Enron Corp. fired back at California yesterday, filing a lawsuit against a state Senate committee to block a subpoena for internal documents covering virtually its “entire western marketing and trading operations.” The suit against the Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market was filed in the Superior Court of the State of California in Sacramento.

However, Enron told the court yesterday the documents requested are confidential and contain trade secrets, yet the committee “refused to agree to a protective order” that would shield the confidential documents from its competitors. Without responding to Enron’s objections, the committee “arbitrarily found” Enron in contempt on June 28. As a result, Enron seeks a declaration by the court that it need not produce the confidential information except under a protective order and that the committee has violated Enron’s rights of due process by its finding of contempt. Enron also seeks a declaration that the committee’s subpoena is invalid under California law because it involves trade secrets, seeks documents that are outside its jurisdiction and is not seeking information pertinent to its proper legislative function.

Enron told the court the “expansive subpoenas…sweep far past any conceivable legislative action. The sheer volume of the requested information would render it unusable by the Senate.”

Enron also seeks an injunction and protective order by the court that no contempt proceedings may be pursued nor considered valid until its objections are heard by an impartial hearing officer and its confidential documents are protected from unlawful disclosure.

The committee yesterday voted 6-0 to move against the Houston-based energy giant after an angry hearing in which Enron representatives repeatedly questioned the committee’s authority. If passed by the full Senate, the contempt citation would be the first imposed by California’s Senate since 1929. While deciding to move against Enron, the committee voted to terminate contempt proceedings against generator Mirant Corp., saying that company was now cooperating with its investigation.

In a letter sent to Committee Chairman Sen. Joseph L. Dunn yesterday, Enron’s Executive Vice President Steven J. Kean informed the committee of the lawsuit and said Enron would not provide all the documents requested because they go beyond the committee’s jurisdiction. He said the impartial neutral court would determine Enron’s rights and obligations under the Select Committee’s subpoena. Enron, meanwhile, will make some documents available to the committee, but only non-confidential documents “where Enron has no objection to their production,” he said.

Kean also told Dunn Enron is “equally, if not more, concerned about the tone and direction of the committee’s discovery requests…It is exceedingly difficult to discern whether the committee’s actions are designed to uncover the facts…or create a convenient political scapegoat to shoulder the blame for California’s policy mistakes and changes in market fundamentals.”

Kean noted that the committee has singled out Enron for scrutiny when the company represents only 0.4% ($39 million) of the $8.9 billion in overcharges estimated by the California ISO. Furthermore, under the assumption that refunds would be owed to power buyers during the time period in question, Enron likely would end up a net recipient of refunds because it is mainly a buyer in the California market — the company only holds a small amount of wind power and its production is under long-term contracts, Kean added. Enron strongly disagrees with the ISO’s calculations because they are “mired in numerous faulty assumptions and ‘what if’ calculations that either ignore or distort the facts,” he said, noting the a FERC administrative law judge also agreed the ISO’s methodology is flawed. “In addition there is no legal basis for any refunds in the absence of specific fact-based findings by the Federal Energy Regulatory Commission of unlawful exercise of market power.”

Furthermore, said Kean, Enron fails to understand why it has been singled out when by the ISO’s own calculations the aggregate overcharges attributed to municipal generators and other non-jurisdictional generators and marketers are “more than 100 times greater than those allegedly attributable to Enron,” yet those entities have been excluded from the investigation.

Kean said told Dunn it was California’s own policy failures and “flawed deregulation scheme” that caused the wholesale power market distortions. “California’s financial crisis was created by and has been extended by a series of policy missteps and political miscalculations. And California policy makers have prolonged the problem by focusing on blame and demonizing ‘out-of-state generators’ and other suppliers rather than addressing the structural problems afflicting California’s electricity market. This blame-game approach has diverted scarce time and resources away from real fact-finding and problem solving and has cost California consumers billions of dollars as a result.”

He said the investigation should have focused on why the state’s three utilities rejected power sales offers at fixed long-term rates from Enron and other suppliers last summer. “The savings for citizens in San Diego from Enron’s offer alone would have been more than $1 billion.”

California claims energy generators and traders overcharged the state by $8.9 billion. Talks ordered by the Federal Energy Regulatory Commission to settle those allegations broke down earlier this week without an agreement. Energy generators and traders had offered California $716 million in refunds. FERC Administrative Law Judge Curtis Wagner said after the talks failed that he did not think a settlement would exceed $1 billion, and he asked federal regulators to determine appropriate refunds, if any.

Meanwhile, California Gov. Gray Davis said that if the state isn’t awarded the full $8.9 billion in refunds, it would file suit against the energy companies.

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