Portland General Electric (PGE) is taking umbrage with a recent FERC staff report that concludes that the Enron Corp. subsidiary jointly developed an arrangement under which Enron Power Marketing Inc. (EPMI) was able to implement a scheme to create false congestion and to receive payment for relieving that congestion on California’s transmission lines.

FERC staff recently filed the report with FERC Administrative Law Judge (ALJ) Jeffie Massey (see NGI, Nov. 25). 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 (see NGI, Aug. 19).

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 also 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.

PGE responded to the series of claims made by FERC staff in a Nov. 27 filing at the Commission. Among other things, the utility denied that it violated any provisions of its code of conduct, that PGE’s operating personnel did not operate independently of EPMI or that the utility granted EPMI any undue preference.

While admitting that sleeves were used in the transactions mentioned in the report, PGE refuted the notion that the sleeves were used for the purposes detailed in the report. “PGE further denies that such purposes would constitute a violation of any statute or regulation enforced by the Commission.”

In addition, PGE denied that any of its personnel indicated a belief that the transactions were illegal or inappropriate. “PGE admits that its personnel implemented the transactions, but denies that there was any obligation for them to report any of the transactions to ethics officials or PGE legal staff,” the utility went on to say.

PGE also denied that its transmission personnel failed to function independently by scheduling the transactions with EPMI.

Overall, PGE said that other than self-reported posting violations, the company committed no violations of any statute or regulation enforced by the Commission or of PGE’s code of conduct. “The other asserted violations included in the statement are unsupported by the facts known to PGE and/or do not constitute violations of any statute or regulation enforced by the Commission or of PGE’s code of conduct.”

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