Thursday, February 14, 2002

Federal regulators ordered a nationwide investigation into wholesale power and natural-gas markets yesterday, focusing on whether manipulation by Enron or other energy traders caused soaring prices in the West a year ago.
Pat Wood, chairman of the Federal Energy Regulatory Commission, said the agency would conduct “a full-bore investigation” of both physical energy transactions and financial trades such as those dominated by Enron’s online trading division before the company sank toward bankruptcy.
Mr. Wood said in an interview that the investigation could take as long as six months and, while focusing on trading activities of Enron, would include wholesale gas and power trades of other energy companies as well.
After the staff findings, the commission will decide whether to start a second round of investigations into whether to require changes in long-term power contracts “whose prices may have been influenced by any inappropriate Enron activities,” Mr. Wood said.
Several Western senators have demanded that the agency pursue evidence of market manipulation by Enron after hearing testimony from an energy consultant that the price of some long-term power contracts, known as “forward contracts,” dropped dramatically in the week after Enron filed for bankruptcy in December.
But Sen. Maria Cantwell, Washington Democrat, said she was disappointed that the commission was not moving more quickly into a formal investigation into whether some of the high-priced power contracts negotiated in the West were entered into improperly and should be reworked.
Both in California and the Pacific Northwest, utilities entered into long-term power contracts that many of the utility and state officials now think might have been driven up because of manipulation by Enron and other independent power marketers and suppliers.
Based on these accusations, the commission has begun an investigation “of whether there was actually some manipulation” of power or natural-gas markets by Enron or any of its affiliate companies, Mr. Wood said.
He later told a House Energy and Commerce subcommittee that the disappearance of Enron, once one of the largest energy traders, has had little, if any, negative effect on energy markets or energy supplies.
Except for a few isolated incidents, “there has have been few disruptions to the deliveries of electricity and gas,” he said.
Before a different House subcommittee, lawmakers debated ways to strengthen pension laws to protect workers, such as those at Enron.
“Welcome to Capitol Hill today, where we are all Enron, all the time,” said Rep. Sam Johnson, Texas Republican and chairman of a House Education and the Workforce subcommittee.
Lawmakers are trying to tread carefully as they write legislation to prevent another Enron debacle for workers, but do not discourage companies from offering 401(k) retirement plans, which are voluntary.
Mr. Johnson and Rep. John A. Boehner, Ohio Republican, plan to offer a bill based on President Bush’s 401(k) reform plan that would let workers more quickly sell company stock and would ban corporate executives from selling stock when employees cannot.
Several senators yesterday introduced legislation that would scrap an accounting rule by which Enron Corp. and other companies offered tax-deductible stock options without listing the expenses on company balance sheets.
Sen. Carl Levin, Michigan Democrat, said the bill is intended to restore investor trust in company financial statements. The proposal would require that companies claiming tax deductions for stock options also report them as expenses against their earnings.
“We’ve got to make sure that financial statements are credible,” he said. Joining him were GOP co-sponsors John McCain of Arizona and Peter G. Fitzgerald of Illinois, and Democratic Sen. Richard J. Durbin of Illinois.
Enron claimed almost $600 million in tax deductions for stock options it offered employees between 1996 and 2000, Mr. Levin said.
Unlike other forms of employee compensation, stock options do not have to be reported as expenses against company profits. In Enron’s case, Mr. Levin said, the effect was overstatement of company earnings and complete elimination of federal taxes during those years.
Separately, the Securities and Exchange Commission said it would propose changes to tighten corporate disclosure rules.
Among other things, the new rules would require more prompt filing by companies of their quarterly and annual reports, and of stock purchases and sales by company officers and directors.

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