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Friday, February 04, 2005 - Page updated at 12:00 A.M. Tapes hint Enron scheme was wider, longer in scope Times Snohomish County Bureau EVERETT — Enron's power-market gouging schemes geared up before the West Coast energy crisis began, extending its manipulation as far north as Alberta, Canada, according to new information released yesterday by a Snohomish County utility. 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 yesterday that more than 100,000 pages of new evidence and audio-tape transcripts confirm what federal investigators had suspected. The evidence suggests 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. 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." Tim Belden, a former Enron trader convicted of fraud for his involvement in the company's dealings, included comments about market manipulation in performance reviews, while other employees openly talked about the potential for jail time. "I'm just trying to be an honest camper, so I only go to jail once," project manager John Lavorato told Belden in one conversation. "Nobody else seems to be concerned anymore about it, except for me." 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. "There is clear and convincing evidence that market manipulation occurred," Cantwell said yesterday. Seattle City Light says it is owed about $80 million in refunds, while Tacoma Power is due about $10 million. The PUD would like to collect about $40 million, but instead is focusing on efforts to counter a lawsuit in which Enron is seeking a $122 million termination fee. The PUD, saying it shouldn't have to pay, canceled a 9-year contract in 2001, claiming the contract was based on artificially inflated prices.
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, the latest 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, noting the unusually steep increase. "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 plant to shut down, faking a mechanical problem, while California was experiencing rolling blackouts. The Enron staging violated a federal order requiring utilities to operate at maximum because of the impending crisis. FERC staff testified Monday that as much as $1.8 billion in Enron profits might be refunded to West Coast utilities, but with the company in bankruptcy court, questions abound whether any money will reach the Northwest. FERC spokesman Bryan Lee said the commission has a timeline for reviewing all evidence, including the audio tapes, but that it cannot make a ruling until a federal administrative judge's decision in October on potential refunds to Northwest utilities. "Staff has been actively reviewing the Enron recordings for a long time now," Lee said. "There is much to be said about that, but we cannot discuss it since the matter is still pending in court." But Cantwell called on the Senate's governmental affairs committee to investigate how FERC has handled the evidence, saying the federal office continually trails the PUD in its investigative announcements. The PUD has spent nearly $2 million to transcribe tapes, collect evidence and make a case for FERC to consider. Enron officials would not comment directly on the material released yesterday, but said they are continuing to cooperate with federal officials. Christopher Schwarzen: 425-783-0577 or cschwarzen@seattletimes.com
Copyright © 2005 The Seattle Times Company
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