Enron Probes Proceeds. Bulging boxes holding thousands of Enron documents line the walls four high in the offices of the Energy Task Force on the 18th floor of a downtown building leased to the California Attorney General’s Office.newest investigation
The only criminal prosecution stemming from the energy crisis has come from the newest investigation. The office of Kevin Ryan, U.S. attorney for the Northern District of California, began its grand jury investigation after the Enron memos were made public in May.
His prosecutors obtained a guilty plea Oct. 17 from Belden on a charge of conspiracy to commit wire fraud. Belden, who headed Enron’s West Power Trading Division in Portland, Ore., is cooperating and is expected to lead them to others.
Last Friday, Ryan’s office also served subpoenas on Duke Energy Corp., AES Corp. and Williams Cos. The FERC is also investigating the Charlotte, N.C.-based Duke and the Tulsa, Okla.-based Williams.
The California Senate Select Committee, under the flamboyant Sen. Joe Dunn, a Democrat from Orange County, has kept the investigation in the spotlight.
He has accused the Independent System Operator, created by California’s 1996 electricity-deregulation law to manage the power grid, of manipulating the market and has called for the resignation of its director.
His committee persuaded the Senate to hold Enron in contempt for failing to produce some documents and forced Ross Perot to testify about allegations that Perot Systems Corp., the computer-services company he founded, tried to teach energy companies how to manipulate the deregulated market.
“The committee made it impossible politically for market manipulation to be ignored,” said Larry Drivon, chief counsel for the committee. “I think more revelations are coming than most people realize there are.”
The California Public Utilities Commission was one of the first state agencies to suggest that the market was being manipulated. But early on, it turned the investigation over to the attorney general’s office, PUC President Loretta Lynch said.
The PUC investigation had focused on power generators and in September issued a report alleging that Dynegy, Reliant, Duke Energy, Mirant, AES and Williams kept power plants idle or off the market during the height of the energy crisis.
The Independent Systems Operator issued a report this month questioning the PUC allegations, but Lynch said she stands by the report and that the commission will issue a rebuttal within weeks.
The FERC is investigating a finding by an administrative law judge that Houston-based El Paso Corp. withheld capacity on a major interstate natural gas pipeline, driving up the cost of operating gas-fired generating plants during the electricity shortage. The company vigorously disputes the finding.
The commission has scheduled a hearing on the matter Dec. 2.
FERC officials also have been studying Enron Corp.’s former online trading system, Enron Online, to determine if it was employed to manipulate the system, said Donald Gelinas, the commission’s associate director for the Office of Markets, Tariffs and Rates.
FERC officials are scheduled to testify Tuesday before the Senate Governmental Affairs Committee to discuss the agency’s oversight of Enron.
The Oregon and Washington state attorneys general are cooperating with Lockyer’s investigation as they pursue their own probes. The power crisis in California spilled into other Western states, causing a 40 percent increase on some days in Oregon rates, said Kevin Neely, spokesman for the Oregon attorney general’s office.
Cheryl Reid, spokeswoman for the Washington attorney general’s office, said the price per megawatt in that state spiked from $30 to $3,000 at one point during the crisis.
The Oregon Public Utilities Commission is trying to determine whether Enron subsidiary Portland General Electric and other power suppliers owe refunds to consumers because of market manipulation. PUC spokesman Bob Valdez said the commission wants to know whether a regulatory firewall between Portland and Enron was breached, whether FERC codes of conduct were violated or PUC orders disregarded.
The investigations are complicated by a strain between the FERC and the California agencies, who have accused the federal agency of being slow to act.
“We have to give everybody due process,” FERC spokesman Bryan Lee said in response.
Spokesmen for the energy industry praise the FERC, but call the state investigations useless and a damper on the state’s business climate.
“I would say 99 percent of it right now is driven by politicians,” said Jan Smutny-Jones, executive director of the Independent Energy Producers.
Gary Ackerman, executive director of the Western Power Trading Forum, said, “Politicians are getting a lot of heat to do something, and throwing lawsuits around is one way to get a lot of press.”
But Frank Wolak, a Stanford economist and member of the FERC Market Surveillance Committee, said the state was forced to take action because the FERC failed to do it.
“I’m certainly sympathetic to Jones’ and Ackerman’s perspective, but what do you expect?” Wolak said about the state investigations. “What are they going to do, just say we will ignore this sequence of events?”