Risk & Compliance

The Enron Tapes: New Evidence

Electricity traders at the bankrupt power company were recorded as they manipulated prices by shutting down a power plant.
Marie LeoneFebruary 7, 2005

New evidence surfaced last week to further implicate Enron Corp. traders in schemes to manipulate electricity prices during the height of the California blackouts in 2001.

A Seattle-area municipal power company, Snohomish County Public Utility District (PUD), publicly released a new set of telephone transcripts that include Enron electricity traders directing a power-plant technician to fabricate a glitch that would force the shutdown of a tiny 52-megawatt facility. The shutdown of the Enron plant — one of the suppliers to the Snohomish County PUD — further squeezed supply in an already tight electricity market and increased prices.

The transcript “provides definitive evidence that Enron intentionally congested electricity transmission lines” and used its influence to inflate wholesale prices by constraining supply, according to PUD officials .

This is the second set of transcripts released by the utility. The first, made public in May, illustrated “extensive manipulations of the West Coast energy markets in 2000-2001,” continued PUD officials.

According to the transcripts, on January 17, 2001, Enron’s Las Vegas power plant — which customarily delivered electricity to California — was taken offline. On that same day, the electricity supplies to California became so constrained that the northern part of the state suffered a power emergency that forced rolling blackouts affecting 2 million consumers. In addition, by taking the plant offline, Enron was in direct violation of an emergency order issued by Bill Richardson — the lame-duck Secretary of Energy for the outgoing Clinton Administration — that required generating companies to make power available to California.

Both sets of PUD transcripts were filed with Federal Energy Regulatory Commission as part of an effort to void a $122 million lawsuit launched against the utility by Enron. Enron’s bankruptcy trustee is using the suit to recoup funds related to a cancelled electricity-supply contract, from which PUD withdrew just before Enron declared bankruptcy.

PUD buys 80 percent of its electricity from the federally owned Bonneville Power Administration and purchases the balance from other power generators, such as Enron.

While the shutdown of the Las Vegas plant may be ruled illegal based on the emergency order, the shutdown of the small Las Vegas plant did not directly affect California energy prices or collapse the California system — which produces over 50,000 megawatts of electricity — asserts Robert Schwieger, editor and publisher of the Combined-Cycle Journal, a technical magazine for power-plant operators.

Schwieger also points out that electricity traders and power-plant operators regularly talk about plant outages and how they will affect prices, much as any manufacturing-plant operator might communicate with the sales department about inventory control.

However, posits Schwieger, the plant shutdown and transcripts may help build a case illustrating that Enron’s corporate culture was one that promoted manipulating prices in a competitive market.