Williams says it didn’t manipulate power prices

By Clayton Bellamy The Associated Press
Thursday May 23, 2002

TULSA, Okla. — Williams Cos. told energy regulators Wednesday that some of its California trades resembled those allegedly made by Enron Corp., but were not designed to manipulate the state’s power market. 

“We emphatically denied that Williams participated in those types of strategies,” said Bill Hobbs, president of Williams’ energy trading division. “We disclosed some of our transactions that had similar characteristics but were done for entirely different purposes.” 

“There were few of these transactions and their volume was insignificant,” Hobbs said in a conference call with analysts. 

The filing sent Williams stock soaring. Shares closed up $1.71, or 10.7 percent, to $17.71 in trading on the New York Stock Exchange. 

The Federal Energy Regulatory Commission on May 8 ordered Williams and other companies involved in the California energy market in 2000 and 2001 to disclose by Wednesday whether they engaged in questionable trades. Energy prices in California increased tenfold in those years. 

A FERC spokeswoman said the commission would not comment on Williams’ filing, which is part of a continuing investigation scheduled to end this summer. 

The commission began investigating possible price manipulation in California in February. The inquiry gained steam earlier this month when FERC received internal Enron documents outlining how the company allegedly misled state officials about trades to make more money during the state’s energy crunch. 

The memo from an Oct. 3 meeting said Enron traders coined colorful terms such as “Get Shorty,” “Fat Boy” and “Death Star” to describe different energy sales plans. 

In the filing, Tulsa-based Williams said it engaged in some transactions similar to “Get Shorty,” in which a trader agrees to provide auxiliary energy in the future beyond its current capability. The trader later buys the necessary energy on the real-time market at a lower price. 

Williams never made deals to provide power it didn’t have, but it did occasionally buy auxiliary power on the real-time market for reasons other than profiting from the price difference, the company said in the filing. 

Williams said it also engaged in trades sharing characteristics with “Fat Boy,” in which Enron allegedly withheld scheduled power service so it could instead sell the energy in the real-time market. 

While Williams also scheduled power service that did not meet any demand, it did so for legitimate reasons, the company said. Also, Williams said it didn’t deceive California officials, because it already had access to energy it could sell in the real-time marketplace. 

Williams said its scheduled, unused energy amounted to just four-tenths of a percent of its California transactions, and it sold only $1.9 million of scheduled energy on the real-time market in 2000 and 2001. 

“Throughout the time period, we closely monitored the evolving market and made every effort to participate in a way that was fair and legal,” chairman, president and chief executive officer Steve Malcolm said. “Williams does not have and it never has had strategies to engage in illegal or improper market behavior.” 

FERC has also given Williams and its rivals a May 31 deadline to disclose any “round-trip trading,” in which one company sells power to another and then simultaneously buys it back at the same price. 

The companies claim that no profit is generated, but trading volume and firm reputation is elevated. 

Williams on Monday joined four rivals in admitting to the legal trades. But Williams said “round-trip” trades made up less than 1 percent of its total volume the last two years and didn’t affect reported revenues.