PacifiCorp, PGE detail role in Enron trading
oregonlive.com
PacifiCorp, PGE detail role in Enron trading
05/23/02
GAIL KINSEY HILL
Portland General Electric and PacifiCorp told federal regulators Wednesday that they acted as intermediaries in numerous electricity trades that may have allowed Enron to manipulate markets in California and drive up prices throughout the West.
PGE and PacifiCorp, Oregon's two largest utilities, uncovered the transactions during internal investigations of their trading activities. They said they did not initiate the trades nor engage in any deceptive or illegal practices.
"We certainly were not involved in any way with helping them do this," said Don Furman, senior vice president of PacifiCorp, referring to Enron and other power marketers that initiated the controversial trades.
The Federal Energy Regulatory Commission directed more than 100 utilities and power marketers to conduct the investigations as part of a sweeping review of the events behind the energy crisis of 2000-2001. FERC is trying to determine whether illegal trading activity contributed to a crisis that saw wholesale prices rise to unprecedented levels and blackouts ripple through California.
FERC issued its directive May 8, after receiving Enron memos written in December 2000 that indicated the now-bankrupt energy trader may have engaged in schemes to manipulate markets and drive up electricity prices throughout the West. The memos said other power marketers used similar strategies.
Enron gave its trading practices nicknames such as "Ricochet," "Death Star" and "Get Shorty."
PGE officials said they had no way of knowing they may have helped Enron carry out these strategies, but they speculated that the utility's role as intermediary enabled Enron, its parent company, to complete its Ricochet or Death Star trades.
Enron needed another company's help, knowingly or unknowingly, to execute some of the strategies. For example, under the Ricochet practice, also known as megawatt laundering, Enron would buy electricity from the California Power Exchange at capped day-ahead prices, "park" the power with an out-of-state third-party, then resell it back in California at much higher prices on the real-time market. Death Star, a more complex strategy, also often required a third party.
"We know on 17 days we were an intermediary," said Mary Turina, PGE's vice president for power supply. "We speculate that we could have been used in one of Enron's strategies."
Because PGE is a subsidiary of Enron, state and federal regulations restrict the types of trades the two companies may conduct with each other, Turina said.
PacifiCorp officials pinpointed 767 transactions, made between July 2000 and November 2000, in which the utility served as intermediary in Ricochet trades. Enron Power Marketing, Aquila Inc., Sempra and Williams Energy Services initiated the trades, PacifiCorp said.
PacifiCorp stopped agreeing to the trades in mid-November 2000 amid "growing concern that the transactions might have elements of megawatt laundering," according to PacifiCorp's report to FERC.
"Given all that was going on, we said we want to be squeaky clean," Furman said of the decision to reject such trades.
The utilities received a small fee for acting as the go-between in the trades but made no profit on the trades themselves, PGE and PacifiCorp officials said.
PGE and PacifiCorp were intermediaries in only a small percentage of total trades, utility officials said.
In the reports to FERC, PacifiCorp and PGE addressed one-by-one the various trades described in the Enron memos. The utilities vigorously denied that they initiated or knowingly participated in any of the practices.
"We found absolutely no evidence of deception or market manipulation by PGE," Turina said. "We did an extensive review, and we were in no way engaged in practices that manipulated or could be interpreted to manipulate prices," said Jan Mitchell, a spokeswoman for PacifiCorp.
Both utilities admitted to buying power from California to export out of the state to supply their customers but said they have been conducting such trades for 30 years.
California has complained that Enron and others bought power within the state at capped prices, then sold the electricity to utilities or traders elsewhere for huge profits. The strategy drove up prices and exacerbated shortages, California claims.
Bonneville Power Administration, the Portland-based federal agency that markets power from 29 hydropower dams in the Northwest, also filed a report to FERC. In the 11-page document, it flatly denied engaging in any of the Enron-style trading tactics. BPA couldn't have gotten involved in several of the Enron techniques simply because its involvement in the California market was limited, the agency said.
However, like PGE, Bonneville didn't rule out the possibility that it could have unwittingly played an intermediary role in others' trading tactics, particularly the Ricochet strategy.
"BPA trades with many counterparties and the possibility exists that BPA was unknowingly involved in facilitating 'ricochet' transactions," the agency said. |
