Power Woes Raise Questions Over Control of Gas Pipelines March 26, 2001 By RICHARD A. OPPEL Jr. and LOWELL BERGMAN Many industry officials question whether regulated pipeline companies are able to favor unregulated sister companies that trade natural gas and are free to maximize profits.

After a contentious hearing at the end of May in which the FERC administrative law judge questioned the veracity of a top El Paso executive, El Paso's Chairman, William Wise, was called to testify about the issue. Last week another El Paso executive confirmed that the company did not make all its capacity available to potential customers. The complaint filed by the California PUC and joined by PG&E and Southern California Edison--California's largest utilities--could result in massive refunds to the state and fines against El Paso. The judge's ruling is expected on June 30th. That ruling will be reviewed by the commissioners of the FERC.

		UPDATE
		On September 23, 2002, the FERC administrative law judge ruled that the El Paso Corporation had engaged in "the unlawful exercise of market power." It is the first ruling by a federal official concluding that there was widespread manipulation of the California energy market by suppliers. Judge Curtis L. Wagner determined that the El Paso had used only 79% of the capacity of its pipeline, which, he said, "shows a clear withholding of substantial capacity" which contributed to rising gas prices in the California. The decision will be reviewed by the FERC commissioners, and possibly a federal appeals court, if the commission upholds the ruling.

		Other Reports
		Energy Company Chairman Testifies on California Sales (Bloomberg News) The chairman of the El Paso Corporation, William A. Wise, shed some light on a transaction that California officials say was used to drive up natural gas prices in the state. Natural gas price squeeze: Report says supplier manipulated market (San Francisco Chronicle) How Texas firm outfoxed state, PG&E (San Francisco Chronicle)

			Power Concern Offers California a Secret Deal May 2, 2001 By JEFF GERTH and LOWELL BERGMAN Duke Energy, a power-generating company accused of overcharging customers millions of dollars during California's year-old energy crisis, has secretly offered Gov. Gray Davis a deal that it hopes will solve its legal problems while helping to calm the state's chaotic electricity markets.

Duke subsequently released some of the documents to the public and posted them on their web site.

In a March 23 letter to the Governor's office, Duke's attorneys wrote that Duke's average price for sales in California during 2000 was $77.47/megawatt hour and that the company, "by and large, was not a significant recipient of the exceptionally high prices" which occurred in the California markets after April, 2000. However, the Charlotte Observer and the San Francisco Chronicle subsequently reported that in January 2001, the company sold electric power to California at $3,880 per megawatt hour.

California officials say investigations of the energy generators, including Duke, are ongoing.

		Other Reports
		How energy giant tried to cut a deal (San Francisco Chronicle)

			Power Trader Tied to Bush Finds Washington All Ears March 25, 2001 By LOWELL BERGMAN and JEFF GERTH Enron, the nation's largest electricity trader, has become close enough to the Bush administration to possibly have influence on federal energy policy.
			Senator Calls for Hearings Into Energy Regulators' Moves May 26,2001 By CHRISTOPHER MARQUIS Accusing federal regulators of not doing their job,Senator Dianne Feinstein called today for hearings into possible improprieties between members of the Federal Energy Regulatory ommission and private energy interests.

Also, the swing in control of the Senate from Republicans to Democrats raises the probability, according to sources, that Senator Joseph Lieberman will soon announce Senate hearings first called for by Democrat Dianne Feinstein of California. The hearings would focus on the FERC and its enforcement record in the electricity and natural gas markets. Spurred by another New York Times/FRONTLINE story about the FERC and the lobbying of Enron Chairman Ken Lay, the hearings are expected to look into the relationship of energy suppliers, generators and marketers to the commission.

		Other Resources
		Governor Davis letter to the FERC In a letter to FERC Chairman Curt Hebert, Davis criticizes FERC for refusing to institute wholesale price caps, and says that although he applauds the FERC's order that the power wholesalers refund the California utilities for overcharging, "these refunds, if ultimately made, represent a tiny fraction... of the overpayments made in a wildly dysfunctional market." Davis threatens to sue regulators to get price limits (San Francisco Chronicle)

The steep price rises in the California electricity market spawned investigations by the California Public Utilities Commission into the "ramping" of power plants - the practice of manipulating the output of electricity plants by stopping and starting production to create artificial shortages. Investigators are looking into whether power generators game the system by increasing and decreasing a plant's output to maximize profit instead of to fit California's energy needs. The state PUC and the state attorney general are also investigating a rash of plant "outages" that plagued California this past winter. One economist for the state power authority, the ISO or Independent System Operator, says the outages occurred at a rate five times the normal pattern. Taking plants completely off-line is another alleged practice that was used to keep prices high.

The energy companies mentioned in the outage and ramping reports, including Duke, Reliant and Dynegy, vigorously deny the charges. They claim that the energy crisis is forcing them to run their plants flat out, causing them to skip scheduled maintenance on the plants and causing breakdowns, which in turn is why the plants are sometimes offline. The California Attorney General and PUC investigations have been supplemented by ongoing hearings in the state legislature. For the first time, the FERC has also begun to take a more active role in the investigation of possible manipulation of supply.

		Other Reports
		Power juggling ramped up price; Insiders say manipulation also strained equipment (San Francisco Chronicle) Power plant 'ramping' to be probed; State senators also expected to file suit, charging federal regulators with failing to ensure fair rates (San Francisco Chronicle)

			Some Evidence of Overcharges March 23, 2001 By JEFF GERTH California utilities paid $6.2 billion above competitive prices for wholesale electricity over the last 10 months, according to estimates filed today by the operators of the state's power grid.

In another twist, Governor Davis accused California's municipal utility districts, which are basically city-owned power companies and operate independently of the ISO, of charging as much or more for their excess electricity as the out of state power generators. Davis says the municipal utilities should provide the power they do not need for their citizens to the state at cost, not at the premium the other power generators are charging. If they refuse, he is threatening to seize their excess power. The municipal utilities expressed shock and outrage at the threat and noted that Davis' chief energy advisor is David Freeman, the former head of Los Angeles' municipal utility. Private generators point out that the Los Angeles Department of Water and Power, the federal government's Bonneville Power Administration and Canada's B.C. Hydro have all been named by the FERC as among those generators that overcharged California.

		Other Reports
		Energy Cost Study Critical Of Public Agencies Too (Los Angeles Times) Municipal utilities warned Governor says he'll seize excess electricity if prices don't come down (San Francisco Chronicle) Municipal utilities lambaste Davis threat to seize power (San Francisco Chronicle)

In March of this year, the Supreme Court agreed to hear a case involving a division of Enron, Enron Power Marketing against the Federal Energy Regulatory Commission (FERC). This case involves Enron's longtime goal of opening up the interstate transmission grid--the high-powered electrical power lines that criss-cross the country--to all parties. Enron claims the FERC has regulatory control over the transmission grid, and therefore, the obligation to force companies with regional control over some power lines to open them up to competition. Enron believes the power grid should work like the interstate highway system, and that FERC has the authority to regulate it. At the same time the court agreed to resolve a competing case brought by the state PUCs against the FERC and its order mandating that transmission lines should be part of its policy of "open access."

The FERC Order 888 does not go far enough according to Enron. The current chairman of FERC Curt Hebert does not believe that FERC has the statutory authority to force states to provide "open access" to their transmission lines and believes their participation in what are called "regional transmission organizations" should be voluntary. Enron and the presumptive new chairman of the FERC Pat Wood maintain the FERC already has that authority.

		For more information
		U.S. Supreme Court Docket Sheet U.S. DC Circuit Court of Appeals opinion in 1999