Sanctions Against Enron Urged

A Senate committee investigating suspected price gouging in the California electricity market recommended Saturday that a Texas generator be found in contempt and fined for refusing to disclose top-secret business records.

The special committee recommended the actions against Enron Corp. of Houston, a major wholesaler of electricity. Swift ratification by the full Senate is expected.

The committee, investigating whether generators have manipulated prices to drive up profits during the state’s energy crisis, urged that Enron be fined an initial $1,000 and that the cumulative sum be doubled for each day the company continues to defy the panel.

In its controversial probe, the committee has found eight power sellers in contempt for failure to produce subpoenaed documents about their production and pricing practices. Recently, six of the companies have sought to have the contempt citations cleared by agreeing to hand over the records.

But Enron and Reliant Energy have refused. Last week, the committee voted a second time to hold Reliant in contempt, but has so far suggested fines only against Enron.

If Enron obeys the demand to turn over its trade secrets and other confidential information before the full Senate acts, the contempt action will be stopped, lawmakers said.

“We have no hope they will comply,” said Sen. Joe Dunn (D-Santa Ana), committee chairman.

Senate President Pro Tem John Burton (D-San Francisco) said upper chamber approval of the committee’s recommendations would occur quickly, but called the progressively severe fines “pocket change” for Enron.

“Ken Lay spends more than that on his Rolex watches,” Burton said of Enron Chairman Kenneth Lay.

An Enron official, Karen Denne, said the committee’s recommendations took the company by surprise. She said Enron had been working in “good faith” with the committee to provide the information, but now was being exclusively targeted for punishment.

“No one else has been singled out by the committee. Why is Enron being singled out?” she said.

Denne said Enron in the last week had agreed to provide all its California transaction documents for last year. “That’s far more than anyone else has turned over,” she said.

She conceded that the records did not detail out-of-state transactions, which the committee also had subpoenaed.

Enron has refused to let the committee inspect its records, contending that the Federal Energy Regulatory Commission is the only regulatory entity that can legally investigate and control the wholesale electricity market in California.

Enron and other generators also argued that their most closely guarded trade secrets would be put at risk of exposure to competitors if they were given to the committee, even under confidentiality agreements proposed by the panel.

Though it is rarely used, the Senate last exercised its contempt power in 1929 during a price-fixing investigation of the cement industry. Several executives were found in contempt for refusing to answer questions and were ordered to jail.

The state Supreme Court, however, voided the contempt citations on grounds that the Senate’s demands for information were too vague.

Dunn said the committee considered recommending other punishments, including the jailing of top Enron executives and forbidding the firm from doing business in California as long as it was in contempt.

He said the committee, which adopted the report on a unanimous bipartisan vote, agreed that payment of fines, known as “coercive penalties,” was the best choice.

The Senate ordered the investigation last winter as Gov. Gray Davis declared the state to be in an “energy emergency” and a series of rolling blackouts was imposed statewide.

At the time, wholesale generators, most located out of state, were charging what some called “rip-off” prices. Davis has asked the federal government to order generators to refund almost $9 billion in alleged overcharges, but indications are that only about $1 billion may be paid.

The committee was charged with examining the wholesale market and making recommendations for legislation if abuses were found.

The committee subpoenaed Enron and seven other generators in April, insisting that they turn over millions of records relating to bidding strategies, prices, energy availability and documents dealing with possible antitrust issues, including out-of-state transactions.

All the companies initially defied the subpoenas. But under the threat of contempt, most recently have said they will provide the information under confidentiality agreements.

Enron and Reliant of Houston held out. Enron filed 20 objections to the subpoenas and argued that the committee’s investigation was out of bounds.

Reliant has sued the committee in Sacramento Superior Court to stop the investigation, charging that the panel violated the company’s rights to due process and refused to hear its objections to the subpoena.