San Diego Union Tribune

June 17, 2004

Regulator criticized by Boxer, Feinstein
Two senators urge FERC to back state's refund effort


WASHINGTON California's two Democratic senators blasted the Federal Energy Regulatory Commission yesterday, calling on the agency to support the state's effort to recoup $8.9 billion in refunds from power companies stemming from the 2000-01 energy crisis.

Following what she termed a disappointing hourlong meeting with FERC Chairman Pat Wood III, Sen. Barbara Boxer also said FERC officials who have not supported California's effort for refunds should be ousted.

Boxer said she sent a letter to the White House asking the Bush administration to support California's bid for the refunds and to seek resignations of FERC officials.

Sen. Dianne Feinstein said she called on Wood to use his authority to refund Californians for their losses and punish traders and companies that manipulated the Western market.

Tensions between California officials and the federal regulator have risen again in the wake of newly released tape recordings that appear to document market rigging by Enron Corp. during the power crisis. FERC also has sparked anger in California by ordering the state to refund $270 million to Enron and other companies the state says ripped off billions from consumers here.

The state and FERC have long been at odds over the commission's handling of the crisis and its aftermath, with FERC balking at California's request for $9 billion in refunds and state requests to cancel or revise expensive long-term electricity contracts.

Neither FERC officials nor the White House would comment directly on Boxer's statements, made during a news conference, or Feinstein's comments in a news release.

Boxer said she had sent a letter to the White House.

"I haven't seen it yet," said White House spokesman Ken Lisaius.

Referring to the Democrats' criticism, he said the administration has maintained a record of trying to help Californians deal with the power crisis to "keep the lights on."

California's senators also reacted to recent disclosures about Enron's manipulation of energy markets during the 2000-01 power debacle. Documents show that Western customers were defrauded about $1.1 billion, according to documents.

Audiotapes and other records captured conversations among Enron traders who gloated about ripping off Californians, including poor grandmothers.

While Boxer said she was outraged at the disclosures, she said that Wood didn't appear to have such a reaction.

During their closed-door meeting at her Capitol Hill office, Wood a Bush appointee to the top FERC post defended his position to challenge California's efforts to seek the refunds and renegotiate contracts, Boxer said.

Wood said the commission was still reviewing records and had not made a decision, she said.

"I am sorry to say that the agency responsible for protecting consumers from 'unjust and unreasonable' electricity prices has failed miserably," Boxer said. "It is now 2004 and not one dime of the $8.9 billion in refunds owed to California has been received. The FERC has also done nothing to order the renegotiation of long-term contracts."

In a letter to Boxer on June 7, Wood said the commission is "pursuing Enron's misdeeds in every way possible."

He also said the commission "continues to pursue refunds or disgorgement of profits in other proceedings related to California's electricity crisis, including the ongoing investigations into gaming by Enron and others."

Wood asserted in the letter that FERC found no evidence market rigging had affected the long-term power contracts California signed at the height of the power crisis. That assertion contradicts a FERC staff report on the crisis published last year, which found that market rigging had inflated the contract prices.

California officials agree and have pressed FERC to force revision or cancellation of the agreements, which they say will cost electricity customers here from $5 billion to $7.5 billion in overcharges in coming years.

FERC has declined thus far to take any action on the agreements. A spokesman for the commission yesterday said Wood could not be reached for explanation of the apparent contradiction between his comments and the commission's earlier staff report.

Feinstein criticized FERC's decision in May that ordered California to pay Enron and other energy companies $270 million in refunds that were linked, she said, to the state's efforts to stabilize the energy market.

"To ask Californians to repay energy companies $270 million after the fraud perpetrated against them is preposterous," Feinstein said.

The criticism of FERC officials comes at a time when the Bush administration is pushing a new energy bill in Congress. A White House spokesman criticized Democrats who have not supported the president's energy reform legislation now being considered by Congress. California's two senators have opposed the legislation.

Bill Lockyer, attorney general of California, is scheduled to file a lawsuit against Enron today, seeking compensation for market manipulation during the crisis. The suit will accuse the bankrupt company of commodities fraud and unfair business practices.

The attorney general says the market rigging included exporting electricity out of California during power shortages. The suit will ask for compensation that could total hundreds of millions of dollars to the state, according to Lockyer's office.