The Bush administration, specifically Dick Cheney, was behind the energy price gouging in CA. This is NOT a Clinton legacy: 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.
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.
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