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Secrets and Lies

by JASON LEOPOLD

The front pages of California’s major daily newspapers were buzzing last week with fresh reports of one energy company ripping off the state in the spring of 2000 by deliberately keeping a power plant from generating electricity so the company could take advantage of sky-high wholesale electricity prices the state was forced to pay to keep the lights on.

The evidence, a transcript of a tape-recorded telephone conversation between an employee at Williams Companies, the Tulsa, Okla. based energy company, and an employee at a Southern California power plant operated by Williams, shows how the two conspired to jack up power prices and create an artificial electricity shortage by keeping the power plant out of service for two weeks. The scheme worked. Williams earned $10 million from California consumers through its manipulative tactics. In March 2001, in a settlement reached with FERC, Williams agreed to refund California $8 million it obtained through the scam without admitting any guilt.

But here’s the real tragedy. The evidence has been under seal and in the possession of President Bush’s Federal Energy Regulatory Commission; the governing body that is supposed to make sure power prices is just and reasonable, for more than a year. FERC released the transcripts after the Wall Street Journal sued the commission to obtain the full copy of its report. However, it was New York Times op-ed columnist Paul Krugman who first wrote about the existence of the Williams tapes in a Sept. 27 column. The Journal sued FERC after Krugman’s column ran and reported the findings of the FERC investigation last week.

How could FERC keep this smoking gun concealed for a year? It’s no secret that California politicians and consumer groups have blamed energy companies like Williams and Enron for the state’s energy crisis and even alleged that energy companies created the illusion of an electricity shortage by shutting down power plants in the state. Had this evidence been released 18 months ago, pre-Enron, it would have driven that point home. But it wouldn’t have jibed with Bush’s energy policy, which was made public instead in May 2001. Around the same time, President Bush was in California and met with Gov. Gray Davis about the state’s energy crisis. Bush told Davis the state implemented a flawed energy plan and that and that alone was the reason for electricity price spikes. Meanwhile, FERC is sitting on a pot of gold and no one in California even knows it.

A few weeks before the meeting between Bush and Davis, Vice President Dick Cheney, who chairs Bush’s energy task force, was interviewed by PBS’ Frontline for a special series on California’s energy crisis. During the interview, Cheney flat-out denied that energy companies ripped off California.

“The problem you had in California was caused by a combination of things–an unwise regulatory scheme, because they didn’t really deregulate,” Cheney said in the May 17 Frontline interview. “Now theey’re trapped from unwise regulatory schemes, plus not having addressed the supply side of the issue. They’ve obviously created major problems for themselves and bankrupted PG&E in the process.”

It’s true that California created a horribly flawed deregulation plan. But as state Sen. Joseph Dunn, a Democrat leading the investigation into California’s energy crisis, told me: “we may have left the car running but the energy companies stole the car.”

When asked whether it was possible whether energy companies were behaving like a “cartel” and if some of the high power prices in California could be the result of manipulation, Cheney responded with a resounding “no.”

It’s highly unlikely that Bush, Cheney and members of the energy task force were kept in the dark about the Williams scam, especially since the findings of the investigation by FERC took place around the same time the policy was being drafted.

According to evidence obtained by Congressman Henry Waxman, D-California, earlier this year, the energy task force “considered and abandoned plans to address California’s energy problems in its report.” Despite my best efforts to get an answer from the White House about whether the energy task force knew about the Williams scam while it was drafting its policy my call was never returned. Additional evidence has been released this year by federal and state investigators that show a pattern of deceit by energy companies and give credence to the claims that California’s energy crisis was manufactured. To think that some of these companies influenced President Bush’s energy policy is like asking a convicted murderer to decide his own fate.

Unfortunately, with a change in leadership in the Senate and the House it doesn’t appear that new information about the energy task force will be released anytime soon, according to John Hess, an aide to Senator Barbara Boxer, D-California.

“According to our energy person, the Commerce Committee has no plans at this time to hold a hearing on Cheney and his Task Force. With the change in the majority, I’m not surprised that the Republicans who now control the Committee agenda prefer not airing this issue further.”

But this latest saga is just an example of why it’s crucial that Cheney release the names of the people in the energy sector he met with while preparing the President’s energy policy. Cheney’s stonewalling tactics have bought the administration some time. But the heat is on.

JASON LEOPOLD can be reached at: jasonleopold@hotmail.com

 

JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

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