- The Washington Times - Tuesday, February 26, 2002

Top Clinton administration officials including Treasury Secretary Lawrence E. Summers and Federal Energy Regulatory Commission Chairman James Hoecker sided with Enron in opposing increased regulation of energy markets, including the critical question of capping electricity prices during California's power crisis last year.
Documents just released by the commission show that Enron executives met frequently and dined with Clinton-appointed commissioners and their staff when they were deciding on the price cap and other contentious issues affecting California. They were particularly fervent in courting a key Clinton-appointed commissioner who cast a swing vote against hard price caps in early 2001.
The documents show that Enron Chairman Kenneth L. Lay attended meetings hosted by Mr. Summers in the last week of President Clinton's term aimed at brokering an agreement between the state and large power-generators such as Enron, which the state accused of price gouging.
Mr. Summers and Mr. Hoecker opposed price controls, and the commission had repeatedly spurned California's demands for hard caps on wholesale prices that were soaring as high as $250 per megawatt hour in the spot market.
Only Clinton Energy Secretary Bill Richardson showed sympathy to the state in the dispute and briefly imposed a $64 price cap through a temporary executive order that forced Enron and other generators to keep supplying power to California even though the state's utilities were insolvent and behind on payments.
"We cannot 'price cap' California out of a supply shortage," Mr. Hoecker said at the start of the fruitless weeklong negotiations, although he held out the possibility of temporary caps set high enough to "prevent clearly unwarranted price explosions."
Mr. Summers at the meeting rejected a plea by California Gov. Gray Davis for a federal bailout of the state's beleaguered utilities. Enron and other generators were seeking state guarantees on the utility payments, which were not agreed to at the meeting.
Mr. Summers had earlier sided with Mr. Lay in deciding not to regulate Enron and other energy derivatives dealers.
Documents show that Mr. Lay had sought Mr. Summers' support for the regulatory exemption for over-the-counter energy derivatives, which Mr. Clinton signed into law in December 2000.
The California negotiations ended without a deal on price caps, according to a Clinton aide, because there were not enough votes to support it on the Clinton-appointed commission. The negotiating group instead focused on trying to help California lock in lower prices for the state through long-term power contracts.
During several months of transition between administrations from February to June 2001, Commissioner Linda K. Breathitt was the swing vote on California issues. She sided against hard caps, though the commission did agree to impose a "soft" cap requiring generators to justify charges of more than $150 per megawatt hour. It also fined some generators it found to be overcharging.
Hard price caps were not adopted by the commission until President Bush's chairman, Patrick H. Wood III, came on board in June.
The documents show that Enron was particularly active in courting Miss Breathitt during the transition.
On Jan. 18, two days before Mr. Clinton left office, Enron representatives met with Miss Breathitt and officials from Reliant and Dynegy to discuss the need for a "demand response" program in California.
Enron and other generators, in opposing price caps, frequently said the solution lay in reducing the demand for power in California.
Three days later, Miss Breathitt made a brief stop at an inaugural brunch at the Red Sage restaurant hosted by Enron for President Bush. In late January 2001 and late March, Miss Breathitt twice dined with Enron's Richard Shapiro, managing director for governmental affairs. Miss Breathitt said she paid for the evening meals.
Miss Breathitt followed the commission's ethics rules and did not discuss price controls or other contentious California-related issues at the meetings, an agency official said. The documents say that the dinner meetings were focused on transmission-line access and regional transmission-organization issues of interest to Enron.
Miss Breathitt's vote was critical on the commission at the time because its interim chairman, Curtis L. Hebert, opposed price controls while a third commissioner, William L. Massey, supported them.
"She's basically a believer of letting the markets work," said the official, adding that Enron was never "overbearing" in pushing its views on Miss Breathitt. "She's very independent-minded and takes into account all the factors. I think people recognize that."
During another critical stage in December 2000 when California's power market was exploding, Enron hosted several top commission staff members at its Houston headquarters, the documents show. On Dec. 7, the staff had lunch with Enron Chief Executive Jeffrey Skilling and toured Enron's Houston trading floor.
Mr. Hebert listed only one contact with Enron in the documents, a Feb. 16 phone conversation with Mr. Lay in which he unsuccessfully sought Mr. Lay's support for him to remain FERC chairman.
Mr. Hebert said Mr. Lay refused to back him because Enron wanted mandatory open access to power transmission lines and he opposed that.

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