Bush turned a blind eye to 'pirates'
The Atlanta Journal Constitution
Opinion
Jay Bookman is the deputy editorial page editor. His column appears Thursdays.
accessatlanta.com
Funny how things happen
A year ago at this time, California officials were begging federal
officials for protection against energy marketers -- "pirates," as Gov.
Gray Davis called them -- who were allegedly manipulating the state's
electricity market and causing annual energy costs to triple in less
than a year, from $9 billion to $27 billion.
Everyone knew the situation was dire. Utility bills were bankrupting some
companies, and others were leaving the state. Rolling brownouts had hit. Over the
holidays, residents had even been asked not to plug in their Christmas lights, to
save energy.
The response from the Bush administration, though, was brutal. "Tough, it serves
you right," captures the tone of the message perfectly. Officials from the president
on down suggested that what California needed instead was a little bit of market
discipline.
Besides, they were told, price caps would never work. They would make the
problem much worse, they would drag other Western states into California's mess.
They just weren't . . . American.
With the benefit of a year's hindsight, though, Davis was right. He and his state were
indeed being ravaged by pirates -- well-connected, smooth-talking buccaneers, out
to squeeze California ratepayers for every penny they could.
Newly released memos written in December 2000 by attorneys for Enron lay out in
candid, almost cheerful, detail the various scams the company was using to milk
the California market.
"This strategy appears not to present any problems, other than a
public relations risk arising from the fact that such exports may have
contributed to California's declaration of a Stage 2 Emergency
yesterday," one memo reads.
"The net effect of these transactions is that Enron gets paid for moving
energy to relieve congestion [on transmission lines] . . . without
actually moving any energy or relieving any congestion," it brags in
relating another scam.
The strategies had nothing to do with such free-market virtues as competition or
matching demand with supply. They amount to lying, cheating and stealing. The
memo also describes how some of Enron's machinations were taking place in
markets beyond the reach or observation of California officials, where only federal
regulators could conceivably have caught them.
If only they'd been looking.
Unfortunately, while federal officials turned a deaf ear and blind eye to California's
plight, they were listening quite intently to people such as Ken Lay, Enron's top
executive. They listened when Lay recommended two appointments to the Federal
Energy Regulatory Commission, the agency charged with overseeing his industry.
They listened when Lay, in a private meeting with Dick Cheney, gave the vice
president an eight-item "want list."
Among the top priorities: Don't allow price caps on the California energy market.
That was in April, 2001. By June, with legislation moving in Congress to force price
caps in California, federal regulators grudgingly moved on their own. And in rapid
succession, interesting things began to occur.
The "energy shortage" disappeared. Prices began to fall sharply. Contrary to
warnings by the administration, the crisis did not spread to other states.
In August, two months after imposition of the price caps that Lay had lobbied so
hard against, his financial house of cards known as Enron began to collapse.
Without that collapse, we would never have known what had happened. The internal
memos describing Enron's manipulations were voluntarily released by newly hired
Enron officials acting as caretakers for what remains of the company.
More ominously, the internal Enron memos claim that other energy-marketing
companies were employing identical strategies in California, and in fact had
developed a common terminology to describe the various scams.
If that proves true, this scandal has a long way to go yet. |
