09.24.02

Senators Call on Conferees to Include Strong Consumer Protections in Electricity Title

Daschle, Five Energy Conferees sign Cantwell letter

WASHINGTON, DC – U.S. Senator Maria Cantwell (D-WA) today announced that she was joined by 34 Senators, including Majority Leader Tom Daschle (D-SD) and five energy bill conferees, Senator Jim Jeffords (I-VT), Senator John Kerry (D-MA), Senator Harry Reid (D-NV), Senator Max Baucus (D-MT), and Senator Joseph Lieberman (D-CT), in sending a letter to Energy Committee Chairman Jeff Bingaman (D-NM) and ranking member Frank Murkowski (R-AK), calling for enhanced consumer protections in the electricity title of the energy bill currently in conference.

"This letter sends a clear message that more than a third of the Senate has serious concerns about the electricity title in the energy bill," Cantwell said. "Since the Senate passed this legislation, much more compelling evidence has surfaced about the manner in which Enron and others were allowed to manipulate energy markets to the detriment of the consumers and economy of the West. Now is the time to improve not roll back the protections afforded our nation’s electricity consumers. Unfortunately, the Senate electricity title must be significantly improved to meet this goal, and the House title offered last week is an even bigger leap backward."

"I’m afraid that both versions give the Federal Energy Regulatory Commission more authority to pursue deregulation plans that have already cost western ratepayers billions of dollars, and threaten chaos in our nation’s energy markets as a whole," Cantwell said. "If energy bill conferees cannot come to an agreement on language that appropriately responds to the western energy crisis and the collapse of Enron by ensuring effective regulatory oversight to prevent, detect and remedy market manipulation – in a manner sensitive to regional differences – then they should not include an electricity title in any final energy legislation."

The text of the letter and a list of the signers follows:

September 24, 2002

The Honorable Jeff Bingaman, Chairman The Honorable Frank Murkowski, Ranking Member Senate Committee on Energy US Senate Washington, D.C. 20510

Dear Chairman Bingaman and Ranking Member Murkowski,

As you proceed with efforts to craft final energy policy legislation, we urge you to consider the reports of electricity market abuse and corporate malfeasance that have come to light since the passage of S. 517, the Senate energy bill. In light of recent events, we believe it is necessary that Congress take additional steps to restore confidence in the energy industry and protect electricity consumers from market manipulation.

During consideration of S. 517, the Senate debated measures necessary to oversee wholesale electricity markets, prevent market manipulation and ensure that rates are just and reasonable—particularly given the Western energy crisis and collapse of Enron. Since passage of S. 517, however, consumer and investor confidence in the utility industry has reached an all-time low. Revelations of unethical and sometimes illegal activities within the energy sector have further demonstrated the absence of adequate market structures and oversight to prevent these activities from reoccurring:

· Enron (and others) employed numerous trading schemes to artificially restrict power supply and raise prices in the West. These manipulative practices came to light only because Enron’s lawyers released key documents during an investigation requested by Congress--not through any independent discovery by federal or state regulators.

· Numerous energy marketers engaged in "wash trades"–power sales designed only to boost perceived trading volume and, potentially, inflate market prices. The pervasiveness of this scheme, as well as other manipulation strategies, remains under investigation by the Federal Energy Regulatory Commission (FERC) and Commodity Futures Trading Commission (CFTC).

· Market manipulation is not limited to Enron or the West: allegations of abuse abound throughout the country, even in the much-heralded PJM market. As recently noted by the head of the PJM market monitoring unit: "I don’t think any energy market is immune to manipulation."

· The GAO assessed the capabilities of FERC and determined that the Commission is not performing the market oversight needed to ensure just and reasonable rates.

· Allegations of abuse and rating agency downgrades have shaken investor confidence, with one analyst quoted in Business Week stating that "there’s overall investor disgust with this sector now." As a result, it is more difficult for energy companies to attract the capital required to build needed infrastructure. It also makes further contraction – and less competition--within the utility industry more likely.

We need to advance a regulatory and market structure that promotes ethical business practices, ensures fair competition, provides effective market oversight and aggressively prosecutes those who seek to circumvent the rules. Regrettably, electricity provisions pending in conference fail to provide the necessary framework and safeguards. Congress must ensure that:

· Market rates can be charged for utility services only when truly competitive markets—those that bear just and reasonable rates--exist;

· All energy transactions are subject to effective regulatory oversight to detect, prevent and correct market manipulation and abuse;

· Energy companies are held to the highest business standards – and companies and their executives are penalized if they violate the public trust;

· Market transparency and early-warning systems are established to make sure allegations of market abuse are known and corrected.

As the Western energy crisis and Enron’s collapse made clear—and as recent revelations have reinforced— the market is ripe for manipulation unless clear safeguards are put in place and companies are held accountable. Consumers and investors alike must be reassured of our energy markets’ integrity. It is our hope that this ethic will be adequately reflected in any electricity legislation the Conference Committee reports back to the Senate.

Sincerely,

Senator Maria Cantwell (D-WA) Majority Leader Tom Daschle (D-SD) Senator Mark Dayton (D-MN) Senator Russ Feingold (D-WI) Senator Susan Collins (R- ME) Senator Olympia Snowe (R-ME) Senator Debbie Stabenow (D-MI) Senator Lincoln Chafee (R-RI) Senator Barbara Boxer (D-CA) Senator Jim Jeffords (I-VT) Senator Ron Wyden (D-OR) Senator John Kerry (D-MA) Senator Patrick Leahy (D-VT) Senator Carl Levin (D-MI) Senator Bill Nelson (D-FL) Senator Tom Harkin (D-IA) Senator Byron Dorgan (D-ND) Senator Daniel Inouye (D-HI) Senator Jean Carnahan (D-MO) Senator Max Baucus (D-MT) Senator Jack Reed (D-RI) Senator Herb Kohl (D-WI) Senator Tim Johnson (D-SD) Senator Daniel Akaka (D-HI) Senator Patty Murray (D-WA) Senator Christopher Dodd (D-CT) Senator Dick Durbin(D-IL) Senator Paul Wellstone (D-MN) Senator Hillary Clinton (D-NY) Senator John Corzine (D-NJ) Senator Chuck Schumer (D-NY) Senator Joseph Lieberman (D-CT) Senator Harry Reid (D-NV) Senator Ben Nelson (D-NE) Senator Edward Kennedy (D-MA)