Williams denies Enron-style trading strategies

TULSA, Okla., May 22, 2002 — Williams responded recently to the Federal Energy Regulatory Commission (FERC) stating that it did not engage in Enron-style trading strategies as described in the commission’s inquiry.

“It’s not a surprise that in our extensive internal review that we didn’t find any alleged Enron-style trading strategies because we are — and always have been — very different from Enron,” said Steve Malcolm, chairman, president and CEO. “We sell power in California that’s produced in California, so we don’t need to employ complicated strategies to compete. Our primary business is long-term management of energy supply risk and price risk.

“Throughout the time period, we closely monitored the evolving market and made every effort to participate in a way that was fair and legal. Williams does not have and it never has had strategies to engage in illegal or improper market behavior,” Malcolm said. “In fact, Williams prohibited its traders from selling power outside California for resale into California for the purpose of evading the state’s price caps even though we did not conclude that the activity was illegal.”

The report does identify Williams-specific transactions amounting to a fraction of a percent of its overall trading volumes that have some of the characteristics described in the Enron memo but which were engaged in for entirely different reasons. Williams has provided the details of these transactions to FERC in the interest of full disclosure.

Specifically, Williams denied all activity that corresponds to alleged Enron trading strategies, except for the clearly legal “export of California power purchased from the California Power Exchange” for which the company cannot admit or deny because of the difficulty of determining actual physical flows of every megawatt hour of energy. Regardless, Williams said it did not engage in power exports to the detriment of meeting its commitments in the California power market.

Williams retained outside investigative experts to help review its power transactions during the past two years — a period during which it bought and sold hundreds of millions of megawatt hours of energy in California — in response to a request from FERC. On May 8, the commission ordered participants in the California power market in 2000 and 2001 to specifically “admit or deny” by May 22 whether they had participated in a number of alleged Enron trading strategies detailed in that company’s internal memos.

The FERC has issued an order requesting additional information from market participants regarding so-called “round-trip” trading. Williams will comply with that new request by the May 31 deadline.

The complete text of the response Williams filed with FERC recently is available as a download in the News & Media and Investor sections of www.williams.com .

About Williams
Williams moves, manages and markets a variety of energy products, including natural gas, liquid hydrocarbons, petroleum and electricity. Our operations span the energy value chain from wellhead to burner tip. Williams information is available at www.williams.com .

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