Feds Suggest Enron Contracts Were Illegal
Saturday March 12, 5:40 am ET
By Gene Johnson, Associated Press Writer
Federal Regulators Suggest Enron Contracts Were Illegal, Handing Victory to Utilities
[EDIT: About time. I wonder if any of the big GOP donors will ever get meaningful jail time for their actions. Doubtful. Just a few apples.... lol]
SEATTLE (AP) -- Government regulators handed a major victory to western utilities and cities trying to get out of exorbitant contracts they made with disgraced energy giant Enron Corp. during the power crisis of 2000-01.
In a six-page order issued Friday evening, the Federal Energy Regulatory Commission determined that Enron was engaging in illegal activity at the time it entered in the contracts. It was the first time the commission acknowledged that the contracts were signed under fraudulent pretenses.
The regulatory agency said a hearing should be held to determine whether Enron can collect profits it would have received had those contracts been fulfilled. The hearing is expected in May, followed by FERC's final decision late this year.
Utilities and cities ended their contracts with Enron or watched as Enron terminated them when the company's web of fraudulent accounting was revealed in late 2001. They include the Snohomish County Public Utility District in Everett, about 30 miles north of Seattle; Nevada Power Company and Sierra Pacific Power Company in Nevada; and the California cities of Palo Alto and Santa Clara.
When Enron went bankrupt, it sued for the money it would have made had the contracts been fulfilled. Enron sought $300 million from the Nevada companies, and $122 million from the Snohomish utility district, which in January 2001 signed a nine-year contract with Enron for power that was four times as expensive as usual.
To come up with $122 million, the Snohomish PUD would have to collect $400 per customer. Rather than raise the money, the utility district went looking for evidence of illegal activity at Enron. It searched through thousands of pages of Enron documents and paid to transcribe hundreds of hours of taped conversations involving Enron traders.
On the tapes, traders joked about stealing money from California grandmothers and about the possibility of going to jail for their actions.
Early this year, Snohomish's investigators determined that Enron began honing its schemes to manipulate the market in 1997 -- well before rolling blackouts hit California.
Armed with the new evidence, the utility district went to FERC and asked to get out of its contract with the fallen energy giant. Friday's ruling brought the utility closer to that goal.
"This is a very significant order for us," Snohomish PUD lawyer Eric Christensen said. "We've now put in place all the essential legal groundwork to make sure Enron is not able to collect any further unjust profits from us."
FERC has already demanded that Enron give up $32.5 million in unjust profits, but Snohomish's investigators have estimated that the company gouged Western ratepayers for at least $1.1 billion.
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