New evidence: Enron was scamming years before energy crunch

Enron geared up its power-market gouging schemes prior to the West Coast energy crisis, extending its manipulation as far north as Alberta, Canada, according to new information released by a Snohomish County utility today.

The Snohomish County Public Utility District, fighting an ongoing legal battle with Enron in federal court and before the Federal Energy Regulatory Commission (FERC), said today more than 100,000 pages of new evidence and audio-tape transcripts confirm what federal investigators had suspected.

The evidence suggests that Enron began practicing market schemes as early as 1997, moving into larger-scale operations the following year - before the West Coast energy crisis erupted in 2000 and 2001.

PUD officials say their review of audio tapes, trading documents and internal memos point to market manipulation that even Enron CEO Jeffrey Skilling was aware of at the time. On at least two occasions, his day calendar makes reference to one or two of the schemes, known by insider names such as "ricochet," "sidewinder" and "deathstar."

While FERC officials say the commission and staff are busy reading the same evidence, Sen. Maria Cantwell, D-Wash., again accused federal regulators of dragging their feet. FERC staff testified Monday that as much as $1.8 billion in Enron profits might be refunded to West Coast utilities that were affected.

The PUD, however, is trying to counter a lawsuit in which Enron is seeking a $122 million termination fee because the PUD canceled a 9-year contract in 2001. The PUD says the contract was based on artificially inflated prices, and it shouldn't have to pay.

While audio tapes and transcripts released last year by the PUD gave the public its first taste of how greedily Enron day traders and executives were milking markets, today's tapes push that evidence back several years. It also extends the breadth of the market manipulation to Canada.

"Project Stanley," named after the National Hockey League's Stanley Cup championship trophy, indicates that Enron used an Alberta, Canada, utility to keep available electricity off the market. The Canadian grid is connected to the West Coast grid, which means energy from there can be purchased by West Coast utilities.

"Prices increased that day [in 1999] by more than $300 a megawatt-hour," said PUD attorney Eric Christensen. "By the beginning of 2000, the tiger was out of the cage."

Enron practiced ways to keep energy off the grid and then cover up how it was done with a second set of accounting books, investigators say. One example is a Jan. 17, 2001, arrangement for a Las Vegas, Nev., plant to shut down, faking a mechanical problem, while at the same time California was experiencing rolling blackouts.

The Enron staging was in direct violation of a federal order requiring utilities to operate at maximum because of the impending crisis.

Cantwell called for a renewed investigation into how FERC has handled the evidence, saying the federal office continually trails the PUD in its investigative announcements. She is asking the Senate's governmental affairs committee to review FERC's procedures.

Enron officials would not comment directly on the material released today, but said they are continuing to cooperate with federal officials.

FERC spokesman Bryan Lee said the commission has a time-line for reviewing all evidence, including the audio tapes, but that it cannot make a ruling until the administrative judge's decision in October.

Christopher Schwarzen: (425) 783-0577 or cschwarzen@seattletimes.com