Enron memos expose $ 30 billion scam

WASHINGTON – On May 6, the Federal Energy Regulatory Commission (FERC) released internal documents revealing how Enron created phantom shortages in California’s unregulated electricity market to fleece ratepayers of an estimated $30 billion during the 2001 energy crisis.

The various schemes were given code names such as “Death Star,” “Fat Boy” and “Load Shift,” all reminiscent of the gangster-like tactics after which they were modeled.

Loretta M. Lynch, president of the California Public Utilities Commission (CPUC), charged that the memos are a “smoking gun” showing that Enron’s business plan was to “game the California market so they could suck every dollar out of California.”

Sen. Barbara Boxer (D-Calif.) said the memos confirmed what she had been saying, for months. “It is high time we see some indictments handed down in this case,” the state’s junior senator added.

Several months ago, Boxer said Lay’s memo to Vice President Cheney urging the White House to ignore appeals from California officials to impose caps on the price of electricity was the “smoking gun” in Calfornia’s energy crisis.

Bush followed Lay’s advice despite six disastrous blackouts and a 400 percent surge in utility rates. Finally FERC imposed price caps that locked California into ruinous utility rates. California Gov. Gray Davis said the administration’s failure to act allowed Enron and other utility companies to extort “about $30 billion from the state. Those who claimed that there was no price manipulation were just plain wrong.”

Davis has demanded that Bush enforce the Federal Power Act and order Enron and other energy companies to give back the ill-gotten profits and cancel the long-term contracts forced on the state.

Carl Wood, a member of the CPUC, has obtained photocopies of the Enron memos. “It is astonishing, that they would commit to paper the details of these plans,” Wood told the World. “We had already identified the strategies they used. Our problem was getting documentary proof from inside the company. These memos provide the hard evidence we need.”

Davis’s charge that $30 billion was extorted is “outrageous but true,” Wood added. “California was forced into long term contracts at the most unfavorable rates and conditions. In many cases, the power was sold to us at prices several times the cost of production.”

The “Death Star” memo outlined a strategy in which Enron earned money by scheduling transmission in the opposite direction of congestion even though no electricity was actually bought or sold. As the memo says, Enron raked in profits,” for moving energy to relieve congestion without actually moving any energy or relieving any congestion.”

Another memo describes how Enron bought California electricty at the controlled price of $250 per megawatt-hour and resold it in the Pacific Northwest for $1,200. Wood said the cost of generating a megawatt-hour of electricity is between $35 and $40.

The “Load Shift” strategy was an Enron scheme to sell electricity in neighboring states at low rates and then reimport it, selling it to local electric utility companies at an enormous markup and pocketing the loot.

Wood charged that the Bush administration “is trying to protect deregulation by making it appear that Enron was the only company profiteering. But there is plenty of evidence that other companies were engaged in these same practices.” California investigators are probing whether Duke Power, Dynegy and other energy traders engaged in a conspiracy with Enron.

The crisis has also energized grassroots calls for publicly owned power with many activists pointing to the Los Angeles Department of Water and Power, which provided electricity to its millions of customers at a fair prices and actually made money for the city.

Wood says the solution lies in a regulated utility where “rates are set by the cost of service not by whatever the market will bear. There is already a legal framework to rebuild the regulated utility structure in California.”

Wood, a former utility worker from Southern California and leader of the Utility Workers union, was once ridiculed publicly by Lay as the only public utility commissioner in the country who advocated government regulation. “I wasn’t given an opportunity to answer Lay but everyone there knew where I stand,” Wood said, laughing. “But now everyone is coming out of the woodwork in favor of regulation.”

The author can be reached at greenerpastures21212@yahoo.com