Enron duped California’s power, witnesses tell Senate

The Associated Press
Friday April 12, 2002

Affiliates traded more than 10 million megwatt hours of electricity amongst themselves 


WASHINGTON — Companies controlled by Enron Corp. deliberately drove up the price of power during California’s energy crisis by selling each other large amounts of electricity, according to the head of the state Public Utilities Commission. 

“These were sham transactions, causing the price to rise with each supposed sale,” PUC President Loretta Lynch told a congressional committee on Thursday. “The same individuals were managing these companies. They had the same employees, trading with themselves.” 

In all, she said, five Enron affiliates traded more than 10 million megawatt hours of electricity among themselves in the last three months of 2000, the same time that power prices in California were spiraling out of control. 

Lynch’s testimony before the U.S. Senate Commerce Committee was the latest allegation that Enron manipulated California’s electricity crisis in late 2000 and early 2001. 

No Enron officials appeared at the hearing, called at the request of Sen. Barbara Boxer, D-Calif., and largely sympathetic to the proposition that now-bankrupt Enron was heavily involved in the meteoric rise in power prices. 

“Enron played a key role in what happened to the people of California,” Boxer said. 

One cautionary note came from Sen. Peter Fitzgerald, R-Ill., who said he was “skeptical ... as to whether Enron had any effect on California’s energy crisis.” 

But five witnesses, who also included state Sen. Joseph Dunn, D-Santa Ana, and California Power Authority Chairman S. David Freeman, told the committee that Enron initially sought the deregulation of the electricity market in California by falsely promising that consumers’ electric bills would go down, then leaned heavily on federal energy regulators not to step in when power prices began to climb in the newly deregulated market. 

Dunn is leading a Senate investigation into the energy crisis, in which wholesale power rates jumped tenfold, three investor-owned utilities faced financial ruin and Californians experienced rolling power blackouts. 

“The deregulation, led by Enron, has become perhaps the greatest fraud ever perpetrated on the American consumer,” Dunn said. 

Witnesses told the panel that California and other states will again see soaring power prices if the Federal Energy Regulatory Commission lifts the caps it imposed last year on wholesale power purchases throughout the West. The caps, credited with helping bring down prices, will expire Sept. 30 unless FERC extends them.