As part of its affidavit on price-manipulation practices in western energy markets, PacifiCorp has turned over to FERC a “sampling” of audio-taped transactions to corroborate claims that may have been an unknowing “intermediary” in a number of “ricochet” trades with third-party energy companies during the latter half of 2000.

The tapes cover trading transactions that were conducted from July through November 2000 with counterparties Aquila Inc., Enron Power Marketing Inc. (EPMI), Sempra Energy and Williams Energy Services Co., the Portland, OR-based utility said. With the exception of EPMI, all have denied any role in the questionable “ricochet” trades (see NGI, May 27).

PacifiCorp identified 767 transactions for a total of 40,376 MWh in which it acted as an “intermediary for a purchase and sale with a third party and earned a small fee.” These trades represented nearly one-sixth of the company’s total transactions in western markets during the six-month time frame, it noted.

“PacifiCorp was not the entity initiating [these] ‘ricochet'” trade transactions, Stanley K. Watters, vice president of trading and origination, said in the company’s affidavit submitted to FERC [PA02-2]. In so-called “ricochet” trades, or megawatt laundering, traders purchased energy at capped prices from the California Power Exchange, exported it to another entity for a small fee, and then repurchased it to resell at higher uncapped prices in California.

These transactions “initially appeared no different from PacifiCorp’s buy-sell transactions which use PacifiCorp’s transmission system. However, as the number of these transactions increased, the fact that they were limited to a single point of delivery became increasingly apparent, and there was a growing concern that the transactions might have elements of megawatt laundering,” PacifiCorp told FERC. It said it put a stop to the company’s participation in the trades by mid-November 2000.

“After PacifiCorp advised counterparties of its unwillingness to engage in such bundled buy-sell transactions at an interface with Cal-ISO, the requests for such transactions diminished markedly.”

PacifiCorp also reported that a company employee, who had worked at Enron prior to March 2001, has confirmed that Enron traders engaged in the questionable practices — known as Death Star, Fat Boy and Get Shorty — during the critical 2000-2001 period. An outside attorney interviewed the PacifiCorp employee, and prepared a memo of the interview, during the course of PacifiCorp’s investigation into its own practices in response to FERC’s questions. PacifiCorp has asserted “attorney-client” privilege over the memo, which was dated May 18, 2002.

In reaction to the first detailed information alleging companies other than Enron played wholesale energy trading games in the western markets, Aquila, Williams and Sempra Energy each publicly denied they participated in the “ricochet” trading or “megawatt laundering” schemes detailed in the PacifiCorp filing.

“We believe the transaction PacifiCorp describes in its FERC filing appears to be what we referred to in our FERC filing as informal ‘parking’ agreements,” said Bill Hobbs, CEO of Williams energy marketing and trading. “These transactions involved power Williams purchased from out-of-state sources — not from the California Power Exchange — and sold into California to increase the state’s supply at a time it was needed. Our records show that during the time of price caps, we did not sell to the California Independent System Operator at levels above the caps.”

Similarly, Aquila Merchant President Ed Mills said the company’s review of its trading records uncovered no trades “fitting the description” used by the Oregon utility. “In fact, Aquila was cited in a Los Angeles Times article last year as one of the good guys in the California power market. An official of the California Independent System Operator (Cal-ISO) told how we were offering the lowest-priced power while other firms were trying to drive up the price.

“There is nothing to hide,” said Mills. “We were providing a service. We followed the rules and tried to act responsibly. We bid the power into the Cal-ISO at competitive prices, and it was accepted by the Cal-ISO and used to meet California’s energy needs.”

Both Williams and Aquila confirmed they did deals with PacifiCorp but said they were within the rules for “parking” — buying power from out-of-state sources and selling it back into California. Hobbs said that Williams forbid its traders from selling power outside of California for re-sale back into the state.

Sempra Energy, whose trading unit was also implicated by the Oregon utility repeated its mantra from the May 22 filing to FERC, arguing that it has done nothing wrong in any of its trading activity.

Sempra Energy Trading specifically in its submittal to FERC’s data request said it interviewed all of its currently employed electricity traders, schedulers, managers and operations personnel in reviewing its activity in determining that its trading was in order. It did say, however, that it does not maintain telephone logs, but records all of the phone conversations by traders. It will not attempt to review all of the telephone recordings, however, because to do so would take an estimated two years of man-hours and would be “unduly burdensome.”

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