Regulators to Probe Enron’s Wind Units

Federal power regulators said Friday that they would investigate whether Enron Corp. illegally kept ownership of three California wind generation firms it had been ordered to sell in 1997. The inquiry could lead to an order for millions of dollars in refunds to Southern California Edison, which bought the wind power at above-market rates.

The investigation by the Federal Energy Regulatory Commission aims to determine whether former Enron executives fraudulently concealed Enron’s ownership in the three companies, which operate wind farms near Palm Springs, in the Tehachapi Pass outside Bakersfield and at other locations in the state.

Federal rules allow companies that generate power from wind and other renewable sources to charge above-market rates for their output. A technicality of federal utilities law required Enron to sell much of its interest in the three wind farm companies in 1997 to retain their preferred status.

If FERC determines that the wind companies did not properly qualify for preferential rates, it could order a refund of the difference between what the companies were permitted to charge Edison and the lower, regulated price Edison paid to generate or purchase conventional power.

Utility industry sources said that at various times during its contracts with the wind companies, Southern California Edison, the utility arm of Rosemead-based Edison International, may have paid them two to nine times the regulated rate for power. Moreover, the Securities and Exchange Commission said in a complaint that the wind companies reaped about $2.7 million in unlawful profit from 1997 through 2000.

Former Enron Chief Financial Officer Andrew S. Fastow and another ex-Enron executive, Michael J. Kopper, already have been accused by the Justice Department and the SEC of concealing Enron’s ownership of the wind farms and profiting from the subterfuge.

Whether Edison could collect any mandated refunds from Enron is unclear. The Houston company is under Bankruptcy Court protection. An Enron spokesman confirmed that the wind companies are currently regarded as Enron subsidiaries.

Enron told FERC it was selling the wind generators to two independent partnerships. In fact, the SEC alleged this month that these partnerships had been created by Fastow and Kopper as fronts allowing Enron secretly to retain ownership. The two also used the arrangement to “secretly siphon off for themselves” proceeds of the sales by paying themselves portions of the revenue the wind generators recorded, the SEC said.

Fastow reaped nearly $190,000 in gains from the wind-power deals, the SEC says. Much of that, the SEC says, was funneled from the companies from 1997 to 2000 in the guise of annual “gifts” of $10,000 to Fastow’s wife and two children from Kopper and his domestic partner.