefit of these congestion contracts, not some speculators,” Ms. Garant said.

 

A version of this article appears in print on August 15, 2014, on page A1 of the New York edition with the headline: Traders Profit as Power Grid Is Overworked. 

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