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News Release
Decision Delayed to Open Formal PGE Investigation into Energy Trades
 
June 13, 2003 (2003 - 016)
 
Contacts:  Roy Hemmingway, Chairman, 503 378-6611; Lee Beyer, Commissioner, 503 378-6611; Bob Valdez, Public Information Officer, 503 378-8962
 
Salem, OR – Today the Oregon Public Utility Commission postponed a decision whether to open a formal investigation of possible misconduct or mismanagement in connection with past trading practices between Portland General Electric (PGE) with an Enron affiliate, and past trading practices of PacifiCorp and Idaho Power.
 
The Commission stated again its commitment that it will hold customers harmless for any penalties imposed by the Federal Energy Regulatory Commission (FERC) or any other authority related to trading activity during the western electricity crisis of 2000-01.
 
"We reaffirm today that customers will not be harmed," Commission Chairman Roy Hemmingway said. "Shareholders who accepted the risk when they bought the stock will be responsible for paying any fines or penalties that may be imposed as a result of ongoing energy trading investigations."
 
Commission staff said while it remains convinced there is enough evidence to warrant opening formal investigations, staff believes it would make more sense to make that decision and proceed with any investigation when the full record from the FERC cases is available.
 
"This course of action will allow the Commission to proceed with its investigation without having to make mid-course adjustments to account for continuing developments at FERC," added Commissioner Lee Beyer.
 
The commission staff released the final version of a 46-page report that examined the western markets in 2000-01 from the perspective of whether the activities of Oregon's three investor-owned electric utilities violated any Oregon statutes or Commission rules or orders. The staff focused on conditions imposed in the Enron merger with PGE, requirements for dealings between affiliated companies, and the Commission's general authority to set rates.
 
In its report, the staff argues that PGE mismanaged its trading activities with its affiliate, Enron Power Marketing, Inc. (EPMI), citing PGE's involvement in "Death Star" deals with EPMI and its failure to post transactions with EPMI properly.
 
PGE claims it unwittingly participated in the Death Star trades. However, the report states that the company should have questioned the deals offered by Enron Power Marketing Inc. (EPMI) for several reasons:
  • PGE should have been cautious in its dealings with EPMI because it is subject to regulatory requirements that prohibit it from giving undue preference to its affiliates.
  • PGE reviewed and then rejected a deceptive trading strategy proposed by EPMI in 1999, but did not scrutinize the Death Star deals to the same extent.
  • PGE managers and traders knew the transactions were being done to get around certain restrictions imposed by the California ISO.
  • The convoluted nature of the deals should have raised red flags.
PGE also discovered and then reported to federal and state authorities that it made posting errors in 65 percent of its transactions with EPMI (1,290 out of 1,979) during 1999-2001. PGE asserts the posting errors had no effect on market prices. The posting requirements are designed to ensure that PGE does not favor its affiliates by buying at a higher price or selling at a lower price that it is willing to offer others.
 
The staff report also states that an investigation into misconduct and mismanagement by Idaho Power Company may be warranted because it has admitted several violations of federal requirements relating to dealings with affiliates.
 
The Commission remains active in two multi-state refund cases and is participating in ongoing FERC investigations into possible market manipulation and contract modification.
 
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