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Letter from FERC Chairman Pat Wood, III to Senator Barbara Boxer
In Response to Senator Boxer's Concerns Regarding Enron Tapes
June 7, 2004
The Honorable Barbara Boxer
United States Senate
Washington D.C. 20510
Re: San Diego Gas & Electric Co. v. Sellers of Energy and Ancillary Services, et al.,
Docket No. EL00-95
Public Utilities Commission of the State of California v. Sellers of Long Term Contracts to the California Department of Water Resources, Docket No. EL02-60
Fact-Finding Investigation of Potential Manipulation of Electric
and Natural Gas Prices, Docket No. PA02-2
Dear Senator Boxer:
Thank you for your June 2, 2004 letter with regard to the recently released audiotapes of conversations among Enron energy traders. You state that these tapes constitute clear evidence that California ratepayers were robbed during the electricity crisis. You urge the Commission to immediately refund $8.9 billion to California and to order renegotiation of long-term contracts that were entered into at a time when prices were subject to manipulation. You state that, if the Commission does not order this relief, then it is sending a signal to energy companies that they will not be held responsible for their wrongdoing.
The Commission takes very seriously your concerns about market manipulation. The Commission has received copies of the tapes you mentioned, and is pursuing Enron's misdeeds in every way possible. In addition, the Commission continues to pursue refunds or disgorgement of profits in other proceedings related to California's electricity crisis, including the ongoing investigations into gaming by Enron and others. To date, the Commission has approved, or had a role in other agencies' approval of, numerous settlements that grew out of dysfunctions in California energy markets. These settlements amount to over $3.1 billion. This sum does not include the refunds that will be assessed at the conclusion of the refund proceeding, which are likely to be in excess of $3 billion.
The Commission has worked persistently to resolve the issues in the refund proceeding so that refunds may be distributed. Based on the Commission's rulings, the California ISO estimates in its most recent status report that, barring further delays, it will complete all phases of the refund process by December 2004.
Last, you mention renegotiation of long-term contracts. Modification of long-term contracts entered into by market participants in California was sought in several complaint proceedings. After extensive evidentiary proceedings and a supplemental 100-day discovery proceeding, the Commission found no evidence that there was market manipulation specific to the long-term contract negotiations and no evidence of unfairness, bad faith or duress in the negotiations of the long-term contracts. The Commission's rulings have been appealed and are now pending before the 9th Circuit Court of Appeals.
Let me assure you that the Commission understands the significance of these developments to the citizens of California. Your letter and this response will be placed in the public file in the above-referenced proceedings, which serves to alert the Commission to the concerns of interested individuals and groups. If I can be of further assistance to you, please do not hesitate to contact me.
Pat Wood, III
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