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The Business Journal of Portland, July 5, 2002

PGE energy traders may have known more than bosses realized

Oregon Public Broadcasting has reported that Portland General Electric employees knew or suspected that some of their energy trading transactions were at least questionable and probably illegal. But those employees failed to report their concerns to regulators.

OPB's Jeff Brady authored a three-part series on the PGE-Enron power trading scandal. In a follow-up piece to the series which ran Wednesday, his reporting raised questions about statements from PGE executives that no one at PGE "knowingly" participated in Enron's scheme to manipulate the California power market.

"PGE's own transcripts of telephone conversations, submitted to federal regulators, show that some of the utility's employees raised concerns about questionable transactions, but they did not report those concerns to authorities,"Brady reported this week.

According to the radio report, last month PGE Executive Vice President Fred Miller told OPB that electricity traders "don't always know where power is produced and where its eventually going to end up. That issue is important because PGE has denied that it `knowingly' helped Enron move power around the Northwest in an effort to manipulate the California market."

Brady quoted Miller as saying during a June 24 interview: "I don't expect traders to know that when they buy or sell from someone that they know the ultimate destination or how it's used. And our research showed that they didn't know that, or weren't party to anything with a funny name attached to it."

But, Brady reported, "A day later, PGE filed with federal regulators transcripts of telephone conversations among PGE, Avista and Enron employees that contradict Miller's statement. Miller says he has not read all the transcripts himself--there are hundreds of pages--but he says PGE's chief lawyer, Doug Nickels, assured him the utility was in the clear. Nickels was not available to talk about the matter. PGE officials say he's out for the holiday."

Brady studied some of the transcripts and said they indicated that "several PGE employees were aware of some of Enron's questionable trades but did not report them to authorities."

Brady cited this example: "In April 2000, transcripts show Enron trader John Forney describing to a PGE transmission employee a plan to send power from California to Oregon and then back into California. That practice was part of what was known at Enron as `Forney's Perpetual Loop' which was used to take advantage of the California Market.

"One PGE employee called the plan `squirrelly,'" Bradfy reported, "another told a colleague at another energy trading company `This is a scam and you know it.'

Brady said that the transcripts don't show that PGE helped plan the manipulation of the California market. But, ghe reported, Jason Eisdorfer with the Citizens Utility Board of Oregon believes PGE had an obligation to inform regulators about the questionable trades.

Eisdorfer told Brady: "The transmission people knew that something strange was going on--they really could have raised a red flag. One of the reasons they may not have is because Enron is their corporate parent. And that is something, I think, we'd be really interested to learn more about--whether or not there was pressure from Enron--direct or indirect--that cause PGE employees to look the other way."

Eisdorfer told OPB that "if PGE engaged, knowingly, in corrupting the markets and that caused the markets to skyrocket. And that, in turn, caused PGE's retail rates to go up as much as 50 percent, there is every reason for the public utility commission to come in and say, `These rates are not just and reasonable.' And then to cut retail rates quite significantly."

© 2002 American City Business Journals Inc.