http://www.snopud.com/?p=2647

New Evidence Against Enron (2/3/05)

PUD Evidence Shows Schemes Crossed Canadian Border & Known by Senior Execs
Enron Broke Energy Dept. Order, Took Plant Offline During Calif. Blackouts

Snohomish County Public Utility District (PUD) today publicly released a new set of evidence showing Enron energy traders fabricated repair needs in order to take a Nevada power plant offline during the height of power blackouts in California in early 2001. The evidence also highlights illegal gaming schemes that crossed into Canada and involved senior Enron officials. PUD evidence reveals that Enron’s market manipulation started at least two years prior to the western energy crisis as part of a premeditated plan to reap unjust profits from western consumers. The evidence was filed this week at the Federal Energy Regulatory Commission (FERC) as part of the PUD's efforts to void a $122 million lawsuit by Enron against the PUD.

“Beyond the illegal nature of Enron's gaming of the energy market, its insensitivity to human suffering is reprehensible,” said PUD General Counsel Michael Gianunzio. “Countless consumers and businesses lost thousands of dollars during blackouts. This new evidence reaffirms that FERC should require Enron to disgorge all illegal profits and to void the $122 million termination payment that Enron is seeking from the PUD.”

“The fact that Enron would jeopardize the health and safety of Western citizens to chase profits in the energy market is disgraceful,” said U.S. Senator Maria Cantwell (D-Wash.). “But it’s not just disgraceful on a human level—it’s also illegal, and FERC needs to do its job. The more we learn about Enron’s role in the Western power crisis, the more insult is added to the substantial economic injury we suffered in the Northwest. At the very least, FERC needs to ensure that the victims who paid the price for Enron’s schemes the first time around aren’t forced to pay a single penny more.”

On January 17, 2001, Enron traders concocted false repairs for a Las Vegas power plant – making power unavailable that would have been delivered to California – on the very same day that supplies were so tight that Northern California experienced a Stage 3 power emergency and rolling blackouts hit as many as 2 million consumers. By taking the plant offline, Enron was also in direct violation of an Emergency Power Order by U.S. Energy Secretary Bill Richardson that required power generators to make power available to California.

Telephone transcripts between Enron and the Las Vegas plant confirming the effort to falsify repairs read as follows:

Bill: Ah, we want you guys to get a little creative.
Rich: OK.
Bill: And come up with a reason to go down.
Rich: OK
Bill: Anything you want to do over there? Any -
Rich: Ah-
Bill: Cleaning, anything like that?
Rich: Yeah, Yeah. There's some stuff we could be doing.

Other PUD evidence indicates that Enron’s exploits weren’t limited to the United States. A scheme called “Project Stanley” was used in Alberta, Canada in 1999, which inflated energy prices by colluding with other energy marketers. Knowledge of the illegal scheme goes to the very top of the Enron organization, showing up as a reference on former CEO Jeffrey Skilling’s calendar on at least two dates. And an internal Enron file includes a client reference for Project Stanley listed as “Office of the CEO.” Project Stanley inevitably affected western energy markets in the U.S. as the markets are closely correlated.

One telephone transcript indicates that Tim Belden, head of Enron’s Portland trading office and John Lavorato, who led the Project Stanley project for Enron, were both well aware of the illegal nature of the activities. A section of the transcript reads:

John: I’m just ah - f***, I’m just trying to be an honest camper so I only go to jail once.
Tim: Well, there you go. At least in only one country (laughs)
John: Yeah, f***, this isn’t a joke. I’m a tide -- nobody else seems to be concerned anymore about, except me.
Tim: Yeah

Beyond the activities in Canada, Enron traders tested gaming techniques as early as May 1998, creating imbalances in the California market as a result of loopholes it discovered in the system. Another illegal scheme in 1999 dubbed “Silver Peak” involved over-scheduling load in California; it was not caught by state energy officials. These pilot programs, tested before the western energy crisis, gave Enron traders a chance to refine skills prior to the dysfunctional energy market of 2000-2001.
PUD officials pointed to the new information filed this week at FERC as further evidence supporting its effort to void the termination fee claimed by Enron. FERC staff recommended to the FERC commission earlier this week that Enron should disgorge up to $1.8 billion in unjust profits; the matter will be reviewed by an administrative law judge and FERC commissioners.