THE ENRON COLLAPSE
Memo details Cheney--Enron links
Company's suggestions resembled
elements of the administration's
energy policy
While the White House insists that
details of its talks with Enron officials
remain secret, a memo outlining those
discussions reveals the extent to which
the Houston energy giant lobbied to
influence government policy.
The memo, a copy of which was
obtained by The Chronicle, was handed
by former Enron Chairman Ken Lay to
Vice President Dick Cheney last April
when the two met to discuss the
administration's response to
California's energy crisis.
The White House acknowledged last
night that aspects of the memo
resembled elements of Cheney's
energy plan, but it refused to say
whether the document was included in
notes that Cheney now refuses to
divulge to congressional investigators.
The General Accounting Office is
threatening to sue the administration if
it doesn't disclose details of its talks
with Enron officials.
The three-page document contains
eight points spelling out Enron's case
for why federal authorities should
refrain from imposing price caps or
other measures sought by California
officials to stabilize runaway electricity
prices.
A number of the positions in the memo
subsequently made it into Cheney's
energy plan or were reflected in
comments by senior administration
officials.
"Events in California and in other parts
of the country demonstrated that the
benefits of competition have yet to be
realized and have not yet reached
consumers," the memo argues.
"The following actions need to be
taken," it continues, outlining positions
on a series of matters. Some of the
topics, such as equal access to
transmission grids and interconnection
of power networks, are largely technical
in nature.
ENRON FROWNED ON PRICE
CAPS
The key point as far as California was
concerned was whether soaring
wholesale power prices should be
limited or whether such prices were
merely a reflection of normal
supply-and-demand dynamics.
"The administration should reject any
attempt to re-regulate wholesale power
markets by adopting price caps or
returning to archaic methods of
determining the cost-base of wholesale
power," the memo says.
It adds that even temporary price
restrictions "will be detrimental to
power markets and will discourage
private investment."
The memo blames California officials
for having made only "limited progress"
in tackling the state's power woes. It
says that if the administration were to
follow all of Enron's recommendations,
the measures "would mitigate this
crisis."
An Enron spokesman confirmed that
the memo had been given by Lay to
Cheney during their one-on-one talks.
Mary Matalin, an adviser to the vice
president, said Cheney's energy plan
included input from many sources.
"Just because some of the things (in
the memo) are included in the plan
doesn't mean they were from the talks"
between Cheney and Lay, she said.
LIMITS CALLED 'A MISTAKE'
Still, as far as price caps go, the
administration was quick to fall into
lockstep with Enron's opposition to any
federal regulatory moves. "We think
that's a mistake," Cheney said just
weeks after his meeting with Lay.
Nevertheless, federal regulators finally
imposed price limits in June based on
the cost of the least-efficient, and thus
most expensive, generating plant.
Democrats in Washington had
threatened to act on their own if the
regulators did not come up with a
remedy for California's troubles.
Cheney also echoed Enron's position
on the culpability of California's
leaders in exacerbating the state's
energy problems.
"When the problem became obvious
last year, over a year ago, they didn't
respond," he said in May.
Noting that California had experienced
rolling blackouts and the bankruptcy of
its biggest utility, he also said, "I don't
think that's a sterling record of
leadership, I would guess, on their
part."
SHARED FAITH IN
DEREGULATION
To be sure, Cheney, Lay and President
Bush, as well as other industry players,
shared a belief in deregulation well
before the lights went out in California.
But the memo underscores the broad
kinship between Enron and the
administration in drafting official
policy.
Steve Maviglio, a spokesman for Gov.
Gray Davis, said it came as no surprise
that Enron had substantial clout in
formation of the Bush administration's
stance on California's difficulties.
"What the federal government did
during the energy crisis was pretend
that the problem didn't exist and say
that the markets can solve everything,
and that's the same thing Ken Lay told
the governor," Maviglio said.
He added that "the administration was
espousing what Enron was espousing --
that the markets should fix
themselves."
Whatever else, it's extraordinary for a
private company, particularly one
accused by California officials of having
gouged the state with wildly inflated
energy prices, to have played such a
prominent role in the White House's
response to the crisis.
'CONSUMERS SHOULD BE
OUTRAGED'
"If the administration was allowing
Enron to guide its policy during the
California energy crisis, consumers
should be outraged," said Janee
Briesemeister, senior policy analyst at
Consumers Union in Austin, Texas.
"It's not unusual for a company to hand
policymakers their ideas for what
should be done," she added. "Things
break down when policymakers refuse
to admit that they used what was
brought to them by industry."
Cheney's argument, as he told an
interviewer Sunday, is that revealing
details of his talks with Enron would
undermine "the ability of the president
and the vice president to solicit advice
from anybody they want in confidence."
Bush echoed this sentiment a day
later, saying that confidential talks are
necessary to "get good, sound
opinions." He reiterated that stance
yesterday in a meeting with
congressional leaders.
Craig McDonald, director of Texans for
Public Justice, a watchdog group,
called it laughable for the
administration to cast its secrecy as a
defense of high-minded principle.
"All they're fighting for is to keep the
wraps on how much clout Enron had
over Dick Cheney's energy plan," he
said.
San Francisco chronicle
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