The Federal Energy Regulatory Commission issued a formal order Wednesday initiating a fact-finding investigation into possible manipulation of short-term prices for natural gas and electricity in West Coast markets. The agency’s action was sparked by the Enron Corp. financial debacle, Chairman Pat Wood said, and was a follow-up to his pledge before a congressional committee two weeks ago (see Daily GPI, Feb. 4).

The investigation will be “pretty broad,” he noted, adding that FERC will work jointly with the Department of Justice, the Federal Trade Commission and the Commodity Futures Trading Commission on various parts of it. It will look at short-term energy prices dating back to Jan. 1, 2000, said Wood, who indicated the probe may include the futures market as well. While western energy markets will be the focus of the agency’s effort, he noted that it also will examine energy prices nationally to obtain comparisons.

Wood stressed that the pricing activities of the now-bankrupt Enron and its trading operation, EnronOnline, will be only part of the FERC probe. “There are others” that the Commission plans to look at closely, he said.

If manipulation is detected, “I’m not going to speculate on what could happen,” he told a press briefing following FERC’s regular meeting. But Wood later acknowledged that the renegotiation of energy contracts in West Coast markets was “certainly…something that could happen.”

The order calls for FERC staff to collect information on whether any company, including Enron (through any of its affiliates or subsidiaries), manipulated short-term energy prices in the West or “otherwise exercised undue influence over wholesale electric prices in the West since Jan. 1, 2002, resulting in potentially unjust and unreasonable rates in long-term sales contracts” that were entered into by buyers in the West .

Staff can use information developed from its price probe to proceed on “any existing or future…Section 206 complaints involving long-term power sales contracts,” or initiate on FERC’s behalf a formal Section 206 inquiry of electricity prices and/or a Section 5 proceeding for natural gas, the order said.

Wood said he has “freed up quite a few dollars” so that a number of Commission staffers can be involved in the inquiry. He noted that FERC’s general counsel will have subpoena power to interrogate energy executives, and to compel testimony and the production of documents.

While the order does not set a deadline for the completion of the staff inquiry, except to say it should be done “as soon as practicable,” Wood noted that his “internal timeline” calls for the Commission to report its findings to Congress by this summer.

When asked whether the new investigation would impact the Commission’s ongoing price-manipulation and affiliate-abuse probe of El Paso Natural Gas, the chairman responded, “I won’t say yes or no to that.” However, he said he “doesn’t envision it would” interfere with the ongoing California refund case at FERC.

In a move aimed at the critics of Wood, the three other commissioners gave the FERC chairman a rousing vote of confidence at the Wednesday meeting, pledging their support for him. “I would just like to say publicly I consider you [Wood] to be one of the most public-spirited officials that I have dealt with in my 22 years in Washington,” remarked Commissioner William Massey.

“I would also like to align myself with Commissioner Massey’s comments…You’re doing a great job, Pat,” Commissioner Linda Breathitt gushed. Commissioner Nora M. Brownell joined the love-fest, saying “I really like you, Pat.”

This display by the FERC commissioners presumably was in response to recent congressional attacks on Wood. Rep. William Pascrell Jr. (D-NJ) has called for Wood’s resignation, claiming that former Enron Chairman Kenneth Lay’s influence over his appointment to the Commission last year has “irreversibly compromised” the integrity of the agency (see Daily GPI, Feb. 13).

Sen. Barbara Boxer, a sharp critic of FERC, has initiated an examination of the close ties between Enron and the Commission, but she hasn’t echoed Pascrell’s call for Wood to step down. She has asked FERC to turn over a list of all meetings and phone calls between Enron officials and FERC commissioners that took place between August 2000 and June 2001.

Similarly, the House energy and air quality subcommittee asked Wood Wednesday to provide it with a record of all his contacts with Lay and other Enron executives during his terms at FERC and at the Texas Public Utility Commission. Specifically, the subcommittee wants Wood to supply the dates of these “contacts,” the names of those he met with, and the subject matter discussed.

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