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Tuesday, June 15, 2004 - Page updated at 12:03 A.M.

Enron gouged $1.1 billion, utility says

By Christopher Schwarzen
Times Snohomish County bureau

TED S. WARREN / AP
Ed Hansen, center, general manager of the Snohomish Public Utility District, holds records released yesterday that the utility says show that Enron Corp. manipulated the energy market for at least $1.1 billion. With him are Snohomish PUD Commissioner Dave Aldrich, left, and at right, Mike Gianunzio, PUD general counsel.
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Newly released financial documents show that Enron made more than $1.1 billion manipulating energy markets during the West Coast energy crisis, U.S. Sen. Maria Cantwell and the Snohomish County Public Utility District charged yesterday.

Scrutinizing about 750 pages of financial documents called "inc sheets" and hours of day-trading tapes, PUD officials said it appears Enron manipulated energy markets 88 percent of the time it made trades from January 2000 to June 2001.

The tapes and financial sheets unveil several schemes traders used to control prices, PUD general counsel Mike Gianunzio said. Traders used names like "ricochet," "sidewinder" and "ping pong" when referring to price-gouging techniques, Gianunzio said.

One of the most common, tapes show, was the "ricochet," where traders would buy an excess of energy from a California utility, mask where the electricity originated, then sell it back to the same California utility at a higher price. Since California's energy market allows open trading like the U.S. stock exchanges, utilities often would sell surplus electricity hoping for better buys later in the day.

One set of financial records shows Enron using the "ricochet" to buy power virtually for free, then sell it later for $750 a megawatt, making about $223,000 on the daily deal.

The PUD arrived at the $1.1 billion figure by comparing Enron's "inc sheets" and purchasing statements to accounting data. The PUD was able to create a log of the trader's purchases and sales, which showed how the company manufactured demands for electricity and manipulated prices, Gianunzio said.

Cantwell, D-Wash., yesterday urged the Federal Energy Regulatory Commission to reopen its investigation into Enron's tactics. She said the commission's failure to uncover Enron's misdeeds has hurt ratepayers and cost Snohomish County numerous jobs because many businesses can no longer afford the PUD's rates, which are among the highest in Washington state.

U.S. Rep. Jay Inslee, D-Bainbridge Island, and other members of Congress introduced legislation yesterday that would widen the period for which utilities could claim refunds from Enron. FERC has allowed utilities to file for refunds for Enron's overcharges after June 25, 2003. Inslee and the others want to push that date back to 2000.

The PUD last month released transcripts and tapes of day-trading conversations about price gouging that included references to shutting down generators to reduce available electricity and then later adding power to transmission lines to create congestion. Both were used to artificially inflate prices, the PUD claims.

All of the documents are part of the materials received from the U.S. Justice Department after the FBI seized tapes and financial records during an investigation into Enron's tactics. Justice agreed to provide the PUD with copies of the tapes in exchange for written transcripts.

Enron has declined to comment on the documents and transcripts, saying only that it would continue "to cooperate fully with all investigations."
 
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The PUD hopes the new documents, as well as tape-recording transcripts in which Enron day-traders joke about price-gouging schemes, will persuade the FERC to nullify a contract that Enron claims the Snohomish County utility illegally canceled.

The PUD ended a nine-year contract with the electricity marketer in November 2001, shortly after evidence emerged that suggested manipulation was causing West Coast blackouts and high energy prices. The utility claims it should not have to honor the contract because of the alleged price gouging. Enron is suing the PUD to collect a $122 million cancellation fee to help pay its bankruptcy creditors.

Unless FERC, which is responsible for overseeing the nation's wholesale energy market and regulating interstate trade in electrical energy, rules that Enron contracts were based on price-gouging tactics, the PUD could be forced to pay the $122 million, which would cost each PUD customer close to $420, Gianunzio said. The PUD has about 290,000 customers.

The new documents also provide evidence that should allow other utilities hurt during the West Coast energy crisis to make renewed claims against Enron for part of a $3 billion refund account that FERC controls, Cantwell said.

The PUD has claimed FERC members have worked to quash the release of information related to the Enron scandal.

FERC spokesman Bryan Lee yesterday said the accusation is baseless.

"Obviously, the staff commission will carefully review all the material presented to us and then determine what new information, if any, is contained in it," Lee said.

Christopher Schwarzen: 425-783-0577 or cschwarzen@seattletimes.com

Copyright © 2004 The Seattle Times Company

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