Enron Power Marketing Inc. (EPMI) and Portland General Electric Inc. (PGE) jointly developed an arrangement that allowed EPMI to implement a scheme to create false congestion and to receive payment for relieving that congestion on California’s transmission lines, FERC staff said in a recent report filed with a Commission administrative law judge (ALJ).

FERC ALJ Jeffie Massey is overseeing a proceeding [EL02-114] launched this summer by the full Commission in the wake of a six-month review by FERC of alleged manipulation in the short-term electric and natural gas markets.

Specifically, the Commission set for hearing: (i) possible violations by PGE and EPMI of their codes of conduct or market-based rate tariffs and FERC’s standards of conduct and (ii) whether PGE has provided all relevant information in the western energy markets probe “and what the appropriate remedies for any failure should be, including whether Portland General’s market-based rate authority should be revoked.”

Commission staff on Nov. 14 filed with Massey a statement of asserted violations by PGE and EPMI. Under the arrangement between the two companies, staff said that PGE energy traders and transmission schedulers submitted schedules implementing transactions on the AC intertie between the California-Oregon border (COB) and John Day involving a buy-resell transaction between PGE and EPMI and using Avista Utilities (Washington Water Power) as a “sleeve.”

The staff report said that PGE’s participation in developing this arrangement with EPMI violated several sections of its code of conduct set forth in PGE’s market-based rate tariff. “These code of conduct provisions require PGE operating personnel to function independently from EPMI, and prohibit PGE from giving to EPMI any undue preference with respect to transmission services or other regulated service,” Commission staff said.

The report said that PGE energy traders and transmission schedulers submitted schedules implementing transactions on the AC intertie and John Day between April 6 and June 6, 2000. The arrangement involved a buy-sell transaction between PGE and EPMI, utilizing Washington Water Power as a sleeve, “although there would be no physical power flow on the path.” Commission staff told the ALJ that these schedules were implemented by EPMI and enabled Enron to implement market manipulation trading strategies.

Staff said that EPMI arranged, and PGE used, unnecessary marketing sleeves. EPMI and PGE used the sleeves in order to “complicate and confuse” the transaction accounting and to shield EPMI’s trading strategies from scrutiny by the Boneville Power Administration and the California Independent System Operator, the report went on to say. In addition, the sleeves were used in an effort to obfuscate transactions between affiliates, Massey was told by FERC staff.

From the vantage point of FERC staff, PGE “undermined the Commission’s intent to ensure just and reasonable rates and practices and its intent to mitigate any potential for affiliate abuse in authorizing PGE’s market-based rate tariff.”

The report goes on to say that EPMI misrepresented the nature and amount of power that Enron intended to sell into the California market, as well as the load it intended to serve. “EPMI’s misrepresentations constituted unjust and unreasonable practices under sections 205 and 206 of the FPA [Federal Power Act] which may have adversely affected markets in California.”

Moreover, staff said that EPMI’s misrepresentations also violated Enron’s own “Conduct of Business Affairs, Procedures for Use of Communication Services and Equipment,” which states that communication services and equipment may not be used for any illegal/criminal activity or any activity that violates any company policy.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.