Enron's new windfall
Your PG&E bills will
help pay off the alleged market manipulators.
By Matthew Hirsch
NOW THAT STATE regulators have agreed to give Pacific Gas and
Electric Co. billions of ratepayer dollars to pay its bills, want to
know who's getting your money? Let's start with the electricity-generating
company that has the most outstanding claims against PG&E: Enron Corp.,
which is awaiting $580 million.
That's right: the company of Kenneth Lay, the firm that personifies
all of the scams and fraudulent activities that helped precipitate California's
energy crisis, is getting more than half a billion dollars from
northern California businesses and residents to pay for power
that many say was sold to PG&E at badly inflated prices.
And that's just one of the alleged market manipulators that will benefit
from the PG&E bankruptcy settlement.
California Public Utilities Commission president Michael Peevey has
said repeatedly that the Dec. 18 bankruptcy settlement with PG&E will
close the book on the California energy crisis, but nothing could be
further from the truth. The settlement locks in high electricity rates
in northern California for the next nine years and delivers a
huge cash infusion to the very companies that drove up electricity prices
in 2000 and 2001 by gaming the energy market.
Enron led a committee of PG&E creditors that formed shortly after the
company filed for bankruptcy in April 2001. The committee includes merchant
energy generators, investment banks, and subcontractors that are owed
the most money from PG&E.
That committee had considerable power to make decisions about how PG&E's
money would be spent decisions that affected thousands of smaller
businesses with claims against PG&E. Among those on the committee: Enron,
Dynegy Power Marketing, and Reliant Energy, all companies that were
implicated in market manipulation during the California energy crisis.
The total that will now be paid to those alleged crooks: at least $830
million, and possibly much more.
The committee also includes some of the world's largest banks, such
as Bank of America, which has $1.175 billion in claims, and Bank of
New York, which is claiming $2.2 billion.
All of PG&E's creditors' claims were effectively approved Dec. 22 in
U.S. Bankruptcy Court, meaning that even if PG&E's settlement agreement
with the CPUC is overturned on appeal, the creditors are guaranteed
The only way the state of California can now get back some of the money
energy generators overcharged consumers is through a complaint California
attorney general Bill Lockyer filed with the Federal Energy Regulatory
Commission. Since a recent FERC report implicated more than 30 power
companies in market manipulation, few have agreed to pay refunds, and
those that have paid shelled out much less than the state is asking
Even the Utility Reform Network (TURN), which helped broker the PG&E
bankruptcy settlement, opposes paying companies that set off the energy
crisis. "Who in their right mind would pay Enron at this point?"
Mindy Spatt, media advocacy director for TURN, told the Bay Guardian.
"And ... to rely on FERC to refund that money, that's silly."
The CPUC never looked at creditor claims as part of its negotiations
on the bankruptcy settlement, although the CPUC Office of Ratepayer
Advocates said it should have done so.
Linda Stanley, the former U.S. Bankruptcy Court trustee assigned to
the PG&E case, told us any party in the bankruptcy case, including PG&E
and the CPUC, could have suggested withholding money from companies
that were fined for market manipulation but none did. "You
would think PG&E would want to do that," Stanley said.
Stanley told us it became clear during her year on the PG&E case that
U.S. bankruptcy code is inappropriate for dealing with a bankrupt public
utility. The law doesn't recognize the difference between a private
entity that must finance its own bankruptcy settlement and a regulated
utility, like PG&E, that can use ratepayer funds, she said.
In response, Stanley tried setting up a committee of ratepayers to
give electricity customers representation in the court proceedings,
but the bankruptcy judge said no. Stanley at least managed to remove
Enron and Dynegy from the creditors' committee before she was taken
out of the U.S. trustee program, but both companies will still be repaid
by PG&E. Stanley was fired last June, for what some say were political
reasons, by U.S. attorney general John Ashcroft, who controls the U.S.
trustee program. She was in the midst of a five-year term she was appointed
to by former president Bill Clinton.
Ratepayers shouldn't be financing the PG&E bankruptcy if price gouging
during the energy crisis was to blame, Stanley told us. And neither
should they be footing the bill if PG&E was at fault, she said. Unfortunately,
neither of those issues was addressed at the CPUC or at bankruptcy court.
As a result, Enron, Dynegy, and other market manipulators can continue,
even now, to make money from an energy crisis that Michael Peevey says