May 19, 2002:  Enron's lawyers are now claiming that they pointed out the illegality of the flimflams they were using in California in December of 2000, and that the company immediately ceased and desisted from those practices which were unlawful.  I hear that they also claimed that the moon is made of balsa wood, and that Dick Cheney is the secret identity of the Incredible Hulk®.  After all, the worst rolling blackouts and the worst price increases came after that time.

It looks like Dynegy and Reliant are guilty of the same price-boosting scams that Enron used: "fat boy", "death star", and the others.  Having been caught, Reliant Resources is now admitting that it used two of the techniques.  They claim that not only was this entirely legal, but that at the time, using the "fat boy" technique was actually good for helping to alleviate the shortage.  Since Reliant also admitted to shipping locally generated power outside of California, this argument is pretty dubious.

A curious twist:  It turns out that last year, Enron made a deal with another now-bankrupt bunch of crooked scam-artists, Global Crossing.  They arranged a swap of fiber optic bandwidth assets, which allowed each of them to post fake revenue and hide costs, and also concealed what amounted to a high-interest loan to Global Crossing.  The curious part is that the deal was brokered by Enron's competitor, Reliant.  The market for high speed digital bandwidth was, at the time, fraught with "round trip" transactions in which assets were traded in circles, arriving back where they started with prices inflated.  Enron at one time envisioned running the same kind of frenetic trading market for bandwidth that they had for electricity.  Such trading eventually collapsed due to a glut of fiber optic capacity.  This was one of many sources of the losses that eventually drove Enron out of business.  This deal between Enron and Global Crossing was reportedly as much about creating the appearance of brisk trading as it was about muddying the accounting trail.  Reliant got paid for its part (which consisted of more obscuration of the record) by engaging in some further trades with Enron that deliberately lost money on Enron's side.

Joe Lieberman is ragging on the Federal Energy Regulatory Commission for doing an ineffective investigation that overlooked price fixing practices at the time when they were going on, saying that they received pointed clues and didn't follow them up.  Thanks, Joe... where were you at the time?  We out here in the public could see that FERC was turning crooked last year... you couldn't have said something?  (Perhaps I should say crookeder... industry critics have long claimed that utility companies are perhaps the grossest cases of corporate welfare and profiteering through legislative corruption in our economy.)

An internal memo from the White House has turned up that includes clear instructions to downplay the California crisis as much as possible.  It was written by Karen Knutson, the deputy director of Cheney's energy policy task force, to EPA staffer Jacob Moss.  "We are desperately trying to avoid California in this report as much as possible," she wrote -- the "report" in question being the recommendations produced by the task force, which are now the administration's energy policy bill.  This occurred right around the same time -- May 2001 -- as the failed FERC investigation criticized by Lieberman.  It was a few weeks before this that Dick Cheney pronounced that the crisis showed the foolishness of trying to impose price caps or regulate the market.  "California is looked on by many folks as a classic example of the kinds of problems that arise when you do use price caps....  There's no magic wand that Washington can wave."  In June 2001, of course, FERC broke down and imposed real price caps, and the whole spiral promptly collapsed in on itself, with prices tumbling back toward pre-crisis levels.  So much for the absence of magic wands, or the unalterable wisdom of avoiding market regulation.

Energy secretary Spencer Abraham, in a speech on May 13, 2002, was still looking for causes other than market manipulation for the whole state power crisis.  "To a large extent, California's blackouts occurred because of inadequate intrastate transmission infrastructure."  Transmission lines were the one part of the California crisis that the task force report addressed.  But how much of that inadequate transmission capacity was simply due to all the shuffling that Enron and its competitors were doing to move electricity between different local markets with different prices?  With power generated in-state being shipped up to Oregon so that Oregon power could be shipped back down, just to make power at both ends more expensive, I don't think lack of transmission capacity was the real problem.

Some are now calling for investigation of all this stuff to be turned over to an independent counsel, instead of to Ashcroft.  Calling for Ashcroft to investigate can't ever have been really taken seriously as a way to get all the truth out in the open.

In other news, the Dubya administration has announced that the United States will not participate in any followup round of global warming negotiations until 2012.  The 2005 follow-up scheduled at the Kyoto conference will not be attended by the US.  The reasons given, as the English newspaper The Guardian puts it, "echoed points made in the last 10 years by the oil and coal lobbies."

< Previous Next >