Calling Enron Corp. a “sad chapter in energy history,” FERC Chairman Pat Wood last Thursday directed staff attorneys to immediately review the explosive new audiotapes and other documents related to Enron’s activities during the 2000-2001 energy crisis, as well as all Enron proceedings pending before the Commission, to determine what further steps the agency may need to take in pending cases.

“As our 2002-2003 staff investigation showed, the corporate culture at Enron ‘fostered a disregard for the American energy consumer.’ These taped conversations indicate that this corrosive attitude seeped down from the corporate offices to the employees at the front line,” he said. Reporters quizzed Wood about why the Commission didn’t know of the existence of these audiotapes when it was conducting its investigation.

Responding to what critics see as the agency’s lax punishment of Enron for its illegal activities, FERC commissioners said the Commission did its best with the limited criminal and civil penalty authority that Congress and the courts have given it.

The attacks on the Federal Energy Regulatory Commission reached a fevered pitch last week in the wake of the release of explosive audiotapes and reams of documents that purportedly reveal Enron and its traders illegally obtained at least $1.1 billion in profits from West Coast customers during the 2000-2001 energy crisis, and boasted to each other about how much they stole.

Defending FERC, Commissioner Joseph Kelliher said, “We have no ability to impose a civil penalty for most violations of the Federal Power Act, and our criminal penalty authority is limited to a daily amount of $500.” He noted that both Rep. Joe Barton (R-TX), now chairman of the House Energy and Commerce Committee, and President Bush have proposed tougher enforcement power for FERC, but the agency still is waiting for Congress to act.

“If Congress does give the Commission the enforcement authority it needs and the Commission fails to act, [then] it’s fair to criticize the Commission” for not being tough on violators, Kelliher said. But until then, “we have to soldier on with grossly inadequate enforcement authority.”

Echoing that sentiment, Commissioner Suedeen Kelly said “there’s in our statute no ability to levy a penalty for this kind of behavior.” She noted she is “more and more distressed that our statutory enforcement is so little” over violators in the energy industry.

“I think it’s our duty to look into those tapes,” Kelly said. They show the “cold-blooded greed,” how “cruel traders were,” and the “callousness of employees to the suffering” of West Coast energy consumers. Perhaps even worse, the tapes reveal that this behavior was “encouraged” and “rewarded” by higher-ups at the once high-flying Enron.

Sen. Maria Cantwell (D-CA), a long-time critic of FERC, and Snohomish County Public Utility District (PUD), a municipal utility located near Seattle, WA, last Monday released audiotapes and a slew of financial documents, which they claim show Enron illegally profited by at least $1.1 billion from western energy consumers. Cantwell and Snohomish PUD contend that the new evidence supports their request for refunds for West Coast customers.

In late May, Snohomish PUD on its own released additional audiotapes and documents detailing the activities of Enron traders on the West Coast. One of the released transcripts revealed Enron energy traders bragging about how much money they stole from “Grandma Millie,” apparently a reference to unsuspecting energy customers on the West Coast (see NGI, May 24). In another transcript, an Enron trader was boasting how a colleague was robbing California “to the tune of a million bucks or two a day.”

At a press briefing following the Commission’s meeting, Wood was quizzed on what substantive actions FERC could now take against Enron in the wake of the new tapes — especially in light of the fact that FERC has already stripped the former energy trading giant of its market-based rate authority.

Wood noted there is a pending case at FERC related to the possible manipulation of western power markets in 2000-2001 through the use of partnerships, alliances or other arrangements [EL03-180-000, et al.]. The agency is looking at whether Enron affiliates engaged in such strategies with various electric utilities.

Curtis Wagner, FERC’s chief administrative law judge, recently agreed to extend the deadline for the issuance of an initial decision in the proceeding to early December.

Meanwhile, Kelly said that “the really damning part” of the tapes is the background information. “It wasn’t the conversation between El Paso [Electric] and Enron — it was everything that was in the background and you could hear what the traders were saying. That’s just the really bad stuff.”

Another reporter questioned whether the fact that FERC just got its hands on this new information sends a signal to the power industry that FERC doesn’t have access to critical information from the Department of Justice (DOJ) that utilities believe should be part of the record. Snohomish PUD received the tapes beginning in February and March following a negotiated agreement with DOJ, which had seized them during its investigation of the Houston-based energy company.

Snohomish PUD is defending itself against a $122 million lawsuit brought by Enron for canceling a 2001 contract. Notably, when Snohomish PUD sought the now-infamous documents and audiotapes from the DOJ to prepare its defense, it said FERC staff filed a motion to quash Snohomish PUD’s subpoena.

“We now have over nine hours of audiotape and tens of thousands of pages of financial documents covering months in our possession that FERC not only failed to uncover in its investigation, but attempted to quash in ours,” Cantwell said.

“FERC’s pattern of inaction and obstruction raises two troubling questions” why didn’t FERC want you to see this evidence and whose side is FERC really on?,” she asked.

The evidence released last week, according to Cantwell and Snohomish PUD, included:

Last week, another California lawmaker, Sen. Barbara Boxer, called on President Bush to direct FERC’s chairman to “cease and desist his opposition to California’s claims” for refunds, to “instruct FERC to agree that California should receive the entire $8.9 billion in refunds that the [state’s] attorney general is asking for,” and to seek the resignation of any FERC commissioner “who does not agree that it is time to end these time-consuming lawsuits and who fails to see that it is time for the consumers to be made whole.”

Amid the firestorm of criticism,Wood defended FERC’s probe of energy traders’ questionable practices in western energy markets. “I do think, to be fair, the Gelinas report was our first attempt at what I would call an investigation,” he said. FERC, in March of last year, issued a report written primarily by then-FERC staff member Don Gelinas that concluded the wholesale natural gas and electricity markets in California and other western states were significantly manipulated during the critical 2000 and 2001 period.

“Did it cover 100% of what was out there?” Wood asked rhetorically in reference to the Gelinas report. “No. Did it cover a lot? Yes. And again, I would urge you to re-read that report — it was a sad day in energy history to actually have to go through it — but I think the FERC found quite a bit, including some of the claims that people are acting like are brand new today. I think we saw a corrupt culture at work with the smoking gun memos and with the follow-up to that Gelinas and his team found in 2002, 2003,” Wood said. “But can we do better? Sure.”

“I think…that it’s fair to say that one of the lessons learned is that we do want 100% of the information,” Kelly added. “I think that what we didn’t know was how pervasive a culture it was and that’s what these tapes show — that it was just so pervasive and encouraged,” she said at a later point of the press briefing.

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