Californians See ‘Poetic Justice’

The electricity crisis left a trail of casualties across California. Gov. Gray Davis lost his job. Pacific Gas & Electric Co., the state’s largest electricity utility, filed for bankruptcy protection. Millions of residents and businesses wound up paying billions more for electricity, and many blamed Enron Corp.

From San Diego to Sacramento, Californians exulted Thursday over the convictions of Enron chieftains Kenneth L. Lay and Jeffrey K. Skilling. Some called it justice; others said the verdicts were merely symbolic, noting that Californians continue to pay exorbitant rates for electricity thanks to Enron.

“It’s not pure justice, but it’s poetic justice,” said Davis, a two-term Democrat ousted by Arnold Schwarzenegger in a 2003 recall election, in part because of his response to the energy crisis of 2000 and 2001.

Enron was among dozens of power suppliers and traders accused of worsening California’s energy crisis by turning off power plants and using questionable trading strategies to drive up electricity prices. The state has pushed for repayment of $9 billion in electricity overcharges, $2 billion of which is attributable to Enron. Several energy suppliers have paid settlements to resolve the matter, largely without admitting guilt.

That has left a bitter taste in the mouths of state officials and energy experts throughout the West, who remain frustrated and disappointed that federal prosecutors declined to charge Lay and Skilling with manipulating the availability and delivery of electricity in California’s partially deregulated market.

“We’ve only done half the job,” said Robert McCullough, a Portland, Ore., consultant involved in lawsuits against Enron by Northwestern power agencies. He hoped that Thursday’s verdicts would persuade federal regulators to order Enron’s bankruptcy estate to pay damage claims now that there is “no question about the pervasive criminality.”

California Atty. Gen. Bill Lockyer said that holding Lay, Enron’s founder and chairman, and Skilling, its president and CEO, accountable sends a signal to other corporate executives that they need to put ethics above profits.

“Hopefully, it will deter corporate crime and nurture the fair dealing and honesty essential to the well-being of our economy,” he said.

Lockyer led an effort that resulted in a $1.52-billion settlement with Enron, which included a $600-million penalty, in a lawsuit that alleged massive market manipulation during the energy crisis. He predicted that California wouldn’t see more than $260 million from Enron.

Calabasas resident and Southern California Edison customer Robert Benson said the verdicts were bittersweet. “They got called to account, but what about the electricity consumers like us, who were put through that phony energy crisis and presumably ripped off of lots of money?” asked Benson, a professor at Loyola Law School. “We won’t see any reimbursement for the crime here in California.”

State officials said Thursday’s convictions -- though not specifically related to any alleged misdeeds in California -- would put a stop to efforts in Sacramento to revive energy competition under the state’s failed 1996 deregulation law.

Enron’s “greed and their criminal behavior killed competition as a policy,” said V. John White, a statehouse energy and environmental lobbyist. “They were among the intellectual architects of California deregulation, and the irony is that rates in California are significantly higher because of deregulation.”

The average monthly bill for an Edison residential customer was $58 before the electricity crisis. Today it is more than $85.

California officials believe there is little doubt that Enron manipulated the energy markets here and in other Western states. Recordings released in connection with the Northwestern utility lawsuits featured Enron traders chuckling about how they exploited “Grandma Millie” and other helpless California ratepayers with trading schemes they dubbed “Fat Boy” and “Death Star.”

Three former Enron traders eventually pleaded guilty to manipulating the state’s power market, but none of the company’s executives faced charges.

“I don’t think this is vengeance for California; it’s justice,” S. David Freeman, a former general manager of the Los Angeles Department of Water and Power, said of Thursday’s convictions. Freeman had helped Davis negotiate contracts that eventually stabilized the state’s wobbly electricity supply.

Enron had contributed hundreds of thousands of dollars to state lawmakers involved in crafting the 1996 deregulation law, and both Lay and Skilling made trips to California to cheerlead for the legislation, signed by then-Gov. Pete Wilson.

Representatives of independent power-generating companies, which survived the energy crisis and continue to sell electricity to California utilities, said they hoped the convictions would end the finger-pointing and regulatory uncertainty that pushed many highflying energy companies into financial straits or even bankruptcy protection.

“It only partially closes an ugly chapter in my industry,” said Gary Ackerman, executive director of the Western Power Trading Forum. Enron “certainly carried with it a lot of other folks in my business, many people who were trading power and had to close up shop.”

Enron traders may have been “wildcatters,” who “pushed the envelope” and took advantage of “pretty vague” California rules, but they “didn’t make the prices go up,” Ackerman said. “There was a shortage” in 2000 and 2001, he insisted.

Those shortages, whether real or manipulated, were exacerbated by Enron corporate leaders’ need “to feed massive amounts of dollars” into a pyramid scheme that gave the illusion that the company was profitable, said state Sen. Joe Dunn. The Santa Ana Democrat is running for state controller by touting his record investigating Enron and other power traders during the energy crisis.

Davis no longer has the option of using Enron’s demise to revive his defunct political career. “There’s no question that the energy crisis precipitated my ultimate defeat,” he said on a cellphone, driving on a Florida highway to visit his 83-year-old mother. “I was clearly the biggest political casualty of Enron.”

What’s important now, he said, is that Lay and Skilling go to prison, no matter what the charges.

“We sent Al Capone to prison for tax evasion, and we were pretty darn sure he was guilty of a heck of a lot more,” he said.

Times staff writer Nancy Vogel contributed to this report.