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Deregulation introduction
Analysis of the impact of deregulation
Increased complexity of power bills
Enron tested deregulation ploy in Alberta
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Utility industry is in shambles
12 years after deregulation in the UK

Enron tested ploy in Alberta

Bankrupt firm manipulated provincial electricity system, evidence suggests

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Enron tested ploy in Alberta
Bankrupt firm manipulated provincial electricity system, evidence suggests
Jason Markusoff
The Edmonton Journal

EDMONTON - Newly unearthed evidence suggests Enron Corp. manipulated the Alberta electricity system during deregulation's early stages to reap revenues of $45 million in a single day, part of a scheme code-named "Project Stanley," likely a nod to the Stanley Cup trophy.

The documents and taped transcripts signal that the infamous, now-bankrupt energy firm used Alberta as a training ground in 1999 before it launched similar price-rigging schemes in following years that prompted California's energy crisis and rolling blackouts, said a lawyer for the Washington state public utility.

"It was testing for more extensive market manipulations they had planned later for the California market," said Eric Christensen, assistant general counsel for the Snohomish County Public Utility District, which is fighting to get judges to nullify a $122-million US lawsuit Enron filed against it.

The new evidence has prompted Christensen and Alberta critics to call for renewed probes into Enron's Alberta trading. The scheme appears to have occurred in June 1999, a period during which the province's energy administrator warned the federal Competition Bureau it observed "bidding behaviour that appeared to be consistent with criminal bid-rigging."

The bureau raided the Calgary offices of Enron Canada and Powerex (an arm of B.C. Hydro) in 2000, but concluded later that year it found no collusion.

A bureau spokesman said Friday officials are aware of the Enron evidence, but federal laws prohibit the arms-length watchdog from revealing whether it is considering or performing a new investigation.

An aide to Alberta Energy Minister Greg Melchin said the minister had been in government meetings all day and was unprepared to comment, but would do so next week.

Liberal energy critic Hugh MacDonald urged a full public inquiry into the matter, citing this as a likely example of how Alberta's energy deregulation saw power prices skyrocket in the province.

"This new evidence is very, very interesting, and Alberta electricity consumers deserve an answer," he said.

The Snohomish utility released one memo indicating Project Stanley had reached the desk of many high-profile Enron officials, including then-CEO Jeffrey Skilling and executives of Enron Canada, its northern branch which was active in the Alberta energy market until the months after its once-mighty parent firm collapsed in late 2001 after a web of fraudulent accounting and bloated profits were uncovered.

By conspiring with other firms to file exaggerated bids, withhold power from the grid and make it appear that the supply and demand of Alberta's electricity system had suddenly gone berserk, traders were able to force a drastic spike in the spot price of electricity, according to an analysis by U.S.-based Frontier Economics for Enron.

"Traders can seek to increase prices by bidding up prices in the (Alberta Power) Pool or withholding capacity," said the analysis, which was also released by Snohomish.

The company would profit by selling power when system prices were high. In one June 1999 day, the tactics allowed Enron to raise revenues by $45 million in 22 hours, while electricity prices shot up.

Doug Downs, a spokesman for Edmonton utility Epcor, said price spikes like the one Enron would have triggered would not force consumer electricity prices to rise, unless they were sustained over a long period.

The Enron analysis cited a company identified by the symbol PWX as having participated in the bidding plot.

Powerex dismissed the evidence as nothing new.

"This is all the same stuff, it's just been rehashed," company spokeswoman Elisha Moreno told Reuters news agency.

"This doesn't mean anything for us.

We were already exonerated of it.

"This doesn't raise any new concerns for us."

Powerex had not been contacted by Alberta or federal authorities, she added.

The Competition Bureau probe in 2000 was prompted by the recommendation of the Power Pool of Alberta, which oversees the provincial market. The pool was in turn told by Alberta Energy's Market Surveillance Administrator to request the investigation.

The Alberta Electric System Operator currently manages the pool. Its officials could not be reached for comment.

The government's administrator had investigated Enron as well and found no wrongdoing, Alberta Energy spokeswoman Cathy Housdorff said.

Both probes were performed before 2001, when revelations of hidden debt and inflated profits destroyed Enron. The massive bankruptcy set off a flurry of criminal prosecutions and multimillion-dollar lawsuits, including many which are still ongoing.

Enron claims the utility in Snohomish, north of Seattle, owes it $122 million US for a contract signed at the height of the massive California energy crisis, in which Enron is believed to have used price-rigging schemes with other code names, such as "Fatboy."

Liberal critic MacDonald has previously asked the Klein government for an inquiry into Enron's role in the deregulation of the provincial power system, which began in 1998.

MacDonald, a longtime critic of deregulation, also filed a Freedom of Information and Privacy request for government documents pertaining to Enron. He refused to pay the $15,000 cost the FOIP office told him was needed to photocopy and collect the mountains of data.

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 The Edmonton Journal 2005

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