The Associated Press
House Minority Leader Dick Gephardt, D-Mo. (center), speaks Wednesday to a group of former Enron employees on Capitol Hill. Rep. Sheila Jackson Lee, D-Texas, is in the left foreground, and Rep. Ken Bentsen, D-Texas, is at right.

Northwest senators join call for Enron probe

Cantwell eyes energy price drop

KATHERINE PFLEGER, THE ASSOCIATED PRESS

WASHINGTON -- Sens. Maria Cantwell and Ron Wyden wrote federal energy regulators Wednesday to formalize their request for an investigation into allegations that Enron may have manipulated certain long-term energy markets in the West.

At a Senate hearing one day earlier, Federal Energy Regulatory Commission Chairman Pat Wood agreed to get to the bottom of the allegations, raised by Robert McCullough, a Portland energy consultant whose clients include Northwest utilities.

He has alleged that the price of some unregulated long-term energy contracts in the West dropped by 20 percent to 30 percent in December when the Houston-based energy trader filed for bankruptcy protection. After eliminating other possible factors, McCullough said the clear implication is that the energy giant used its market dominance to inflate prices.

"Where there's smoke there's often fire, and we must investigate whether we have a simple coincidence here, or something more," wrote Cantwell, D-Wash.

In a separate letter, Wyden, D-Ore., asked for a response from Wood within 30 days.

FERC investigations generally take anywhere from several months to a year. Commission spokeswoman Michelle Veloso said Wood is waiting to get the senators' requests and "is going to proceed from there."

If FERC finds that energy customers in the West were charged unjust or unreasonable rates, the energy commission could order rebates.

Though Enron wielded significant power over energy markets, Lawrence Makovich, a power industry expert at Cambridge Energy Research Associates, said it would be impossible to determine simply from the decline in price whether the market was manipulated.

Other skeptics include the Bonneville Power Administration, a Portland-based federal power marketing agency that provides about half the Northwest's energy. Spokesman Ed Mosey said McCullough is ascribing a lot more market power to Enron than that company could possibly have exercised.

"If we try to make Enron a bogeyman for everything that has gone wrong in the market, we are going to get it wrong," Mosey said, arguing instead the drought and the rocky economy were the real factors.

"You have to look at the other things that were going on in the market in December," he added.

Finding out whether the energy giant wrongly manipulated some long-term electricity prices will be no easy task. The investigation would look into the electronic trading of financial instruments related to so-called forward contracts, which are largely done in secret and not regulated.

Cantwell, Wyden and other senators have been arguing that more needs to be done to improve disclosure of energy companies' operations.

Wyden asserts that energy markets should be treated like other commodity markets.

"We are talking about basic business information," Wyden said.

The Olympian Copyright 2002

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