01.30.02

Cantwell Urges FERC Investigation of AllegedEnergy Market Manipulation by Enron

FERC Chairman Wood Commits to Get Answers

WASHINGTON, DC - U.S. Senator Maria Cantwell (D-WA) today formally requested the Federal Energy Regulatory Commission (FERC) to launch an investigation into alleged manipulation by Enron of long-term energy markets. The investigation could result in the voiding of long-term forward contracts.

"Congress and our nation's consumers-particularly those of the Pacific Northwest, who have suffered through retail rate increases of up to 50 percent over the past year-deserve to know whether Enron was manipulating Western power markets at their expense," Cantwell wrote FERC Chairman Pat Wood in today's formal request.

"After Enron collapsed, prices in the West's forward energy markets plummeted by 20-30%," Cantwell said. "Where there's smoke there's often fire, and we must investigate whether we have a simple coincidence here, or something more. The public deserves answers and, if appropriate, corrective action."

The Enron price manipulation allegations were the focus of a Senate Energy and Natural Resources Committee hearing held Tuesday. At the hearing, three western senators - Senators Cantwell, Dianne Feinstein (D-CA), and Ron Wyden (D-OR) - questioned the FERC chairman and industry analysts on manipulation in forward market prices.

At yesterday's hearing, Wood asked Cantwell whether she wanted a section 206 investigation. After she replied affirmatively, Wood committed FERC to investigate the allegations, saying that "we will get them [the ratepayers] an answer that answers it one way or another and I will commit to doing that for you, Senator."

FERC has the authority to launch a Section 206 investigation into Enron price manipulation allegations. Specifically, FERC may review rates already in effect to determine whether the rates are "just and reasonable," including those contained in long-term firm power contracts such as those used by most Northwest utilities.

The text of the letter follows:

January 30, 2002

The Honorable Pat Wood III Chairman Federal Energy Regulatory Commission 888 First Street NE, #11A Washington, DC 20426

Dear Chairman Wood:

Thank you very much for your participation in yesterday's Senate Energy and Natural Resources Committee hearing regarding the impacts of Enron's collapse on energy markets. I applaud your interest in opening an investigation into the linkage between Enron's trading activities in both the forward and long-term firm power markets. As you recall, we agreed at the hearing that I would follow-up with a more formal request regarding what such an investigation should entail.

I believe a Section 206 investigation-specifically designed to review the activities of Enron, its Internet-based trading platform, EnronOnline, and these activities' impact on long-term firm power prices--is warranted. I further urge the Commission to incorporate information from this inquiry into a Section 206 investigation on whether long-term firm power prices in the West were just and reasonable during the past year's power crisis.

While I think we are all relieved that the bankruptcy of such a dominant energy trader has had seemingly little impact on our nation's short-term spot markets, yesterday's hearing raised several important questions about Enron's role in forward and long-term firm power markets.

Congress and our nation's consumers-particularly those of the Pacific Northwest, who have suffered through retail rate increases of up to 50 percent over the past year-deserve to know whether Enron was manipulating Western power markets at their expense.

I firmly believe that vigorous completion of these investigations will both help answer important questions about the recent chaos in Western energy markets and enable the Senate to more thoroughly debate the future of our nation's energy policy.

I look forward to continuing this constructive dialogue and working with you to ensure that Congress and the American people can have confidence that our federal regulators fully understand how the past year's crisis occurred and how we can best prevent it from happening again.

Sincerely,

Maria Cantwell U.S. Senator