- The Washington Times - Wednesday, August 14, 2002

ASSOCIATED PRESS
Investigators found evidence of price manipulation and deceit by Enron and other energy companies that aggressively sought to profit from California's volatile power markets, a Federal Energy Regulatory Commission report said yesterday.
The staff recommended that the commission pursue "possible misconduct" charges against three Enron-affiliate companies and two investor-owned utilities that did business with Enron.
The staff urged additional investigations into the activities of Portland General Electric Co., Enron Power Marketing Inc., and Enron Capital & Trade Resource, all Enron affiliates; Avista Corp., a Spokane, Wash., electric utility; and El Paso Electric Co., based in El Paso, Texas.
The commission's staff said Enron's questionable trading practices, once they became public, had ramifications "far beyond their dollar impact" in harming public confidence in energy markets.
FERC Commissioner Nora Mead Brownell said the report "certainly identifies companies that we know today were engaging in behavior that was manipulative or inappropriate."
But California Gov. Gray Davis, a Democrat, called the preliminary report "a whitewash pure and simple" and said he was puzzled that FERC has taken two years to finally start a formal investigation into misconduct that he and other state officials have long complained about.
FERC still "hasn't sanctioned anybody, it hasn't issued any refunds to us, it's done nothing to stop the manipulation which everyone agrees occurred here in California," Mr. Davis said.
The investigation was ordered in February by FERC Chairman Pat Wood after repeated charges by California officials that energy marketers were gouging California's utilities and its customers by manipulating power supplies.
Two months later, FERC obtained an internal Enron memo that described a series of trading strategies, including sham transactions and other schemes intended to create congestion on the Western power grids and forcing up prices.
"These now-famous trading strategies have adversely affected the confidence of markets far beyond their dollar impact on spot prices," the FERC staff report said.
The report said Enron's tactics included "attempts to fabricate transactions for profit" and use of middlemen to hide power transactions among Enron-affiliated companies.
"Enron's corporate culture fostered a callous disregard for the American energy customer," the report said.
It described Enron as eager to "game the system" as it sought to reap profits from soaring power prices in California in 2000 and early 2001.
The staff report said the purported misconduct involving these companies included hiding the extent of their mutual business dealings, using middlemen to disguise transactions, not complying with federal rules on open transmission access and not having adequate operating reserves.
California officials say its utilities and, in turn, customers were overcharged as much as $9 billion by wholesale electricity and natural-gas marketers. Enron's energy-marketing subsidiary was among a half-dozen major players in the California market.
During the height of the power crisis in early 2001, the average daily cost of wholesale power in California topped $300 per megawatt hour, 10 times what had been normal in previous years. At times, wholesale prices spiked to as much as $3,800 per megawatt hour.

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