Boxer, Feinstein seize on 'smoking gun' note
White House actions mirrored Enron's ideas
David Lazarus, Chronicle Staff Writer Thursday, January 31, 2002
California's two senators pledged yesterday to turn up the heat on the White House after seeing what one called a "smoking gun" memorandum that highlights the close ties between Enron and the Bush administration.
Sen. Dianne Feinstein, D-Calif., said the memo shows that Enron was more concerned with "escalating gas and electricity prices, from which it benefited,
than in helping to fix the broken energy market."
As reported in yesterday's Chronicle, the memo was handed by former Enron Chairman Ken Lay to Vice President Dick Cheney when the two met in April to discuss a response to the California energy crisis.
Portions of the memo are closely reflected in the plan Cheney subsequently developed to serve as the administration's official energy policy.
"This is the smoking gun," declared Sen. Barbara Boxer, D-Calif.
She said she will confront Lay with the document when he appears before the Commerce Committee on Monday. "We're going to go over it in great detail," Boxer said.
She also submitted the memo to Congress' investigative arm, the General Accounting Office, for inclusion in probes into events leading up to Enron's bankruptcy.
For her part, Feinstein said that "it is a shame that this company was able to make a case against temporary wholesale price caps privately to the vice president, while at the same time the opposite viewpoint wasn't being heard."
RESIST PRICE LIMITS
The Enron memo outlines actions that "need to be taken" by the administration. In particular, it urges Cheney to resist imposing price ceilings requested by California officials to curb soaring electricity costs.
It also stresses that implementation of all of Enron's recommendations would provide the best remedy for California's troubles. This position was shared by most other industry figures.
"During that time, every official in California was knocking on doors in Washington trying to get help," said Loretta Lynch, president of the state Public Utilities Commission. "Now we know why Washington let us down."
The White House acknowledges that aspects of the memo resemble portions of Cheney's energy plan. But it maintains that this is just coincidental.
"The national energy policy is based on sound science," said Jennifer Millerwise, a spokeswoman for Cheney. "Nothing in there benefits a specific company or interest group."
She and other White House officials refused to say whether the memo is included in notes that Cheney is currently withholding from congressional investigators.
GAO TO SUE
The General Accounting Office said yesterday that it will take the unprecedented step of suing the White House for access to Cheney's notes.
Rep. Henry Waxman, D-Los Angeles, called the Enron memo "a significant development," and said "it raises serious questions about Enron's influence on the process and underscores the need for the administration to provide all records to GAO."
Doug Heller, a spokesman for the Foundation for Taxpayer and Consumer Rights in Santa Monica, said the memo indicates that Lay served in more than an advisory capacity in shaping the Bush administration's energy strategy.
"This memo lays the groundwork for the national energy policy," he said. "It's as though Enron gave the vice president the blueprint for national energy policy."
Cheney spoke with numerous energy experts before drafting his plan. But there is no evidence to date that any of the vice president's other sources played as substantial a role in fleshing out the administration's position.
For example, the Enron memo instructs Cheney to "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."
Cheney's energy plan concludes that "American consumers are best served when markets function freely. Free markets allow prices to reflect changes in demand and supply, and avoid subsidies, price caps and other constraints."
The Enron memo encourages legislation that would permit federal regulators "to delegate authority (to an independent organization) to develop reliability standards and enforce those standards."
Cheney's plan calls for regulators "to improve the reliability of the interstate transmission system and to develop legislation providing for enforcement by a self-regulatory organization subject to its oversight."
POLITICAL MUSCLE
Mike Florio, senior attorney for The Utility Reform Network in San Francisco, said that even though other energy companies advocated similar measures, Enron had the political muscle to see them enacted.
"Enron was the political and intellectual leader of the pack," he said. "It laid down the law and others followed."
State Senate President John Burton, D-San Francisco, said the memo all but places Enron in bed with Republican officials. "It always appeared that the Republican Party was a wholly owned subsidiary of Enron," he said.
Even some Republicans are starting to criticize the White House's behavior. Rep. Doug Ose, R-Sacramento, said Cheney should come clean on his meetings with Lay and other Enron officials and try to put the matter behind him.
E-mail David Lazarus at dlazarus@sfchronicle.com.
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