In a surprising announcement last week, California’s Independent System Operator (Cal-ISO) revealed that it fired an employee Monday for violating the grid operator’s rules by seeking a specific bid and price from Enron Corp. The issue surfaced last week from some state legislative subpoenaed tape recordings from Enron Corp. The incident at this point is thought to be an isolated case with a market impact of less than $100,000. No criminal or civil charges are contemplated at this time.

As part of running the private-sector utilities’ majority portion of California’s grid, Cal-ISO runs a real-time emergency energy market to assure that adequate electricity reserves are maintained to avoid curtailments or rolling blackouts. In this capacity, Cal-ISO employees in its control room, or command center, in Folsom, CA, maintain contact with various participants in the wholesale electricity market, such as Enron.

In this instance, Cal-ISO’s general counsel, Charles Robinson, said an internal investigation indicated this is an one-time, “isolated incident,” involving only the one resource coordinator on the organization’s hour-ahead market desk, who allegedly was not violating the rules for any personal gain. Nevertheless, the state’s grid operator has hired an outside law firm to conduct a more thorough investigation.

“We have told [the law firm] that they are to be as broad and thorough as possible, and there are no limits on the investigation,” Robinson told news media at a press conference and conference call. “They will provide their findings directly to management and our board.”

Nevertheless, the Cal-ISO at this point has no plans to take any other action related to other employees or to beef up its internal security or training, said Robinson.

According to the tape recording, the Cal-ISO control room employee on July 3, 2001 initiated a call [which he knew would not be recorded] to an Enron trader. The call was taped by Enron and showed up as part of subpoenaed documents obtained by a special state senate committee investigating potential market manipulation to drive up wholesale prices in the 2000-01 time frame. In a subsequent interview, the employee told Cal-ISO officials he was unhappy with some of the trading ongoing in the grid-operator’s market by other participants so he sought a specific bid from Enron to help lower overall prices by counter-balancing activity by others.

Cal-ISO officials would not give the now-fired employee’s name, nor more detail about the transaction. They also would not speculate if any civil or criminal charges would be filed.

On an ongoing basis, Cal-ISO conducts regular “employee audits” using an outside accounting firm. In this case, it is PricewaterhouseCoopers, which has professionals sit with and assess the work of each grid operator employees involved in the daily power market.

The employee contacting Enron had worked for Cal-ISO for 18 months and “recognized what he did to be wrong at the time he did it, and conceded it was wrong again when he was interviewed,” said Robinson, noting the employee thought the “end justified the means. But he stepped way over the line in terms of Cal-ISO protocol…”

Any action like this — no matter how relatively small or well-intentioned — violates the sanctity of the market, and it must be taken extremely seriously, according to Cal-ISO spokeswoman Stephanie McCorkle, who scheduled the impromptu new media briefing.

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