|Did Enron exploit the California energy crisis?|
Two US senators are demanding a criminal inquiry after evidence emerged which suggested that Enron manipulated the power market to make extra money out of California's energy crisis last year.
The disgraced energy firm is now reshaping itself as an old-fashioned power company after its move into global energy trading ended in disaster.
But in its heyday, confidential memos released by federal regulators suggest that the company abused the rules designed to protect consumers in California.
The state's lawyers have long alleged that power companies were partially responsible for the critical shortage of electricity which triggered rolling blackouts and massive price increases during 2001.
"To us, this is really the smoking gun memo," said Sean Gallagher, a lawyer for the California Public Utilities Commission.
"It's Enron's own attorneys admitting that Enron is manipulating the California market."
California's two Democratic senators, Dianne Feinstein and Barbara Boxer, are now demanding a criminal investigation by the US Attorney General to see whether the company has committed fraud.
"It's high time we saw some indictments handed down in this case," Senator Boxer said.
The information released by the Federal Energy Regulatory Commission (FERC) consists of two December 2000 memos and an undated note from an Enron lawyer, apparently laying out strategies to make the most of California's shortages.
|Red light zone: a power control room at the height of the crisis.|
The company provided the memos on Monday, and an Enron lawyer said their existence had been revealed to the FERC 10 days ago and could easily have been kept confidential, rather than being posted on the agency's website.
The FERC is investigating Enron's behaviour during the crisis, which saw wholesale power prices rise by a factor of ten and almost bankrupted three major utilities.
The meltdown followed a deregulation of wholesale power which left price caps on consumer prices.
The investigation is completely separate from other probes into Enron's collapse into bankruptcy at the end of last year after revelations of suspect accounting practices.
In the memos, codenames such as "Death Star" and "Fat Boy" are linked to ways of shifting power around so as to maximise profits.
One strategy - put into effect on 5 December 2000 - had Enron buying power at capped rates of $250 a megawatt in California and selling it in the north-west for $1,200 a megawatt.
Lawyers warned of "a public relations risk arising from the fact that such exports may have contributed to California's declaration of a Stage 2 emergency", the state's name for a situation of critically low energy supplies.
The memos also spell out techniques dubbed "ricochet" by Enron - but more widely known in the trade as "megawatt laundering".
The strategy had Enron selling its electricity across state boundaries and then reselling it back into California at higher prices.
And a third strategy - the one called "Death Star" within Enron - is eerily similar to the kind of allegation made by California state officials during the crisis.
They had claimed companies including Enron had created phantom congestion on transmission lines, and entered into fake sales with one another to boost prices.
According to the memo from Enron's lawyers, that is precisely what happened.
"The net effect of [the Death Star] transactions," they wrote, "is that Enron gets paid for moving energy to relieve congestion without actually moving energy or relieving congestion."