Tapes Reveal Enron's Power Plant Rigging
Enron Corp. traders conspired to shut down a healthy power plant as blackouts rolled across California in early 2001, according to documents released Thursday.
In the brash language that has become a familiar coda to the electricity crunch, Enron traders and others were captured discussing in e-mail messages and telephone conversations how they could profit from the state's problems.
In one transcript released Thursday, an Enron trader identified only as Bill called it "a good plan" to shut down a small Las Vegas power plant on Jan. 17, 2001, under the guise of "checkin' a switch on the steam turbine." Enron employees also suggested that their plans to exploit Western energy markets predated the meltdown of 2000 and 2001, which brought record electricity prices and emergency blackouts.
I've heard the same sort rumors about oil supply. A regular pipeline allocation destined for the Midwest at key times, like when the news is bad from the Middle East, is diverted to Mexico. Of course the per barrel price is volatile, but that price increase requires weeks to arrive.
So we have gas prices ratcheting up and down to the tune of the news. Average price not surprisingly is gradually edging up towards $2 per gallon. Any bets on whether this reallocation is related to price manipulation? It would be a great way to squeeze out the record profits they report.
Do you think the Bush Administration would look into this? Hardly....
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http://www.latimes.com/business/la-fi-enron4feb04.story
Tapes Reveal Enron's Power Plant Rigging
Transcripts detail how electricity traders conspired to shut down smooth-running generating facilities during the energy crisis.
By Jonathan Peterson
Times Staff Writer
February 4, 2005
Enron Corp. traders conspired to shut down a healthy power plant as blackouts rolled across California in early 2001, according to documents released Thursday.
In the brash language that has become a familiar coda to the electricity crunch, Enron traders and others were captured discussing in e-mail messages and telephone conversations how they could profit from the state's problems.
In one transcript released Thursday, an Enron trader identified only as Bill called it "a good plan" to shut down a small Las Vegas power plant on Jan. 17, 2001, under the guise of "checkin' a switch on the steam turbine." Enron employees also suggested that their plans to exploit Western energy markets predated the meltdown of 2000 and 2001, which brought record electricity prices and emergency blackouts.
The transcripts were among some 100,000 pages of testimony recently submitted to federal regulators by the Snohomish County Public Utility District, a Seattle-area utility that is in a legal battle with Enron.
The Washington utility was allowed by federal investigators — who are looking into the Enron scandal — to retrieve the e-mails and audiotapes from a warehouse owned by Enron. The utility was the source of an earlier set of Enron tapes that proved embarrassing to the Houston energy company, which in December 2001 filed for bankruptcy protection.
That set of tapes, in which traders chanted "burn baby burn" and gloated about inflating costs for "Grandma Millie" in California, inflamed the simmering controversy.
Although the legal significance of the new evidence wasn't immediately clear, it added new dimensions to the picture of Enron as a cynical, manipulative enterprise and brought fresh condemnation from others in the energy business.
"The transcripts that I've got in my hands are extremely disturbing," said Stephanie McCorkle, a spokeswoman for the California Independent System Operator, which runs the electricity transmission grid for much of the state. "It's extremely upsetting to the ISO to look at conversations of this type."
She described as "abhorrent" any intentional plan to take a unit out of service in a bid to disrupt the system.
According to the newly released transcript, Enron traders on Jan. 16, 2001, hatched a plan to take an Enron-controlled power plant in Las Vegas off-line the following day. In a phone call, "Bill of Enron" informed "Rich," a Las Vegas power plant employee, that "we want you guys to get a little creative … and come up with a reason to go down."
The shutdown, he added, was "supposed to be, ah, you know, kinda one of those things."
In an effort to cooperate, Rich responded: "OK, so we're just comin' down for some maintenance, like a forced outage type thing?"
"I think that's a good plan, Rich," Bill said. "… I knew I could count on you."
The 52-megawatt plant was out of operation for several hours the next day, when rolling blackouts plagued Northern and Central California and about half a million homes and businesses lost power. At that same time, U.S. Energy Secretary Bill Richardson had ordered suppliers to make power available in the West.
Some observers viewed the taped conversation as a window into Enron's broader strategic approach.
Through contracts with more than a dozen power plant owners, including municipal utilities in Glendale and elsewhere in California, Enron controlled 3,500 megawatts of electricity as of August 2000, according to documents uncovered by the Federal Energy Regulatory Commission in its investigation of Enron. That was enough electricity to serve more than 2.6 million homes.
"The fact that Enron would jeopardize the health and safety of Western citizens to chase profits in the energy market is disgraceful," Sen. Maria Cantwell (D-Wash.) said Thursday. "But it's not just disgraceful on a human level — it's also illegal."
Earlier this week, staff of the Federal Energy Regulatory Commission recommended that Enron return almost $1.7 billion in profit gained through improper energy trading dating back to 1997. Although that recommendation to an administrative law judge suggests a harder line on Enron by FERC, critics contend that federal regulators still have not been strict enough in response to misconduct in the Western energy marketplace.
Enron, which is in Chapter 11 bankruptcy proceedings, offered little reaction Thursday to the tapes. "We're continuing to cooperate with all ongoing investigations," spokeswoman Jennifer Lowney said. "We are not going to comment on the contents of the tape or the press conference."
Politicians and consumer advocates have long alleged that energy suppliers made calculated decisions to hold back power in 2000 and 2001, but suppliers have emphatically denied it. In one notable example, a federal grand jury indicted Reliant Energy Services and four of its managers in April in connection with an alleged scheme to shut down power plants to force up electricity prices.
As part of its case against Enron, the Washington utility found a May 6, 1998, Enron memo referring to a "PHONY import," another tactic for taking advantage of the energy market. The memo noted that the independent system operator "will call and tell us we're out of balance, so tell them we intend to correct the imbalance in the 'hour-ahead' market. In fact, we really intend to do NOTHING…. "
In response to the disclosure, Cal-ISO officials said Thursday that such tactics would no longer be possible because of reforms that have been implemented since 2002. "There are many practices in place to prevent that type of phony import from happening today," McCorkle said.
Suggestions that Enron's plans to exploit the energy marketplace as much as three years before the 2000-01 energy crisis jarred some officials, who recalled how Enron executives were traveling the country about the same time making a case to deregulate the marketplace.
"Enron put out the most polished presentations, the glossy materials, the things they put out to every policymaker in the West," said Eric Saltmarsh, executive director of California's Electricity Oversight Board.
"To know that it was basically a scam as far back as that says it wasn't just a fraud on the marketplace in 2000 and 2001, it was really a fraudulent ambition in creating what became of the California marketplace," Saltmarsh said. "In that sense, the [marketplace deregulation] was in some respects set up to fail."
In one scheme that Enron dubbed "Project Stanley," company traders were accused of market manipulation in Canada. Canadian officials in 2000 cleared Enron and Powerex Corp., the marketing arm of British Columbia's utility, of bid-rigging charges.
Nonetheless, in an Aug. 4, 2000, conversation, Enron trading executives John Lavorato and Tim Belden discussed the dispute involving traders who worked for Lavorato. The two Enron executives appeared to doubt the project's legitimacy.
Lavorato: "I'm just, ah [expletive] I'm just trying to be an honest camper, so I only go to jail once."
Belden: "Well, there you go. At least in only one country. (Laughs.)"
Lavorato: "Yeah, [expletive] this isn't a joke…. Nobody else seems to be concerned anymore."
Lavorato's lawyer said he was unfamiliar with the conversation and couldn't comment. A lawyer for Belden — one of three Enron traders to plead guilty to fraud charges related to California market manipulation — couldn't be reached late Thursday.
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