Under mounting pressure from Capitol Hill, the Federal Energy Regulatory Commission has kicked off an investigation into whether the once-powerful Enron Corp. manipulated long-term electricity prices during the energy crisis that rocked California last year. If manipulation is found, FERC Chairman Pat Wood earlier this week said federal regulators or the courts could void some of the long-term forward contracts that the state signed.

The Commission had been seesawing on the issue throughout the week, but FERC confirmed Thursday that Wood has directed the staff to explore allegations that Enron extended the energy crisis in California and Pacific Northwest states by manipulating prices. He declined to elaborate further on the scope of the probe.

FERC decided to look into Enron’s activities after receiving a number of requests from senators representing West Coast states, including Sens. Barbara Boxer (D-CA), Dianne Feinstein (D-CA), Maria Cantwell (D-WA) and Ron Wyden (D-OR). Wood had initially promised Cantwell and Feinstein he would look into their complaints during a Senate hearing earlier in the week (see Daily GPI, Jan. 30). California Gov. Gray Davis joined the fray as well. All favor a Commission probe of Enron’s prices in West Coast markets, but some have gone even further.

Boxer has asked FERC to supply a list of all meetings and phone calls that took place between Enron executives and FERC Commissioners during August 2000-June 2001. She said her request was prompted by reports about an April 17, 2001 memo from former Enron Chairman Kenneth Lay to Vice President Dick Cheney, in which Lay allegedly urged the Bush administration not to implement price caps for California consumers.

“This connection between influence and policy relating to the California electricity crisis is quite disturbing. It also raises questions about whether Enron tried to influence the FERC directly,” Boxer said. There have been numerous reports circulating that Lay recommended both Wood and Commissioner Nora M. Brownell for their present positions.

Boxer also has called on the General Accounting Office to investigate Enron’s alleged manipulation of energy prices in California, and possible links between the embattled energy trader and FERC.

“After Enron collapsed, prices in the West’s forward energy markets plummeted [by] 20-30%. Where there’s smoke there’s often fire, and we must investigate whether we have a simple coincidence here, or something more,” said Cantwell in her formal request to FERC for a probe. This “deserves answers and, if appropriate, corrective action.”

In addition to an investigation, Wyden has called on Wood to consider naming a federal advocate to look out for consumer interests in the interstate energy market.

In a letter to Wood Thursday, Davis Thursday said he was “extremely concerned about revelations made in the past few days,” and added that California “has a special interest in getting to the bottom” of the allegations that Enron manipulated energy prices in the state. The state has signed long-term contracts for more than $40 billion of wholesale electricity supplies during the years ahead. The contracts have been widely assailed in the state for locking it into above-market prices over the long term.

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