FERC demands information from other energy traders after Enron memo

By Sylvie Dale, Online Editor

May 9, 2002 — The Federal Energy Regulatory Agency has contacted a large list of energy trading companies to find out whether any of them use similar trading practices as those mentioned by recent Enron memos.

The agency on Wednesday sent out the order, called Docket No. PA02-2-00, to all sellers of wholesale electricity and/or ancillary services to the California Independent System Operator and/or the California Power Exchange during the period 2000-2001.

Responses have to be signed under oath in the form of an affidavit by someone with sufficient authority by May 22. FERC threatened those who don’t respond on time with possible revokation of the authority to sell wholesale power and/or ancillary services at market-based rates.

The agency included a list of trading practices mentioned in the recently released Enron memos and asked each company to either admit to using the practice or deny having used the practice.

FERC on May 6 asked Enron for names and more information about its trading practices in response to three memos. These memos can be viewed on FERC’s web site, http://www.ferc.fed.us/electric/bulkpower/pa02-2/pa02-2.htm#memo.

The two Enron memoranda dated December 6, 2000, and December 8, 2000, describe in detail certain trading strategies engaged in during the years 2000 and 2001 by Enron traders and, allegedly, traders of other companies active in wholesale electricity and ancillary services markets in the West and particularly in California.

According to the memoranda, these trading strategies generally fall into two categories.

The first is described as “inc-ing load” into the California Independent System Operator’s (Cal ISO) real time market. Here, a company artificially increases load on a schedule it submits to the Cal ISO with a corresponding amount of generation. The company then dispatches the generation it scheduled, which is in excess of its actual load.

This, in turn, results in the Cal ISO paying the company for the excess generation. Scheduling coordinators that serve load in California were able to use this trading strategy to include generation of other sellers (e.g., Powerex and Puget Sound Energy).

The second is described as “relieving congestion” and involves a company first creating congestion in the California Power Exchange’s (Cal PX) market, and then “relieving” such congestion in the real time market. This trading strategy is accomplished through such actions as reducing schedules or scheduling energy in the opposite direction of a constraint (counterflows), for which the Cal ISO will make payment to the company.

The December 6, 2000, and December 8, 2000, Enron memos then outline ten “representative trading strategies” that employ “inc-ing load” and “relieving congestion.”

FERC’s requests for admissions describe certain activities, using the names applied to the “representative trading strategies” in the Enron memos, and ask the energy companies to respond to each point and provide details if applicable.

FERC also asked for copies of all communications or correspondence, including e-mail messages, instant messages, or telephone logs with respect to all of the trading strategies discussed in the Enron memoranda (both the ten “representative trading strategies” as well as “inc-ing load” and “relieving congestion”). The request encompasses all transactions conducted as part of such trading strategies engaged in by your company and the other company in the U.S. portion of the WSCC during the period 2000-2001.

For more information, visit FERC’s site at http://www.ferc.fed.us/electric/bulkpower/pa02-2/pa02-2.htm#request.

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