Utility Exposes Enron Greed at Its Core
Exclusive Tapes Portray Lust for Profit, Lack of Concern for Consumers
washingtonpost.com
By Blaine Harden
Washington Post Staff Writer
Tuesday, March 1, 2005; Page E01
EVERETT, Wash. -- Utility companies usually don't get fan mail, especially when they have hiked electricity rates 50 percent in the past four years and disconnected record numbers of customers for failure to pay bills.
But the small, publicly owned utility that serves this town north of Seattle has become a West Coast hero by goring the bankrupt carcass of the disgraced Enron Corp. and spilling buckets of deliciously embarrassing blood.
It has flowed in the form of vulgar and cynical chitchat by Enron energy traders -- thousands of hours of it, all recorded on tape. The taped conservations have added a graphic new dimension to public understanding of the company's record of greed, callousness and complicity in the western power crisis of 2000 and 2001. Traders gloat on one tape about jacking up the electricity bill of "Grandma Millie." On another, they scheme to shut down a Nevada power plant in the midst of rolling blackouts in California.
In the litigious aftermath of Enron's bankruptcy, Snohomish County Public Utility District pushed to obtain the tapes over federal objections, exclusively transcribed them and starting last summer has gleefully fed transcripts of Enron's skulduggery to courts and the news media.
The release of the transcripts is part of a legal and public relations strategy by Snohomish that has deepened Enron's humiliation, put pressure on federal energy regulators (who didn't bother listening to the tapes until after the Snohomish utility released them to the press) and may save about $420 for each of the utility's 295,000 customers.
"I just want to say, 'You guys rock!' " David Roberts, one of those customers who lives here in Everett, wrote this month in an e-mail to the utility's legal department
"Please excuse me for using profanity, but I hope you nail those rat [expletive] to the wall!" wrote Jill Southworth, a customer from nearby Lynnwood, in another recent e-mail.
"Thank you again for your continued battle to expose Enron for the financial terrorists they are," wrote Jillian Johnson from La Crescenta, Calif. "You are our heroes."
A spokeswoman for Enron had no comment, other than to say the company is cooperating with the federal probe.
The Federal Energy Regulatory Commission (FERC) today will post transcripts on its Web site of thousands of hours of taped conversations by Enron energy traders, according to spokesman Bryan Lee.
Snohomish has a selfish motive in its crusade to publicize the cupidity of Enron. It is trying to extricate itself from a costly, nine-year contract it signed in January 2001 with the Houston-based energy company.
That was before Enron's collapse, but in the middle of the West Coast power crisis. The spot-market cost of regional power had spiked more than a hundred-fold due to drought in the Northwest, regulatory dysfunction and -- as was later discovered -- widespread manipulation of the electricity supply by power traders like Enron.
Before the tapes were released, Timothy N. Belden, former director of Enron's West Coast power trading unit, pleaded guilty to a criminal conspiracy charge related to manipulating energy prices to benefit Enron financially, as did Jeffrey S. Richter, another trading official. John M. Forney, another of Enron's onetime top energy executives, pleaded guilty to conspiracy last August.
The deal with Enron committed the utility to buy power at three times the cost of any previous long-term contract and about four times the historical rate for electricity in the Pacific Northwest. It led to rate hikes here that overwhelmed low-income people, closed factories and forced cutbacks in local schools.
Everett School District cut its electricity consumption 12 percent in 2000 but still had a nearly 100 percent increase in power costs. To pay the bill, it cut the school budget by almost $1 million, equal to annual spending for textbooks or the salaries of 15 teachers. Across the West, the power crisis reduced economic growth by $35 billion, cost nearly 600,000 jobs and helped deepen a recession, according to a peer-reviewed economic study.
When Enron began to unravel in late 2001, lawyers from Snohomish terminated the high-priced contract. It stopped sending money to Enron and found cheaper power elsewhere. "That money would have disappeared into a bankruptcy," said Eric Christiansen, assistant general counsel for the utility.
Although mired in bankruptcy and essentially out of the energy business, Enron struck back. It sued Snohomish, demanding $122 million for profits it would have made had the utility honored its contract.
In response, Snohomish went after the tapes, which had been seized by the government in 2002. They existed because energy companies like Enron routinely record the rapid-fire, mostly verbal deals that traders make on the phone to balance a region's ever-changing need for electricity.
Neither Justice nor FERC had heard them. Federal officials have said they didn't listen because they didn't have the money to pay for transcription.
When Snohomish asked if it could listen, the government objected, citing the ongoing criminal investigation. Finally, a judge ordered the tapes released to the utility.
Snohomish made an "educated guess" that the tapes would contain evidence of Enron market manipulation that amounted to fraud, according to Christiansen, a former FERC trial lawyer who came up with the plan. He said that revelations of fraud would justify the utility's decision to cancel its Enron contract and would absolve it of responsibility to pay any of the $122 million.
Snohomish has spent about $200,000 in the past year, hiring a team of 10 transcribers to sit in a windowless office in Santa Cruz, Calif., and listen to more than 2,800 hours of recordings. The first batch of transcripts was released last June. It included profanity-laced conversations among Enron traders chortling about ripping off "poor grandmothers." The second batch, released at the end of January, showed traders conspiring to close a functioning power plant during a period of severe electricity shortages in early 2001.
The revelations, however, have yet to end a dispute about whether the utility should have to pay Enron $122 million. The question is still before a federal administrative judge, who is expected to submit his decision to FERC commissioners in the fall. FERC, so far, has not let the utility off the hook.
"It remains to be seen whether a court is going to be persuaded because of a tape of some energy trader with a locker room mentality going over the chaos he created," said FERC spokesman Lee. "It is understandable that sentiment against Enron should be to take them and hang them from the nearest tree. But the commission has an obligation to render a judgment based on due process."
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