In a sweeping unprecedented move Wednesday, the Federal Energy Regulatory Commission ordered more than 140 suppliers and affiliates to furnish information on whether they engaged in Enron-like strategies to manipulate energy trading during the height of the California energy crisis in 2000-2001. The agency, in short, wants sellers to western markets to “admit or deny” under sworn oath whether they unfairly gamed the market.

Donald J. Gelinas of FERC’s Office of Markets, Tariffs and Rates, who is heading up the agency’s probe into the trading activities of natural gas and power sellers in western markets, told the companies that failure to respond to the series of data requests in a “timely and complete fashion” would result in enforcement action, including the revocation of their authority to sell wholesale electricity and/or ancillary services at market-based rates.

Company responses are to be “signed under oath” by the president, CEO, general counsel or a corporate officer of “comparable authority,” attesting to the fact that they had “diligently conducted a thorough investigation into the trading activities of the company’s employees and agents, including those of its affiliates and subsidiaries, in the U.S. portion of the Western Systems Coordinating Council (WSCC).” The WSCC includes about 11 western states. Company replies are due at FERC before May 22.

In responding, Gelinas directed companies to use as a guideline the three Enron memos that appear to be a blueprint for gaming the energy markets in California. The internal memos, released by FERC on Monday, described in detail a number of colorfully named strategies — ‘inc-ing load,’ ‘ricocheting,’ ‘Fat Boy,’ and ‘Death Star’ — that Enron employed to manipulate the energy market in California to its financial advantage.

The memos suggested the gaming strategies were not unique to Enron, but that other energy suppliers engaged in them as well. However, it did not identify any companies.

FERC asked suppliers to “admit or deny” whether they purchased energy at the California Power Exchange (Cal-PX) to export outside of the state to take advantage of the price spread between the capped and uncapped markets; whether they created and then relieved phantom congestion in the Cal-PX so they could be paid the congestion charge; faked schedules to receive inter-zonal congestion payments; or intentionally dispatched excess load to be paid higher fees, just to name a few.

The Commission ordered suppliers to turn over “all communications or correspondence, including e-mail messages, instant messages, or telephones logs between your company and any other company (including your affiliates or subsidiaries) with respect to all of the trading strategies” that mirror those used by Enron.

In addition, it directed sellers to provide “all material[s]…that address or discuss your company’s knowledge of, awareness of, understanding of, or employment or use of any of the trading strategies discussed in the Enron memoranda, or similar trading strategies” in the U.S. portion of the WSCC during the 2000-2001 period.

In a related development Wednesday, the Senate Energy and Natural Resources Committee said it plans to schedule in “short order” a hearing to explore the magnitude of supplier manipulation of the natural gas and electricity markets.

Committee Chairman Jeff Bingaman (D-NM) “is planning a hearing as a result of what was divulged about Enron this week,” said spokesman Bill Wicker. “It’s something we will turn our attention to very soon,” he said, adding that the hearing “won’t zero in exclusively on Enron.”

The Senate panel and Congress “will not interfere with FERC’s ongoing investigation” of Enron and other energy suppliers in the western markets, “but we will ensure that, as we move forward into conference on the broader energy bill, we will remain alert to problems that need to be addressed so that consumers are served by well-functioning energy markets,” Bingaman said in a prepared statement.

Wicker believes the issue of stiffer penalties for companies that game energy markets will receive greater attention when Senate and House conferees meet later to reconcile their omnibus energy bills. Neither measure currently addresses tougher penalties for market abusers, Wicker said, but this is something that both Bingaman and the Bush administration favor. Specifically, the White House supports raising the current penalty of $500/day to $25,000/day.

The “biggest advocate” for increased fines within the Bush administration has been Joseph T. Kelliher, Wicker noted. Kelliher, a senior policy advisor at the Department of Energy (DOE), was nominated last week by President Bush for a five-year term on the Federal Energy Regulatory Commission (See Daily GPI, May 6).

In addition to the expanded probe being carried out by FERC, Sen. Dianne Feinstein (D-CA) and California Gov. Gray Davis separately have asked Attorney General John Ashcroft to open a wide-ranging criminal investigation into Enron and other companies that traded and delivered natural gas and electricity to western markets during the 2000-2001 energy crisis in the state.

California’s other senator, Barbara Boxer, also called for “indictments and…penalties” for Enron. Boxer and Sen. Maria Cantwell (D-WA) separately renewed their pleas for FERC to order refunds for California energy customers and void long-term contracts with the state. “I also believe we need new Senate hearings to review these findings and to explore all available options for ratepayer relief under federal law,” Cantwell said.

The memos released by the Commission “reveal without a doubt that there was a systematic and highly planned scheme by Enron to defraud the people of California…[They show] Enron’s height of arrogance as it hurt and destroyed California’s wholesale power market,” Boxer noted.

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