California lawmakers say Enron memos provide ammunition for refunds, criminal probes
Wednesday, May 8th 2002, 12:00 am
By: News On 6
SAN FRANCISCO (AP) _ Armed with a cache of Enron Corp. memos discussing devious ways of manipulating California's energy market, state officials are gearing up for an effort to recoup billions of dollars in losses suffered during its power crisis.
Gov. Gray Davis joined U.S. Sens. Dianne Feinstein and Barbara Boxer in asking U.S. Attorney General John Ashcroft to open a criminal investigation into the behavior outlined in the Enron memos.
``Through its greed and possibly illegal manipulation, Enron did incalculable damage to California's economy _ and thereby to the national economy,'' Davis wrote in a letter Tuesday to the Federal Energy Regulatory Commission, the chief regulator of power wholesalers.
The Enron memos represent ``a smoking gun connected to a wagon filled with smoking guns,'' said Mike Aguirre, an attorney representing California and several other groups in suits against Enron and five other major power providers.
The memos describe how Enron manipulated California's deregulated electricity market by using complex strategies bearing sinister names like ``Death Star'' _ a reference to the evil empire in ``Star Wars.''
One practice, called ``Ricochet,'' allowed Enron to send power out of California and then resell it back into the state to avoid price caps that applied to transactions solely within California.
Any refunds made to California would provide a measure of satisfaction to consumers and small businesses that are paying dramatically higher prices today than they were before California deregulated its electricity market in 1998.
``We've all been cheated, but I don't think there's anything I can do about it,'' said Menashe Gamliel, the owner of a Los Angeles dye house whose monthly power bill rose from $11,000 to $26,000 last summer.
California lost billions of dollars in 2000 and 2001 as it suffered through rolling blackouts in a power crunch blamed in part on soaring wholesale prices and the state's attempt at deregulation.
Davis and other frequent critics of California's power wholesalers are convinced Enron wasn't the only participant in the alleged scheme. The Enron documents said other power wholesalers relied on similar strategies.
The references made to other energy traders in the Enron memos shouldn't be believed, said Gary Ackerman, executive director of the Western Power Trading Forum, a Menlo Park trade group.
``It's like catching one insider trading in the stock market and then concluding that all the prices on the stock exchanges must have been wrong,'' Ackerman said.
California Attorney General Bill Lockyer said his yearlong investigation into possible collusion and price fixing in the state's power market is continuing.
``The Enron documents would appear to confirm some suspicion of market manipulation,'' said Sandra Michioku, Lockyer's spokeswoman. ``But they will need to be looked at more closely.''
The strategies outlined in the memos required extensive trading in other states that may have contributed to sharply higher power prices in the Pacific Northwest, Arizona and Nevada during 2000 and 2001.
The documents substantiated ``what we have known for a long time,'' said state Sen. Joseph Dunn. ``I compare it to a jailhouse confession,'' he said. ``Now the jig is up.''
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