Subpoenas Issued Over Enron Notes

Congressional investigators Thursday subpoenaed five current and former lawyers for Enron to appear at a hearing next week on price manipulation in California’s energy markets, as state officials stepped up their demands for regulatory reform.

The Senate Commerce Committee issued the subpoenas for the four authors of memos released this week that detailed an array of Enron price-manipulation strategies, and the lawyer who received the memos. The attorneys were ordered to appear at a hearing Wednesday by the subcommittee on consumer affairs.

The memos were written as Enron and other companies operated in California’s deregulated energy markets. One of the memos, dated Dec. 6, 2000, said that one of Enron’s trading ploys “may have contributed” to California’s declaration of a Stage 2 power emergency Dec.5, and that other energy companies also were gaming the market.

Amid growing pressure, the Federal Energy Regulatory Commission on Wednesday ordered scores of utilities and power providers to turn over their trading records.

The new revelations have brought a return of the political sparring--common during the height of the energy crisis in 2000-01--over whether the Bush administration has been responsive enough to California’s demands for refunds.

With Gov. Gray Davis’ handling of the crisis an issue in his reelection campaign, his Democratic colleagues in Washington said the Enron memos vindicate Californians who were scolded during the energy crisis for creating the energy shortage by failing to build enough power plants.

“We’re here to tell you, ‘We told you so,’” said Rep. Sam Farr (D-Carmel), who was joined at the news conference by Sen. Barbara Boxer (D-Calif)., Rep. Anna Eshoo (D-Atherton) and others.

Recalling a meeting last year with Vice President Dick Cheney, Boxer said, “You know what he told us when we complained? He said, ‘You people use too much energy.’ Well, he didn’t know what he was talking about.”

White House spokesman Ari Fleischer said earlier this week that the memos were obtained “as part of an ongoing investigation launched by this administration” and expressed confidence that federal regulators would vigorously investigate allegations of market manipulation.

Davis, during a conference call with reporters, renewed his demand to the Federal Energy Regulatory Commission to step in and repair California’s still-malfunctioning markets, to refund nearly $9billion to the state and to help renegotiate long-term power contracts that the state signed when prices were artificially high. Davis said he might even increase the refund request in light of the latest revelations.

FERC was slow to act to help California, waiting until last June to apply price caps to power markets throughout the West, Davis said. Those caps and other mitigation measures are set to expire Sept. 30, and Davis urged FERC to extend them and provide other market fixes.

California needs tougher rules to combat manipulation that only FERC can institute, Davis said. He noted that FERC recently denied a request from the California Independent System Operator, which oversees the flow of power in the state, for stricter trading regulations like those used by Eastern independent system operators.

Cal-ISO spokesman Gregg Fishman said FERC did reject the proposal but told the agency to resubmit its request as part of a more comprehensive market redesign.

“The Federal Energy Regulatory Commission is on the spot. These memos amount to a confession by Enron of its cynical efforts to defraud Californians,” Davis said.

“Electricity deregulation will not work in this country unless we have a strong referee in charge,” Davis said.

Rep. Henry A. Waxman (D-Los Angeles) added: “The reality now that we have seen these Enron memos makes it clear that California consumers were robbed last year by the big energy companies.... It is obvious to me that what we had was a premeditated, deliberate crisis, and to add insult to injury the energy companies used their political influence to keep the Bush administration and the congressional Republicans from protecting California families.”

Power plant owners and electricity traders, such as Enron, have repeatedly denied causing California’s power woes, instead blaming a shortage of generation and hydro-electricity.

Two California Republicans on the House Energy and Commerce Committee joined the call for the Justice Department to investigate “any collusive activity that may have led to market manipulation and contributed to soaring prices and blackouts during the state’s energy shortage.”

“Previous committee hearings have focused on unethical or irregular financial practices by Enron,” said Rep. Mary Bono (R-Palm Springs). “We now have reason to believe that illegal acts took place.”

But Brian Kennedy, a spokesman for Rep. George Radanovich (R-Mariposa), who also called for a Justice Department investigation, said he is not convinced any laws were broken.

“He thinks that the Enron folks just kind of outmaneuvered, outwitted and outfoxed and used a little bit more market savvy to beat the California ISO, and that there was really nothing illegal done here,” Kennedy said. House Democrats from California, Oregon and Washington pushed for an investigation by the House Energy and Commerce Committee.

Ken Johnson, a spokesman for committee Chairman W.J. “Billy” Tauzin (R-La.), said no decision has been made on how to proceed. “What are you going to accomplish?” he said. “Enron for all practical purposes is dead. Unfortunately, for political reasons, some people want to drag the bodies through the streets.”

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Simon reported from Washington and Rivera Brooks from Los Angeles. Ricardo Alonso-Zaldivar also contributed to this report.