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Regulators Bar Enron's Sale of Electricity at Market Rates

by Associated Press
Wall Street Journal - June 25, 2003

WASHINGTON -- Federal energy regulators on Wednesday barred Enron Corp. from selling electricity and natural gas at market rates anywhere in the U.S., in response to findings that it manipulated Western power markets two years ago. The Federal Energy Regulatory Commission said Enron would be able to sell power, but at much less competitive prices, virtually shutting down the company's ability to compete. It can resume regular business once it emerges from bankruptcy proceedings and gets FERC approval. FERC Chairman Pat Wood said it was the first time that the commission had imposed its so-called "death penalty" on power sellers. "We send a clear signal that competitive markets must work in the interest of customers and the public interest," Mr. Wood said. Houston-based Enron filed for bankruptcy-court protection after a series of revelations of hidden debt, inflated profits and accounting tricks. Thousands of workers lost their jobs and investors were left with virtually worthless stock. The company, which has continued doing business, must file its Chapter 11 reorganization plan by June 30. Mr. Wood said the commission also would uphold the validity of long-term power contracts in California and other Western states that were signed at the height of the energy crisis in 2000 and 2001. California and several Western utilities had argued that the long-term prices were linked to the manipulation by Enron and other companies. The agency on Wednesday asked 65 power companies, utilities and municipalities to justify their prices and marketing strategies during the energy crisis. "This order is a major step toward addressing the manipulation that contributed to the extraordinary western power crisis," Commissioner William Massey said. In March, the agency's commissioners agreed with California officials that there was widespread manipulation of natural-gas and electricity prices and supplies in California when the state negotiated more than $20 billion in power contracts. As a result, Mr. Wood said California would receive more than the $1.8 billion in refunds recommended by a FERC judge in December. The exact amount is to be determined in the coming months. After a 13-month investigation into the matter, FERC singled out seven subsidiaries of Enron and five other companies for taking advantage of a dysfunctional market and reaping millions of dollars in unjust profits.

Associated Press
Regulators Bar Enron's Sale of Electricity at Market Rates
Wall Street Journal, June 25, 2003

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