Federal regulators yesterday ordered Enron Corp. to repay $32.5 million in energy-trading profits made before and during the West Coast electricity crisis three years ago. They will now determine whether the bankrupt Houston company should surrender nearly $3 billion in nationwide trading profits from 1997 through 2001.
The order by the Federal Energy Regulatory Commission affirms findings by an administrative law judge a year ago that centered on an undisclosed agreement between Enron and a Texas utility. The arrangement allowed Enron to control part of electricity sales by El Paso Electric Co., one of the companies supplying power to California and neighboring West Coast states during the 2000-01 crisis.
Enron's opponents claimed the company used its agreement with El Paso Electric to manipulate power prices. The order did not resolve that issue, but was based instead on Enron's failure to tell FERC about the deal with El Paso, which produced the $32.5 million profit figure cited.
FERC's commissioners, under strong political pressure to wind up their West Coast investigations, ordered that all the outstanding Enron cases be combined to determine the total amount of its unjust profits since the start of its El Paso agreement in 1997. The refunds could exceed $124 million if the recovery is limited to California and other Western states, or could reach $2.97 billion if Enron's nationwide profits are included, according to estimates from California authorities.
It's not clear how long FERC's investigation will run or how much Enron would actually pay as it emerges from bankruptcy.
Outrage over Enron's conduct flared again this spring following the publication of transcripts of recorded phone conversations by its traders and managers, who bragged about "stealing" millions of dollars through fraudulent schemes and mocked California officials' attempts to halt soaring power prices late in 2000. "Best thing that could happen is an [expletive] earthquake," one of the Enron employees said about California, according to the transcript. "Let that thing float out to the Pacific."
Sen. Maria Cantwell (D-Wash.), one of the commission's critics, said yesterday's action is a step in the right direction, but a small one. "For those of us who have been dealing with this for three years, we think this is slow justice for sure. We hope this is the beginning of aggressive action by FERC and that they move quickly," she said. Her state's utilities -- like California's -- faced a fourfold increase in wholesale electricity prices during the crisis.
FERC Chairman Pat Wood III, said in an interview this week that he had been disgusted and discouraged by evidence of Enron's power-trading abuses, but asked that the commission be judged on its final decisions. "We have data [on energy trades] for every transaction on every day in the West," Wood said. "Our argument is, let us finish" the investigation.
Enron, which won court approval of a bankruptcy reorganization plan earlier this month, is still trying to force West Coast utilities to make good on high-priced power contracts that the utilities canceled. Company spokeswoman Karen Denne said officials had no immediate comment on FERC's action.
In a separate action, FERC said yesterday it will hold an expedited hearing to determine whether Nevada power companies can break their long-term power agreements with Enron.