Energy Transcript Questioned

Senate investigators Tuesday questioned why the Los Angeles Department of Water and Power gave them a transcript last week that does not match audiotapes of an energy trader phone conversation that briefly resulted in higher electricity prices.

Lawmakers warned that DWP officials risk contempt charges if they altered or fabricated the transcript.

“We want to know the proverbial ‘who knew what, when’ about that transcript,” said Sen. Joe Dunn (D-Santa Ana), chairman of the Senate select committee investigating manipulation of California’s electricity market. “Where it came from, how it was created and what it relates to.”

In response to the Senate investigation and a request by Mayor James K. Hahn, DWP General Manager David H. Wiggs announced at a DWP commission meeting Tuesday that he had hired a Washington, D.C., energy law firm, Van Ness Feldman, to scrutinize the city-owned utility’s trading and marketing practices. DWP and the city attorney’s office did a preliminary investigation over the weekend, interviewing about 50 employees.

Documents obtained by Dunn’s committee appear to implicate DWP in a November 2000 electricity sale dubbed a “ricochet,” in which power is exported out of California so that it can be bought back at a higher price.

“We still believe there was no Enron-type transaction, no ricochet transaction,” said Wiggs, who took his position after the power sales now under scrutiny occurred.

Still, to assuage lingering concerns, Wiggs said the law firm will review taped telephone calls and transactions and focus on any that are questionable. A final report from Van Ness Feldman is expected in September.

Commission President Kenneth T. Lombard said he believes that the utility has done nothing wrong. He railed about the politically charged atmosphere of the Senate hearings and said DWP employees were “ambushed” during Dunn’s hearing last week.

“We need to be prepared when we go to these hearings,” Lombard said.

DWP officials arrived to testify in Sacramento last week with a 17-page transcript of DWP trader conversations. They released the transcript--which includes a DWP trader asking a state grid operator to explain a “ricochet”--to dispute allegations that the DWP engaged in such deals.

DWP officials testified to lawmakers that the utility simply fulfilled a request to move power from Arizona to Northern California and was not trying to drive up the price of power.

But a separate transcript of conversations recorded by the PG&E; National Energy Group and obtained by Dunn’s committee documents DWP’s involvement in what others described as a ricochet scheme.

Rather than placate lawmakers, the DWP transcript raised questions about why it differs from the 40-page PG&E; transcript. Energy companies routinely record their traders’ phone conversations.

Dunn called the DWP and PG&E; transcriptions “irreconcilable.” The committee sent a staff person to Los Angeles on Monday to listen to DWP’s audio recordings from the night of Nov. 11, 2000, Dunn said, and found that the tape matches the PG&E; transcript but is not reproduced entirely in the DWP’s transcript.

Dunn said the committee probably will hold a hearing next week to determine whether DWP’s transcript is a compilation of several conversations, a discussion of an entirely separate incident or “simply created out of whole cloth.”

Wiggs was not available to explain the source of the phone transcript.

It revolves around a brief, multiple-step deal in which PG&E; sold power to DWP for $50 per megawatt-hour, and DWP used its rights to transmission lines to move the electricity to the Oregon border. DWP then sold some of the power back to PG&E;, which sold it to Constellation Energy, which then sold it to the California Independent System Operator for about $250 per megawatt-hour.

When PG&E; and DWP tried to continue their arrangement, it was canceled by Cal-ISO, which operates most of the state’s transmission grid. The Cal-ISO worker who halted the transaction called it a ricochet and said it violated Cal-ISO rules.

Ricochet is among the strategies for boosting profits in the California electricity market that Enron Corp. traders described in a December 2000 memo. Federal regulators made that memo public in May, then asked dozens of energy companies to swear under oath as to whether they had engaged in similar schemes.

DWP officials declared to the federal regulators and to Dunn’s committee that they had not engaged in ricochet transactions--or any of the tactics described by Enron--in 2000 and 2001.

Also on Thursday, the special Senate committee investigating the electricity crisis voted to review documents and e-mails that Enron said it mistakenly submitted last month.

An attorney for the bankrupt Houston company asked the committee to give back several computer disks because some might contain communications protected from the committee’s subpoena by attorney-client privilege.

But lawmakers refused to give Enron the benefit of the doubt, noting that the company appears to have tampered with, destroyed or written over many of the computer files it submitted.

“My working assumption,” said Sen. Debra Bowen (D-Marina del Rey), “is that the company is not respectful of this process and could use any or all mechanisms available to it to avoid turning over information.”