PGE Trading Case May Settleby Jeff Manning & Gail Kinsey Hill
The Oregonian, September 24, 2003
The Oregon Public Utility Commission today will consider a proposed pact
stemming from inquiries into trades with Enron
Portland General Electric has tentatively agreed to pay about $8.5 million to settle claims by federal regulators that it helped parent company Enron manipulate electricity markets, according to a source involved in the settlement discussions.
The proposed settlement is expected to be filed today with the Federal Energy Regulatory Commission. The Oregon Public Utility Commission will consider whether to sign on to the agreement at a meeting this morning, PUC spokesman Bob Valdez said Tuesday.
Jay Dudley, an attorney for PGE, said that under the federal commission's rules he could not comment on any settlement.
"For PGE, considering settlement instead of going to trial is a difficult decision," Dudley said Tuesday evening. "We do want to put these matters behind us and focus on the future."
The tentative settlement stems from a high-profile investigation launched by the federal commission more than a year ago. The commission had zeroed in on a series of transactions between PGE and Enron traders, who at the time worked on separate floors of the same downtown Portland office building.
The trades in question, dubbed "Death Star" by Enron traders, looped electricity from California into the Northwest and back again -- creating false congestion on California's energy grid and the threat of electricity shortages. The transactions allowed Enron to collect payments from the state of California for relieving congestion even though transmission lines never were actually overloaded.
The Houston energy giant's widespread manipulation of power markets, which came to light months after the company collapsed into bankruptcy in December 2001, eventually became a significant part of the Enron scandal. The fraudulent trading practices worsened power shortages and increased power prices during the energy crisis of 2000 and 2001.
Two former Enron power traders have pleaded guilty to charges they were involved in fraudulent trading schemes. One of them was Tim Belden, who headed Enron's power trading office in Portland.
PGE officials have consistently denied any wrongdoing in the trading case, though they have admitted that the company might have unwittingly helped Enron complete certain trades. The utility also has said that it failed to account correctly for many of its trades with Enron. These "posting errors" also are addressed in the proposed settlement.
"We believe our traders did not engage in actions that were intended to deceive or manipulate the market," Dudley said Tuesday.
Other parties needing to sign off on the settlement include the federal commission's trial attorneys, California officials and the city of Tacoma, which operates a municipal utility and has aggressively pursued the fraudulent trading case. The settlement would not formally take hold until accepted by the federal administrative law judge assigned to the case and the full commission.
FERC investigations beginning in August 2002 also targeted El Paso Electric of El Paso, Texas, and Avista Corp. of Spokane for inappropriate trades with Enron. In a preliminary settlement, Avista was absolved of any wrongdoing. El Paso has agreed to $15.5 million in refunds.
It is not clear how the money in the PGE settlement, if finalized, would be parceled out. State regulators have maintained that utility customers would not foot the bill.
At the Oregon commission's meeting today, commissioners will consider whether to pursue their own claims against PGE. Earlier this year, the panel decided to hold off on any investigation into possible misconduct or mismanagement by the utility until the federal commission had completed its review.
The PUC meeting, open to the public, will begin at 9 a.m. in the commission conference room in Salem.
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