Thursday, June 26, 2003

FERC deals death blow to Enron

Calif. attorney calls it kicking a dead horse

By Mark Sherman
The Associated Press

WASHINGTON - Federal energy regulators Wednesday punished bankrupt Enron Corp. for its role in manipulating Western power markets two years ago and threatened costly penalties for the company's partners in manipulating the markets.

The Federal Energy Regulatory Commission also voted to uphold the validity of long-term power contracts in California and other Western states that were signed at the height of the energy crisis in 2000 and 2001. The commission turned down requests for refunds for excessive power prices in the Pacific Northwest.

Regulators have grappled for three years with the skyrocketing prices and power blackouts that followed the deregulation of electricity in California. Long-awaited refunds for California will not be ordered for several months and investigations related to the energy crisis will extend into 2004, FERC Chairman Pat Wood said.

California is demanding nearly $9 billion in refunds.

But in the Enron matter, the commission issued what Wood called a "death penalty" for the company, barring it from competitively selling electricity and natural gas in the United States.

The company may still sell power, but at prices far below market rates, virtually shutting down the company's ability to compete. It can resume regular business after it emerges from bankruptcy proceedings and gets federal approval.

Wood said it was the first time the commission had imposed such a penalty on power sellers, although he acknowledged that Enron has ended much of its power trading.

"We send a clear signal that competitive markets must work in the interest of customers and the public interest," he said.

California's deputy attorney general, Vickie Whitney, viewed the action in the context of Enron's bankruptcy and legal troubles. "It's like having a dead horse in the middle of the room and going up and kicking it," Whitney said.

An Enron spokeswoman said the company was reviewing the order. "In the meantime, we are cooperating fully with FERC and other investigations," spokeswoman Karen Denne said.

Houston-based Enron went bankrupt after a series of revelations of hidden debt, inflated profits and accounting tricks. Thousands of workers lost their jobs and investors were left with virtually worthless stock.

The company, which has been doing business, must file its bankruptcy reorganization plan by Monday.

Regulators Wednesday ordered two dozen companies, utilities and municipalities to explain their role as Enron partners in practices with the colorful names Fat Boy, Get Shorty, Ricochet and Death Star that violate commission rules.

"It was only with the cooperation of others that these strategies could have been executed," the commission said in its order.

Wood said the Enron partners could be forced to return their profits. He said it was unclear how much money was at stake.

Many of those entities were among the 42 wholesale power sellers that the commission also ordered to justify their prices and marketing strategies in sales worth $129 million.

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