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Feds find California power manipulation
Feds find California power manipulation
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By Mark Sherman
March 26, 2003 | WASHINGTON (AP) -- Federal energy regulators said Wednesday that their investigation found widespread manipulation of natural gas and electricity prices and supplies in California.
Pat Wood, chairman of the Federal Energy Regulatory Commission, said that as a result of the manipulation California would receive more than the $1.8 billion in refunds recommended by a FERC judge in December.
The exact amount is to be determined in the coming months, but FERC spokesman Kevin Cadden estimated that the total would be $3.3 billion. California is seeking $9 billion.
The FERC singled out seven subsidiaries of bankrupt Enron Corp. and five other companies for taking advantage of a dysfunctional market and reaping millions of dollars in unjust profits.
"The price gouging abounded," Commissioner William Massey said. He said he regretted that FERC did not intervene earlier to police the newly deregulated power market in California.
California Gov. Gray Davis said the ruling confirms "there was widespread market manipulation and a massive ripoff of California ratepayers. Now the question is whether the FERC commissioners will have the grit to order the remedies that are necessary."
The agency is considering placing limits on the profits of four marketers of wholesale power and banning eight gas companies from selling natural gas in California, Wood said.
The power marketers are Enron Power Marketing Inc., Enron Energy Services Inc., Reliant Energy Services Inc., and BP Energy Company.
The natural gas companies are Bridgeline Gas Marketing LLC, Citrus Trading Corp., ENA Upstream Company, Enron Canada Corp., Enron Compression Services Company, Enron Energy Services Inc., Enron MW LLC and Enron North America Corp.
The investigation also found a close link between natural gas and electricity prices. Gas is the fuel at many power plants.
After a 13-month investigation, FERC concluded "that many trading strategies employed by Enron and other companies violated the anti-gaming provisions" of marketing rules.
"Enron manipulated thinly traded physical markets to profit in financial markets," FERC said, estimating that Enron made more than $500 million in online trading in 2000 and 2001.
FERC investigators recommended that the companies be forced to give up unfairly earned profits.
Investigators also urged the commission to consider sanctions energy companies and public utilities that sold power in California during the summer of 2000. That could further increase the amount of money owed to California since that time period is not accounted for in the refunds that already have been recommended.
The commission deferred action on California's request to renegotiate some $20 billion in long-term power contracts signed at the height of the energy crisis. The three commissioners expressed sharp division over whether to meddle in the contracts, with Wood and Nora Brownell saying they would oppose the state's claim at this time. Only Massey strongly favored ordering changes in those contract.
FERC also is continuing to evaluate other evidence the state has submitted to support more allegations that some energy companies withheld power in a bid to increase prices.
FERC planned to make public the California evidence later Wednesday.
The energy crisis cost the state as much as $45 billion over two years in higher electricity costs, lost business due to blackouts and a slowdown in economic growth, according to the Public Policy Institute of California.
Shortcomings in California's energy market rules and a shortage of electricity stemming from the lack of hydropower in the Northwest in 2000 "made this fertile ground for the manipulation we found," said Donald Gelinas, who headed FERC's investigation.
The regulatory agency capped wholesale power prices across the West and instituted other changes in June 2001 that brought a quick end to the energy crisis.
Wood ordered an investigation in February 2002 after California officials repeatedly charged energy marketers with gouging California's utilities and its customers.
Two months later, FERC obtained an internal Enron memo that described trading strategies, including sham transactions and other schemes aimed at creating congestion on the Western power grids and forcing up prices. Two former Enron traders have pleaded guilty to federal charges stemming from the trading strategies.
The memo indicated that other companies had similar strategies, but provided no details. Energy companies have largely denied wrongdoing.
Separately, California last week agreed to a settlement with El Paso Corp., for $1.7 billion, ending a dispute over whether the company withheld natural gas from California to drive up prices.
- - - - - - - - - - - -
By Mark Sherman
March 26, 2003 | WASHINGTON (AP) -- Federal energy regulators said Wednesday that their investigation found widespread manipulation of natural gas and electricity prices and supplies in California.
Pat Wood, chairman of the Federal Energy Regulatory Commission, said that as a result of the manipulation California would receive more than the $1.8 billion in refunds recommended by a FERC judge in December.
The exact amount is to be determined in the coming months, but FERC spokesman Kevin Cadden estimated that the total would be $3.3 billion. California is seeking $9 billion.
The FERC singled out seven subsidiaries of bankrupt Enron Corp. and five other companies for taking advantage of a dysfunctional market and reaping millions of dollars in unjust profits.
"The price gouging abounded," Commissioner William Massey said. He said he regretted that FERC did not intervene earlier to police the newly deregulated power market in California.
California Gov. Gray Davis said the ruling confirms "there was widespread market manipulation and a massive ripoff of California ratepayers. Now the question is whether the FERC commissioners will have the grit to order the remedies that are necessary."
The agency is considering placing limits on the profits of four marketers of wholesale power and banning eight gas companies from selling natural gas in California, Wood said.
The power marketers are Enron Power Marketing Inc., Enron Energy Services Inc., Reliant Energy Services Inc., and BP Energy Company.
The natural gas companies are Bridgeline Gas Marketing LLC, Citrus Trading Corp., ENA Upstream Company, Enron Canada Corp., Enron Compression Services Company, Enron Energy Services Inc., Enron MW LLC and Enron North America Corp.
The investigation also found a close link between natural gas and electricity prices. Gas is the fuel at many power plants.
After a 13-month investigation, FERC concluded "that many trading strategies employed by Enron and other companies violated the anti-gaming provisions" of marketing rules.
"Enron manipulated thinly traded physical markets to profit in financial markets," FERC said, estimating that Enron made more than $500 million in online trading in 2000 and 2001.
FERC investigators recommended that the companies be forced to give up unfairly earned profits.
Investigators also urged the commission to consider sanctions energy companies and public utilities that sold power in California during the summer of 2000. That could further increase the amount of money owed to California since that time period is not accounted for in the refunds that already have been recommended.
The commission deferred action on California's request to renegotiate some $20 billion in long-term power contracts signed at the height of the energy crisis. The three commissioners expressed sharp division over whether to meddle in the contracts, with Wood and Nora Brownell saying they would oppose the state's claim at this time. Only Massey strongly favored ordering changes in those contract.
FERC also is continuing to evaluate other evidence the state has submitted to support more allegations that some energy companies withheld power in a bid to increase prices.
FERC planned to make public the California evidence later Wednesday.
The energy crisis cost the state as much as $45 billion over two years in higher electricity costs, lost business due to blackouts and a slowdown in economic growth, according to the Public Policy Institute of California.
Shortcomings in California's energy market rules and a shortage of electricity stemming from the lack of hydropower in the Northwest in 2000 "made this fertile ground for the manipulation we found," said Donald Gelinas, who headed FERC's investigation.
The regulatory agency capped wholesale power prices across the West and instituted other changes in June 2001 that brought a quick end to the energy crisis.
Wood ordered an investigation in February 2002 after California officials repeatedly charged energy marketers with gouging California's utilities and its customers.
Two months later, FERC obtained an internal Enron memo that described trading strategies, including sham transactions and other schemes aimed at creating congestion on the Western power grids and forcing up prices. Two former Enron traders have pleaded guilty to federal charges stemming from the trading strategies.
The memo indicated that other companies had similar strategies, but provided no details. Energy companies have largely denied wrongdoing.
Separately, California last week agreed to a settlement with El Paso Corp., for $1.7 billion, ending a dispute over whether the company withheld natural gas from California to drive up prices.
I TOLD YOU SO!
these are two different areas of the action of the corporation. Do you truly believe that the other corporations are clean of this? 
Saying the opportunity was created by idiot legislation doesn't relieve the profiteers of guilt.
ACK!
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