Based on interviews with Wall Street analysts the Department of Energy’s (DOE) inspector general Friday cleared FERC Chairman Pat Wood and Commissioner Nora Brownell of revealing during a conference call with the analysts how they would vote in high-profile western power contract cases, although he said he had “no way of confirming” that since no transcripts of the call were made. He recommended that the agency record or transcribe any conference calls to avoid similar questions in the future.

The March 26 conference call was questioned by Sens. Joseph Lieberman (D-CT) and Maria Cantwell (D-WA), who asked DOE Inspector General Gregory Friedman to investigate the call, citing media reports suggesting that Wood and Brownell had discussed pending power contract cases during the call (see Daily GPI, April 24).

In an April filing at FERC, Kevin F. Cadden, director of FERC’s Office of External Affairs, confirmed that Wood and Brownell participated in the conference call, but noted that it took place after a regular meeting that day during which the agency issued several major rulings related to energy supplier activities in western markets.

“At no time did I hear the chairman or Commissioner Brownell say anything substantively different [during the conference call]” than was said at the open meeting on March 26 or at the subsequent press conference with reporters, said Cadden, who was present during the call. During the open meeting the two commissioners indicated they were leaning toward upholding the contracts, which they subsequently did in a vote in June.

In the DOE IG’s report, Friedman said that he was able to confirm that Wood and Brownell did comment on pending power contract cases during the call, but that Wood and Brownell both asserted that they only repeated comments made earlier in the day on the record at the FERC open meeting. The two commissioners said the call was held as part of a larger Commission outreach strategy intended to enhance public understanding of FERC activities.

Friedman said that his office was able to identify and interview many, but not all, of the conference call participants because FERC didn’t record the identities of those present on the call. “None of the 17 Wall Street representatives we interviewed who participated stated that Chairman Wood or Commissioner Brownell explicitly indicated, during the conference call, how they intended to vote on the contract cases.”

Friedman said the conference call was not recorded and no transcription was made. “Therefore, other than the results of our interviews and record reviews, there was no way of confirming, with certainty, the complete nature and contents of the conversation.”

The report recommended that FERC “carefully consider” whether the conduct or contents of communications such as the March 26 conference call “expose Commission decisionmaking to avoidable legal challenge or needless controversy.”

To the extent that FERC intends to continue engaging in such communications going forward, the DOE’s inspector general said the Commission should consider whether:

FERC in late June upheld the sanctity of long-term power contracts that California negotiated with suppliers during the state’s energy market meltdown in 2000 and 2001, along with contracts held by Nevada Power, Sierra Pacific and PacifiCorp (see Power Market Today, June 26).

The challengers had argued that the contracts were “unjust and unreasonable” because of the crisis-driven high prices, but the agency said they had failed to meet the higher Mobile-Sierra doctrine that required them to show that the contracts were contrary to the public interest.

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