Group Warns of Future Manipulation As a Result of State and Federal Deregulation Laws

Santa Monica, CA — Internal Enron memos released by Federal officials yesterday confirm that California’s energy crisis was artificially created by power company manipulation. Enron and the energy companies and their employees responsible for the $71 billion debacle should be forced to repay the state and then sent to jail, a California consumer watchdog group that has fought deregulation said today.

“The memos vindicate our analysis: there was no shortage, no supply/demand imbalance, last year,” said Harvey Rosenfield, President of The Foundation for Taxpayer and Consumer Rights (FTCR). “Enron used the deregulation law, which the company and its power industry colleagues pushed through the California Legislature, to create artificial shortages and jack up prices. Other companies did the same.”

The first Enron memo, dated December 6, 2000, acknowledges that the company manipulated the market and gamed the system in order to earn millions:

– Enron created apparent shortages in order to get paid for unnecessary power. According to the memo, ” The answer is to artificially increase (‘inc’) the load on the schedule submitted to the ISO.”

– Enron created real shortages by temporarily moving power out of state to increase prices. “Such exports may have contributed to California’s Stage 2 Emergency yesterday.”

– Enron abused apparent congestion of the system to make money for nothing. “Enron gets paid for moving energy to relieve congestion without actually moving any energy or relieving congestion.”

– Enron worked with other power companies to game the system. “Enron‘s traders have used these nicknames with traders from other companies to identify these strategies.”

“Now that we’ve stripped the ‘market forces’ veneer off the so-called energy crisis and exposed it as a crime, we need to put aside the fiction that punishing the corporate entity is enough — and that if it is bankrupt, it cannot be punished more,” said Douglas Heller, FTCR’s senior consumer advocate. “It’s time to go after the people who worked at these companies — from the top executives who designed the heist, to the corporate lawyers who signed off on it and the energy traders who carried it out — and put them in jail. Only that will deter future crimes of this magnitude.”

Energy Industry Must Give Back the $71 Billion It Stole in Phony Energy Crisis

Enron lobbied for deregulation in California, promising, in 1994, that it would, “save about $8.9 billion per year.” But FTCR’s 58 page report: “HOAX: How Deregulation Let the Power Companies Steal $71 Billion From California” shows that deregulation was a license to steal for Enron, the state’s utility companies and other energy firms — which looted $71 billion from California. A copy of the report is available at http://www.consumerwatchdog.org.

The FTCR analysis concluded that Enron and other energy companies used the deregulation law they pushed through the California Legislature in 1996 to create artificial shortages and spike electricity prices. Last year Californians received the largest rate hikes in state history and the state entered into long-term power contracts with power companies based on the exorbitant prices of the electricity spot market, which were directly manipulated by energy companies, according to the newly released memos.

Politicians must renounce deregulation and protect consumers from the past crisis and the next one

Consumer advocates with FTCR argue that, in addition to the enforcement actions against the power companies, the memos should force politicians to change strategies in dealing with the fallout of the California energy crisis.

– Governor Davis and the Public Utilities Commission must halt the consumer funded bailouts of the state’s utilities;

– The California Power Authority should take over operation of power plants that were used to manipulate the system;

– The state should cancel the long-term energy contracts signed with power companies during the crisis, while Enron and others were manipulating the market.

– Federal officials should reject current energy legislation, which allows for future deregulation of the electricity industry. The US Senate recently passed a bill that would remove longstanding oversight of power companies.

“We have the proof that deregulation has been a license to steal and we can tabulate the massive economic damage it has caused, yet the politicians remain loyal to the deregulation plans of the energy industry thieves who brought on this disaster,” said Heller.

FTCR is a non-profit, non-partisan organization that fought deregulation with an unsuccessful ballot initiative, Prop. 9, in 1998 and successfully blocked the legislative bailout of S. Cal. Edison last year. Four weeks ago, FTCR filed a suit against the state Public Utilities Commission asking the Cal. Supreme Court to invalidate $10 billion in illegal rate increases to bail out Edison and PG&E.

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