- The Washington Times - Thursday, March 27, 2003

Seven Enron Corp. subsidiaries and five other energy companies manipulated natural-gas and electricity prices and supplies in California, federal energy regulators ruled yesterday.
As a result of the manipulation, Federal Energy Regulatory Commission Chairman Pat Wood said California would receive more than the $1.8 billion in refunds recommended by a FERC judge in December.
The exact amount is to be determined in the coming months, but FERC spokesman Kevin Cadden estimates that the total will be $3.3 billion. California is seeking $9 billion.
FERC said the seven Enron subsidiaries and five other companies took advantage of a dysfunctional market and reaped millions of dollars in unjust profits.
"The price gouging abounded," Commissioner William Massey said. He said he regretted that FERC did not intervene earlier to police the newly deregulated power market in California.
California Gov. Gray Davis said the ruling confirmed that "there was widespread market manipulation and a massive rip-off of California ratepayers. Now the question is whether the FERC commissioners will have the grit to order the remedies that are necessary."
The agency is considering placing limits on the profits of four marketers of wholesale power and banning eight companies from selling natural gas in California, Mr. Wood said.
The power marketers are Enron Power Marketing Inc., Enron Energy Services Inc., Reliant Energy Services Inc., and BP Energy Co.
The natural-gas companies are Bridgeline Gas Marketing LLC, Citrus Trading Corp., ENA Upstream Co., Enron Canada Corp., Enron Compression Services Co., Enron Energy Services Inc., Enron MW LLC and Enron North America Corp.
The investigation also found a close link between natural-gas and electricity prices. Gas is the fuel used at many power plants.
After a 13-month investigation, FERC concluded "that many trading strategies employed by Enron and other companies violated the anti-gaming provisions" of marketing rules.
"Enron manipulated thinly traded physical markets to profit in financial markets," FERC said, estimating Enron made more than $500 million in online trading in 2000 and 2001.
FERC investigators recommended that the companies be forced to give up unfairly earned profits.
Investigators also urged the commission to consider sanctions against energy companies and public utilities that sold power in California during the summer of 2000. That could increase the amount of money owed to California because the refunds that already have been recommended are for the period beginning October 2000 to June 2001.
The energy crisis cost the state as much as $45 billion over two years in higher electricity costs, lost business because of blackouts and a slowdown in economic growth, the Public Policy Institute of California said.
Shortcomings in California's energy market rules and a shortage of electricity stemming from the lack of hydropower in the Northwest in 2000 "made this fertile ground for the manipulation we found," said Donald Gelinas, who headed FERC's investigation.
The regulatory agency capped wholesale power prices across the West and instituted other changes in June 2001 that brought a quick end to the energy crisis.
Mr. Wood ordered an investigation in February 2002 after California officials repeatedly charged energy marketers with gouging California's utilities and its customers.
Two months later, FERC obtained an internal Enron memo that described trading strategies, including sham transactions and other schemes aimed at creating congestion on the Western power grids and forcing up prices. Two former Enron traders have pleaded guilty to federal charges stemming from the trading strategies.
The memo indicated that other companies had similar strategies, but provided no details. Energy companies largely have denied wrongdoing.
Separately, California last week agreed to a settlement with El Paso Corp., for $1.7 billion, ending a dispute over whether the company withheld natural gas from California to drive up prices.

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