Power Firms Are Ordered to Turn Over Trading Data

Widening their probe of energy price manipulation, federal regulators Wednesday ordered scores of electricity and natural gas sellers across the nation to turn over documents related to trading strategies.

The Federal Energy Regulatory Commission order broadens the scrutiny over fallen energy giant Enron Corp. to a large portion of the industry, including private energy marketing firms, electric utilities and generators owned by municipalities.

In addition to demanding documents, the order asks energy sellers to state whether they engaged in any of the market-manipulation strategies outlined in Enron memos released Monday and to provide supporting documentation.

“It is hardball,” said Roger Berliner, an energy lawyer representing Los Angeles County before FERC. “It is unusual, but the circumstances are unusual. Given the vociferous denials from producers that they were engaged in any of these activities ... I believe that FERC is properly concerned whether people have been saying things that aren’t true.”

As a large consumer of power, the county is supporting efforts by Gov. Gray Davis to obtain billions of dollars in refunds.

The FERC regulators demanded “copies of all communications or correspondence, including e-mail messages, instant messages or telephone logs, between your company and any other company ... with respect to all of the trading strategies discussed in the Enron memoranda.”

Officials also asked companies to state under oath whether they attempted to manipulate California’s energy market.

“Your company’s response is to be signed under oath, in the form of an affidavit ... after the company ... has diligently conducted a thorough investigation into the trading activities of the company’s employees and agents,” said the FERC order, which was posted late Wednesday on the agency’s Web site.

The order covers transactions from 2000 and 2001. The firms were given until May 22 to respond.

“Quite frankly, the commission is tired of this lingering issue and wants to get beyond it,” said one FERC official, who asked not to be identified. “It’s like a piece of bubble gum that sticks to the bottom of your shoe.”

Power marketers offered guarded responses. “We just got the e-mail, and we’re trying to figure out what it says,” said John Stout, a vice president of Houston-based Reliant Energy Inc.

Mirant Corp. spokesman Pat Dorant said his company “will continue to cooperate with all inquiries so that we can try and resolve these issues and move forward to the real question that we still haven’t answered in California: How are we going to have energy for our future?”

Though Enron is bankrupt, many other energy companies are quite profitable.

“If you can show similar behavior from other companies that aren’t bankrupt, that’s money on the table,” said Mark Cooper, an energy policy analyst for the Consumer Federation of America.

The FERC order applies equally to sellers of electricity and natural gas, the main fuel used to generate power. Electricity sellers have long contended that the high cost of natural gas was one of the main reasons they charged such high prices. But state officials have maintained that gas marketers created artificial shortages to drive up the fuel price.

“When FERC goes looking for [electricity overcharges] the money disappears into the gas price,” Cooper said. “The gas price may have been set on the basis of fictitious transactions.”

The FERC order describes each of the market manipulation strategies outlined in the Enron memos. The complex schemes--given such nicknames as Fat Boy, Death Star, Shorty and Ricochet by Enron traders--generally involved taking advantage of loopholes in market rules and oversight to increase profit and raise energy prices. The Enron memos say other companies were doing similar things.

Next to the description of each market maneuver, FERC officials wrote a simple instruction for the energy firms: “Admit or deny.”

Enron, which is under new leadership and struggling to survive, released the documents to the FERC on Monday but said it cannot say whether they are accurate. During the energy crisis, its executives denied manipulating energy prices in the wake of California’s deregulation.

The memos include two virtually identical documents prepared by attorneys and dated Dec. 6 and 8 that were prepared in anticipation of litigation or investigations involving Enron’s trading practices.

Although some California politicians said the Enron maneuvers amount to fraud, it’s unclear whether any of the actions described in the memos were illegal. Some FERC staffers said it appears the company merely took advantage of a poorly designed market structure in California. However, one agency official said the California market rules included ethics provisions approved by the FERC. Violations of these provisions could be punishable by the federal agency, this official said.

California’s Democrats in Congress applauded the agency’s action. In the past, lawmakers bitterly criticized the FERC for failing to use its legal authority to ensure “just and reasonable” wholesale energy prices. The FERC changed direction last summer, setting price limits in the West. Chairman Patrick H. Wood III, an advocate of deregulation, nonetheless promised to make the agency a tough cop on the regulatory beat.

“For the first time, FERC is fully carrying out its charge under the law,” said Sen. Dianne Feinstein (D-Calif.). “FERC’s investigation is critical for determining just what went wrong in these energy markets and who was responsible for an energy crisis that likely resulted in significant overcharges to consumers.”

“It’s exactly what FERC should be doing,” said Rep. Anna G. Eshoo (D-Atherton). “If we had been trying to pursue the truth and get to the bottom of things a year and a half ago, California wouldn’t be holding the bag for billions of dollars.”

In a separate request, the FERC asked the agency that runs California’s electric transmission grid for reams of data on power transactions, which could give federal investigators another avenue to identify companies that engaged in market abuses. The California Independent System Operator said it would comply.

“It’s a pretty extensive data request,” said Stephanie McCorkle, spokeswoman for the California ISO. “Obviously, [federal regulators] are trying to track any manipulation of the market.”

The FERC request covers hour-by-hour transaction data from 2000 and 2001. The ISO plays a critical role in assuring there is enough power available to meet consumer demand.

Investigators will use the Enron memos as a road map for analyzing the ISO information, another FERC official said. The goal is to see whether the transactions reflect the market strategies outlined in the memos.

“What the memos say is ‘these are the strategies,’” said the official, who asked not to be identified. “They may help people who have the data to analyze it. It may help to focus things.”