Boxer tries to broaden inquiries into Enron; Role in California is focus of request

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The San Diego Union-Tribune

Sen. Barbara Boxer will move this week to broaden the bevy of federal investigations targeting Enron Corp. into the company’s conduct in California’s electricity crisis.

On Monday, Boxer plans to request that the General Accounting Office investigate the extent of Enron‘s in-volvement in the California market, an aspect that she said has received little attention in the capital. The GAO is the official investigative arm of Congress.

Enron stands accused of massive accounting fraud and has admitted inflating earnings for years. The company’s complex and mysterious web of partnerships and offshore subsidiaries is also suspected of serving as a shell for avoiding taxes, hiding losses and enriching insiders.

But before its downfall three months ago, Enron was the premier advocate of deregulating markets for electricity and other commodities.

Boxer said she will ask the GAO to determine if Enron manipulated the California market to create phony electricity shortages and drive up prices, as well as whether the company threw its formidable lobbying clout into blocking federal regulatory relief while the state’s power crisis raged.

The California Democrat said the state needs to understand why federal regulators took little effective action for months during the crisis, which ultimately cost state consumers tens of billions of dollars.

“We need to know if the high prices were needed to keep Enron afloat and is that the reason the Bush administration did nothing,” she said.

The Federal Energy Regulatory Commission determined by the fall of 2000 that power prices in California were unjust and unreasonable, she noted. But the FERC didn’t impose price controls until months later, in the spring of 2001. During that time, prices for electricity consistently stood at levels 10 times higher than pre-crisis levels and peaked at 100 times those levels.

Congressional investigations launched so far are focused on the damage done to investors and employees by Enron‘s meltdown. Boxer and others say the damage to California consumers deserves similar attention.

“For all the damage suffered by Enron investors and employees, there was even more dramatic damage done to California by deregulation, which was largely driven here by Enron,” said Doug Heller, of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

The foundation published a report this month estimating that the California crisis could end up costing state consumers about $70 billion, or more than $2,000 for each resident, including the cost of long-term power contracts. The foundation’s report also concluded that electricity supplies were manipulated during the crisis to create artificial shortages and drive up prices.

Enron was here in the early 1990s pushing deregulation,” Heller said. “The investigation of their collapse should not ignore California.”

A spokesman for Sen. Dianne Feinstein said she is also moving to broaden congressional inquiry into Enron‘s role in California. Howard Gantman, Feinstein’s director of communications, said the senator will ask the Energy and Natural Resources Committee, of which she is a member, to hold a hearing that focuses on the company’s role in the state.

State Sen. Joseph Dunn, D-Garden Grove, who launched an investigation into Enron‘s practices in the state last year, said he would welcome the additional clout of congressional inquiries. Enron has been far and away the least cooperative energy supplier in his investigation, Dunn said, and the company was found in contempt by the state Legislature last year.

“None of them have been picnics in the park, but Enron was by far the worst,” said Dunn, who fears key documents may have already been destroyed.

Dunn said the crisis in the state power market last year was caused by sophisticated traders “gaming” the market to their advantage. The manipulation was required, he said, to fulfill the promise of high profits that Enron and other companies made to investors. Enron was the largest electricity trader in the nation.

“It will require an awful lot of resources and political will to complete this probe,” Dunn said.

A spokesman for an energy industry group said investigations into the California crisis will not uncover any inappropriate conduct. Gary Ackerman, executive director of the Western Power Trading Forum, said the state’s crisis resulted from supply-and-demand factors, with a shortage of inexpensive hydropower available in the state being a particularly damaging factor.

Ackerman referenced a chart on hydropower supplies that he said underscored the point. The source of that data, he noted, was Enron Online.

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