[Congressional Record Volume 150, Number 93 (Thursday, July 8, 2004)]
[Senate]
[Pages S7780-S7782]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]




                             ENERGY POLICY

  Ms. CANTWELL. Madam President, I rise this morning to talk about 
where we are going with our Nation's energy policy and what this body 
and the House of Representatives are going to do in protecting 
consumers and ratepayers from continued market manipulation and energy 
fraud.
  This morning, most of America woke up to a picture of one of 
America's corporate leaders led off to an indictment in handcuffs. Yes, 
that is right, Ken Lay from the Enron Corporation, while not found 
guilty today, was indicted on 11 different counts, including wire 
fraud, securities fraud, and making false and misleading statements. 
The question is whether this 65-page indictment of Ken Lay, which does 
prove that no one is above the law, is going to bring justice to 
ratepayers and consumers in America who have suffered from market 
manipulation at the hands of Enron.
  I say that because there are still about 10 States in America that 
have utilities that are being sued by Enron. That is right, even though 
Enron has manipulated contracts, even though there are documents from 
Federal investigators showing that market manipulation has happened, 
Enron still has the audacity to sue utilities across

[[Page S7781]]

the country forcing them to pay on fraudulent contracts. For the State 
of Washington there has not been an insignificant consequence for our 
economy. The fact that people in Snohomish County had a more than 50-
percent rate increase and have had that rate increase in place for some 
time, shows the great impact it has had on our ability to keep jobs, 
keep people in their homes with proper heating. Even the school 
districts have had challenges. Snohomish, Mukilteo, and Everett School 
Districts have estimated that they will pay $2-plus million in energy 
costs if their utility is forced to pay Enron. That money could go for 
hiring teachers, putting classroom materials together, and helping to 
promote programs under the No Child Left Behind Act, but at the same 
time they are getting hit with exorbitant energy costs.
  So my constituents want to know whether this 65-page indictment is 
going to lead to justice for Americans who have been impacted by this 
matter.
  Washington is not the only State. Nevada, the State of the Presiding 
Officer who understands this issue well, has been impacted. There are 
States in the Midwest. There are many utilities that cannot believe 
that with all this information that has come about they are being asked 
to pay on these fraudulent contracts.
  I think the question that Federal regulators ought to be asking 
themselves, and those who are responsible for the indictment of Ken 
Lay--I want to applaud the Department of Justice for doing the great 
work they have done in actually bringing about this indictment today. 
But the question becomes, How did Mr. Lay influence the rest of the 
regulatory process? If you are the Department of Justice you are 
bringing about justice to individuals believed to have manipulated the 
market, financial documents, or made false or misleading statements. 
Then is the Department of Justice not doing its job? The Securities 
Exchange Commission, an independent organization that has basically 
helped in producing this indictment, showing that there has been 
accounting fraud, aren't they doing their job? The question remains, 
Why aren't energy regulatory officials doing their job. They are the 
ones who are supposed to make sure there are just and reasonable rates 
and that there isn't market manipulation. And, basically, they have 
said you are right, there weren't just and reasonable rates as it 
relates to manipulated contracts, but we are keeping those contracts in 
place.
  I raise the question this morning, with Ken Lay's indictment, whether 
in fact Mr. Lay did not have undue influence on the process of actually 
helping to get FERC Commissioners on board, and influencing policy by 
saying to them, stay the course with the California crisis and in the 
impact it is having on western markets. Today, I say we definitely need 
relief from these Enron contracts.
  Still, Mr. Lay sent a letter to the executive branch basically 
saying: I am attaching a list of potential candidates we think would do 
an excellent job on the Federal Energy Regulatory Commission. 
Basically, he went on in that document to then give a list of issues 
that he thought were very important to consider for the Commission 
appointees that he thought would help influence the process. 
Specifically, he talked about how basically the free market should 
continue to be allowed, that they should not push in the energy crisis 
for a variety of resolutions.
  In fact, he actually said one of the criteria should be: Willingness 
to abolish current native load preference under current tariffs. For us 
in the Northwest, right there he was lobbying the administration to 
say, only appoint Commissioners to the Federal Energy Regulatory 
Commission who are going to let us have our way, putting whatever Enron 
power on the grid that can go on the grid. If we are willing to pay to 
put Enron energy onto the grid and pay more money than the Bonneville 
Power Administration is willing to pay, nominate FERC Commissioners 
that are going to let us do that.

  He goes on to say that he wants to select people who are going to 
ensure that there are free markets and open access, which is a concern. 
While he mentions orderly rules of the road, one of the issues has been 
whether there have been any orderly rules of the road. I think that is 
part of the concern that we have with his indictment: how much did he 
influence the regulatory process?
  A second thing came to light within the context of the Governmental 
Affairs Committee. The committee performed an investigation of how much 
Enron did influence the Commission. In fact, after reviewing memos that 
had been sent by Ken Lay to the Federal Government, to various 
individuals, including his support for the nomination of two of the 
Commissioners, basically the Senate Governmental Affairs Committee said 
that ``documents obtained indicate that Enron attempted to directly and 
indirectly influence the FERC investigation of the California markets 
and subsequent decisionmaking.''
  So here we have Federal regulators that have been basically nominated 
and pushed by Ken Lay, and not in the normal, let's nominate somebody 
to head up an independent commission with such an important role for 
our economy and Government, way. He sent a letter basically with a 
litmus test:

       Support these people to be Commissioners of the FERC if in 
     fact they support this philosophy of continuing to let the 
     market go without the proper rules and regulations, and 
     basically let standard market design, something that this 
     body has had a lot of concern about, let that be the policy 
     of the day.

  Well, one of our committees, the Government Affairs Committee, 
basically found that Enron attempted to have direct and indirect 
influence upon FERC's investigation of the market; that they were 
trying to lobby FERC, if you will, to do nothing about the California 
crisis. I find that a very interesting connection in this particular 
issue, again, because my ratepayers are continuing to pay exorbitant 
amounts for energy, being sued by Enron. They are on the hook for 
millions more. Madam President, $122 million just from the utility in 
my home county is what they want to get out of our ratepayers, when 
they have admitted market manipulation. I find this interesting. The 
day that Ken Lay actually sent the letter to the executive branch was 
January 8, 2001. In it, he is basically saying: I want to get 
Commissioners who think like Enron does. I want to get those people 
making these important policy decisions. Here are the policy decisions 
I think they should make. Make sure these markets continue to operate 
in the way that Enron likes.
  I find it amazing because instead of Ken Lay doing his job on a daily 
basis as a CEO, with oversight over an organization, he was lobbying 
for FERC commissioners. Meanwhile, less than 2 days after Ken Lay 
writes this letter we have audiotapes from Enron traders talking about 
the ricochet scheme, which was selling power outside of California and 
then selling it back in, doing that because it could get a higher 
price.
  So he writes this letter on January 8, and we have audiotapes on 
January 18 of Enron discussing how they were manipulating the market 
using the ricochet scheme. On January 23, about 2 weeks after he writes 
this, there are tapes of Enron traders on the phone discussing how they 
are going to take a contract with a utility in my State, in Snohomish 
County, and jack up the price, lying to make them think there was a 
higher demand for the power, and that way the county would pay more 
money.
  Just after that, 2\1/2\ weeks after he sends this letter, there is 
another audiotape where Enron traders are discussing how much money 
they are going to make off of the Snohomish County deal and how they 
are going to account for it in two different ways, one at $10 million 
and the other at $20 million, just because that is the way they keep 
the books.
  Here is a CEO who is spending his time lobbying Federal regulators on 
how they should not take a hard stance in California, how they should 
do nothing about the crisis, how they should continue to let the free 
market work its will, and at the same time his own employees are on the 
phone talking about how to manipulate price and gouge consumers.
  In fact, 2 days after this letter--sent on January 8--on January 10, 
traders discuss whether they should lie to the Wall Street Journal 
about their activities.

[[Page S7782]]

  Here are the people who work for this company. He could have been 
doing oversight of the people within his company and the market 
manipulation, particularly since these individuals, executives of his 
company, had come before Congress basically telling everybody that they 
were doing their job and that market manipulation was not occurring.
  I have a great deal of concern about whether this indictment of Ken 
Lay is going to bring justice for the American people and the 
ratepayers. Again, I applaud DOJ for getting the indictment, but the 
question is whether people who are still being impacted by this crisis 
are going to get relief.
  What does Chairman Pat Wood of the Federal Energy Regulatory 
Commission say about Enron? At the time this happened, Pat Wood 
continued to be, I guess, a market-oriented person even though the 
deregulation experiment in California had proven to be ill-fated, it 
was proven people would take advantage and manipulate the market. The 
publication, Inside FERC, wrote that Pat Wood believed that ``the 
marketmaking style created by Enron should be emulated by other 
companies and supported by regulators.''
  This is after Enron's bankruptcy. Enron had gone bankrupt and we had 
the chairman, supported by Ken Lay--we had the Federal regulator, who 
is the policeman on the beat supposedly protecting people--saying Enron 
should be emulated.
  The PRESIDING OFFICER. The Senator's time has expired.
  Ms. CANTWELL. I ask unanimous consent for an additional 5 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. CANTWELL. I thank the Chair. What else did Chairman Pat Wood say 
about Enron and the market manipulation? I get that he thinks a market 
needs to be open, but a market without transparency and a market 
without aggressive regulators to make sure they monitor for 
manipulation is not a true market.
  Pat Wood, again according to Inside FERC, shortly after Enron went 
bankrupt, said, While Enron may be a ``goner,'' . . . ``the innovation 
and entrepreneurial [spirit] that characterized this company remain . . 
. ''
  I will hope Mr. Wood's observations have changed by today with the 
65-page, 11-count indictment of Mr. Lay. There are lots of things going 
on here, and the entrepreneurial spirit that he thought existed in 2001 
has definitely been characterized in a different light today. It has 
been shown that market manipulation has happened and was perpetrated by 
Enron.
  I think where we are is taking a closer look at a deeper philosophy 
of what Chairman Wood really believes. It is a philosophy, again, where 
Chairman Wood of the Federal Energy Regulatory Commission was quoted as 
saying:

     . . . the new breed of energy company, in fact, is going to 
     be the only game in town 5 years from now.

  That is his philosophy. This leads to the kind of hands-off approach 
for which Ken Lay lobbied. And again, an approach that the Governmental 
Affairs Committee said Enron attempted to put in place through direct 
and indirect influence on the Federal energy regulators. This is 
basically the policy I think got us into so much trouble in California, 
without regulators responding in due time. It is the same philosophy 
that has gotten utilities in about 10 States in financial risk because 
Enron continues to sue them. Pat Wood is clear in his philosophy. He 
thinks that the Enron model is the only game in town and it is the way 
we should proceed.

  I can tell you, I don't think it is the only game in town. I don't 
think we are doing enough on this matter. This body needs to take a 
firm stand that market manipulation is wrong. It can't be just and 
reasonable. It can't be in the public interest. And it is not what we 
ratepayers across the country should be forced to pay on.
  Again, Pat Wood, Chairman of the Federal Energy Regulatory 
Commission, has said, ``We're doing the maximum we can do.''
  We are doing the maximum we can do. He said that in January of this 
year. In January of this year, while the utility in my State, in 
Snohomish County, was being the policeman on the beat, transcribing 
audiotapes, looking through documents, doing all the homework the 
Federal energy regulators should be doing. While Pat Wood was making 
the same statement saying we are doing all we can do, my constituents 
in Washington State were proving there was a heck of a lot more to do 
to give ratepayers justice.
  Again, I applaud what the Department of Justice has done in the 
indictment of Ken Lay. They are going to try to get to the bottom of 
this story. But what my colleagues need to realize, and understand, is 
we have an imbalance. We cannot have the Department of Justice doing a 
great job with its Enron task force and prosecution of various Enron 
executives on accounting and securities fraud. We can't have the SEC 
doing a great job on making sure there are new securities regulations 
in place to make sure these violations don't happen again, and then 
have the Federal energy regulators who are in charge of protecting 
ratepayers fall down on the job. That is exactly what has happened. 
They have fallen down on the job, they are not protecting ratepayers. 
We are going to see that after this indictment we are going to continue 
to pursue this case in the Senate, if we have to, and in the House of 
Representatives, to make sure that all Federal agencies do their job, 
and they are giving justice to ratepayers who have been impacted by 
fraudulent contracts.
  I yield the floor.
  Mr. BINGAMAN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Ensign). The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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