[Congressional Record Volume 150, Number 82 (Tuesday, June 15, 2004)]
[House]
[Pages H4147-H4153]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MANIPULATIONS OF ENRON
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 2003, the gentleman from Washington (Mr. Inslee) is
recognized for 60 minutes as the designee of the minority leader.
Mr. INSLEE. Mr. Speaker, I came tonight to the floor of the House to
address an outrage, perhaps the largest fraudulent activity in American
history which has resulted in literally billions of dollars being
stolen from American ratepayers for electricity in the western United
States. And this, of course, is the outright theft from West Coast
ratepayers by the Enron Corporation. And I have come to the floor
tonight because, unfortunately, the energy bill that passed this
Chamber today did absolutely nothing whatsoever to restore one ounce of
justice for the consumers on the West Coast who were so grievously
ripped off by the Enron Corporation.
Mr. Speaker, the sad fact is that today the House of Representatives
had an opportunity to do something about an outrage that has not been
remedied now despite our efforts for the last 3 years. Because the sad
fact is that the Enron Corporation and others manipulated with
unfortunately great effect the energy market in the West Coast starting
in 2000. This manipulation resulted in West Coast ratepayers paying
conservatively in the billions of dollars of overcharges to Enron and
other energy traders. And the law of the United States as written is
designed to prevent that and does prevent that if we had a cop on the
beat to enforce the laws. But, unfortunately, what happened in the
years 2000 and 2001 is that Enron found a way to gain the system. They
found a way to essentially shut off generating capacity for the western
coast of the United States and, as a result, drive up the prices
dramatically, and they were unfortunately successful in this outrageous
conduct. In fact, rates being paid by utilities, and therefore
ratepayers in the western United States went up by a factor of a
thousand percent, sometimes on a daily basis. And Enron was successful
in doing this because they decided not to follow the law. And,
unfortunately, they had some allies in not following the law, and that
was this Federal Government, which did not enforce the law of the
United States and allowed Enron to foist billions of dollars of
overcharges on the ratepayers on the West Coast.
Now, just to put a sense on how grievous this is, in Snohomish
County, Washington, in the northern Puget Sound area, an area which I
represent, ratepayers are still paying today half as much more than
they should be paying, 52 percent more than they should be paying for
electricity due to the depredation, the rapaciousness of the Enron
Corporation.
This is now over a billion dollars in the State of Washington of
overcharges that ratepayers are still paying today. And we believe, at
least on my side of the aisle, that the Federal Government should take
action to get refunds back from the Enron Corporation as a result of
these wrongful activities.
Unfortunately, today, the Republicans refused to allow an amendment
to be even voted on in this Chamber to get that money back for
ratepayers on the West Coast. It would have been a simple amendment. I
offered it in conjunction with the gentleman from California (Mr.
Filner) and the gentleman from Oregon (Mr. DeFazio), that would have
required that refunds would have been given to these ratepayers going
back to the year 2000. But unfortunately the majority party decided to
side with Enron, the bankrupted corporation, bankrupt both fiscally and
morally. They sided with Enron rather than with consumers and stood
against giving consumers the refunds that they are owing.
{time} 1815
This is outrageous, and I know it is outrageous because the offenses
of which I speak are not hypothetical. We have very clear evidence of
what Enron did, and that evidence has been disclosed by very vigorous,
assertive, and healthfully combative Public Utility District in
Snohomish County PD, in Snohomish County, Washington, because what they
did was they forced the disclosure of audio tapes that these Enron
traders had kept of their conversations when they came up with their
nefarious deals.
The Bush administration and their Federal Energy Regulatory
Commission did not want the public to hear these tapes. They did not
want the public to have access to the gamesmanship that went on that
cost consumers so many millions of dollars, but Snohomish County PD was
very energetic in getting these tapes released. Now they have come
forward, and what is on these tapes would shock even the saltiest of
sailors, not only because of the language that was used but because of
the immoral, unethical conduct where these traders basically sacrificed
willingly the ratepayers in order to juice out another million dollars
or so a day for the Enron Corporation.
I would like to go over some of these, and we have deleted the
expletives that were unfortunately frequently in their conversations,
but we are trying to keep the gist of their conversation, and I am just
going to refer to some of them here. These are audio tapes transcripted
by Snohomish County Public Utility District of traders for Enron
Corporation talking to one another.
First trader: So the rumor is true that they are taking all the blank
money back from you guys, all that money you stole from those poor
grandmothers in California?
Response: Yeah, Grandma Millie, and she is the one who could not
figure out how to blank vote on the butterfly vote.
Response: Now she wants her blank money back for all the power you
jammed her for, for $250 per megawatt hour.
That is a conversation between Enron traders.
Now, when they talk about jamming Grandma Millie, what they mean by
this is they have constricted the supply down, going to the California
ratepayers and Washington for that matter and, therefore, boosted the
price up, in this case to $250 a megawatt hour, in many cases up to
$1,000 a megawatt hour, 10 times what was the previously going rate.
Now this type of conservation was repeated over and over and over
again by these traders.
Second example. The Enron traders discovered a handy little
technique. They found a way to congest transmission lines so that when
they were congested, energy could not get through. So they would
willfully schedule transmissions in a way that would prevent
transmission from occurring, and when that happened, the price
skyrocketed because of the existing demand. So here is a conversation
here. They are talking about the congestion.
Then the other trader states: If the line's not congested, I just
look to congest it. If you can congest it, that is a money maker, no
matter what.
And it was a money maker, because when they congested these lines,
the price skyrocketed, sometimes tenfold, and when it skyrocketed,
several things happened. First off, you actually had brownouts in
California, but you also forced utilities like Snohomish County Public
Utility District in Washington State to enter into long-term contracts
to try to ameliorate, to try to reduce the outrageous hits they were
taking in these skyrocketing prices. Enron tried to sort of lure them
into these long-term contracts and were sometimes successful because
they were punishing ratepayers with these outrageous prices.
Third example. The Enron traders talked about who they would like to
be running the Federal Government, and they talked about it in terms
about who would be on Enron's side. They talked about who would be
favorable to Enron, who would sort of wink at the wrongful actions by
Enron, who would be sort of the cop who was asleep at the switch; and
they reached a conclusion pretty quickly.
First off, they noted that Enron was the biggest contributor to the
election campaign of President George Bush. They then noted that would
it not be great if the next Secretary of Energy was Ken Lay, the
disgraced CEO of the Enron Corporation. What they said was, How great
would that be for all the players in the market. He would open these
markets up.
Now, they were right on that. If Ken Lay was Secretary of Energy, he
would have opened up these markets and
[[Page H4148]]
would not have taken any steps to try to tamp down the rapacious
behavior of Enron, but it turned out they did not need Ken Lay as being
Secretary of Energy because the people in the Bush administration were
quite effective in not doing anything to lift a finger to stop Enron
from gouging west coast ratepayers. They got what they wanted. They got
cops on the beat who just winked and let the bank robbers take money
out the door without doing anything about it.
It is very interesting here. The prediction of the Enron traders
that, number one, they could congest these lines and drive up prices
was accurate, much to the damage of people in Washington, Oregon and
California; but their second prediction, that the President of the
United States would let them get away with it, was accurate, too. That
is the reason why it was such a grand shame here today when the
Republican Party would not let this House vote on an amendment to
simply enforce these laws, to finally blow a whistle on Enron and blow
a whistle on the Bush administration for their failure to enforce this
law.
I would like to yield to the gentleman from Oregon (Mr. DeFazio) who
has been fighting this battle now for several years, who has been a
stalwart on it, who has a never-give-up attitude.
Mr. DeFAZIO. Mr. Speaker, I thank the gentleman for his leadership on
this issue.
Of course, the interesting thing is that we in the Pacific Northwest
were the tail of the dog here. On manipulated markets for profit in
California, they drove up wholesale markets West-wide. In fact, some
570 days they manipulated markets. It has now been found to be more
than 460 days.
The gentleman might remember the meeting we had with Vice President
Cheney just about 3 years ago now. We got a bipartisan meeting together
and Democrats and Republicans came together and said to the Vice
President, as Northwesterners we are really concerned about what is
happening with electricity prices, $2,000, $3,000 a megawatt. This
cannot be market forces at work. Energy is usually selling at $30 a
megawatt, $40 a megawatt. Out in the Pacific Northwest, it is 50, 100
times more.
You probably remember the Vice President. He dismissed us with his
usual, it is hard to say, I guess sneer would be the best way to say,
and say we just simply did not understand, poor little babies. These
were market forces at work. This had nothing to do with market
manipulation, absolutely nothing; and if we did not build a 500
megawatt plant a week for 16 years, this would continue, $2,000, $3,000
megawatt energy.
A funny thing happened on the way to the market forces here, and that
is, the Senate changed hands. Diane Feinstein then managed to schedule
a hearing to bring in the people from the Federal Energy Regulatory
Commission and other people from the Bush administration to have them
testify on the record under oath about these market forces; and you
know what, they suddenly decided there was market manipulation. They
quickly imposed price caps, and then the whole thing began to unravel.
They protected their contributing class of Mr. Lay and others as long
as they could. As these gentlemen said here in these transcripts, Enron
was the single largest contributor to George Bush, and Ken Lay was the
single largest individual contributor to George Bush over his lifetime
until this campaign. He may still well be contributing and the
President may still be taking his money. Ken Lay has not gone to jail
yet so I guess he can still contribute.
Mr. INSLEE. Mr. Speaker, I think it is important to go into our
conversation in some detail with the Vice President.
This was a bipartisan meeting with members of the west coast
delegations, and what we did is we laid out the evidence for the Vice
President, and stoplights in California were not working at the time we
were talking to the Vice President of the United States, begging him
for assistance. What the evidence we showed him was that at the time we
were talking to him fully 32 percent of all the generating capacity in
the west coast of the United States was turned off. At the time that
stoplights were going out in California, Enron and its co-conspirators
had turned off almost a third of all the generators in the west coast.
They have tried to lay this excuse that, well, we were maintaining
them, which was pretty lame because on the average in the last 12 years
there has only been 2 to 4 percent of these plants down.
So what we told the Vice President, in a pretty cogent way is, Mr.
Vice President, it is obvious someone is gaming the system. There is
clear manipulation going on. There is skullduggery. This is a scandal.
One-third of the generators are turned off. You are causing brownouts
in California. We are having 1,000 percent run-ups in the State of
Washington. We need your help. We need your help to force FERC to
enforce the law. And I will never forget what he said to that request.
He looked at us in the eye, and he said, and this is about as close
to a quote as I can come: you know what your problem is, you just do
not understand economics. Now, we do understand economics. My degree
happens to be in economics. It is just that we do not understand
Enronomics. We do not understand Enronomics that the President and the
Vice President of the United States sit on their hands and do nothing
while consumers are gouged 10, 20 billions of dollars a year and are
still suffering as a result of this Federal Government's refusal to
act.
Mr. DeFAZIO. Mr. Speaker, we need to spend more time on the past here
because people need to understand what happened with this market
manipulation, and in fact, of course, the head of the Federal Energy
Regulatory Commission, Pat Wood from Texas, chosen by George Bush and
Ken Lay, wants still to push forward with this deregulation model and
impose it on the rest of the United States of America. After all, it
was a great success. The only problem was that Enron got caught. A few
people made a lot of money. A lot of people had to pay a lot more for
their electricity, but that is kind of the way they run the tax system
in this country.
I would like to draw a parallel to something that is even more on
people's minds. In the Northwest now it is not the heating system. The
high rates are not quite as troublesome, although they certainly
trouble our businesses every day, particularly those that are energy
intensive and are contributing to our high unemployment rate, but I
would compare it to what is happening with gasoline.
We are hearing the same refrain from the administration about the
prices of gasoline, that these are market forces. Yet, in the last 10
years, there have been 2,600 mergers in the oil industry. We find that
every company in the oil industry, those few that are left, are
enjoying record profits; and they are saying, oh, these are just simple
market forces at work, and again, refusing to act, and of course, this
time there is no prospects, since they control both Houses of Congress,
that someone can convene hearings to get to the bottom of the market
manipulation that is going on here.
It starts with OPEC, and the President, of course, is a great
believer in free trade. If he is such a believer in free trade, why is
he letting the OPEC countries violate the World Trade Organization? Why
not file a complaint? I have sent him two letters to that extent and
have had no response.
Beyond that, there are certainly other things he could do. A much
braver Congress and more independent Congress years ago imposed a
windfall profits tax on the industry and took other dramatic steps to
help save American consumers, but they will not do that. It is the same
thing that happened with electricity here.
There are a favored few who I would call the contributor class. Most
of the people who made the money here are Pioneers or Rangers for the
President. Most of the companies that manipulated the market just
happen to be based in Texas, and they are still profiting from these
contracts because they will not allow your amendment.
I mean, if anything is an illegitimate contract, if you read these
obscene transcripts, which we could not read on the floor of the House,
the FCC would be on top of us, of these so-called traders of Enron and
what they were doing to manipulate and the language they were using and
what they were doing to people, if these are not illegitimate
contracts, extorting people illegally in
[[Page H4149]]
the Northwest and elsewhere, I do not know what is; but they will not
allow us to debate an amendment on that issue on the floor.
Mr. INSLEE. That is correct and the reason this is such a shame now
is that for over 2 years we urged the administration to act. They did
not act. There was an obvious defrauding going on, an obvious offense,
an obvious crime. They let the embezzlement in a sense continue, and
then told us they cannot get the money back for us. I want to make sure
people understand this.
First, when we asked for relief, the President and the Vice President
said you are on your own, we are not going to help you. They said that
for 2 years. Finally, in 2003, they said, okay, now we give up, we are
going to offer some price caps, and they finally gave us some relief in
2003.
{time} 1830
But the horse was well out of the barn after 2 years of theft. What
happened was they allowed that money to go to Texas. A lot of people in
Houston bought mansions with the money we paid on the west coast, with
money they stole from the west coast. The former Texas Governor let
them steal it and did nothing for 2 years. Those people are now in
Texas with money in bankruptcy that we cannot get.
Now because of the combination of President Bush's inaction and
failure to follow his responsibility and the bankruptcy laws, this
money is gone. But at least we ought to be able to stop Enron from
getting another $122 billion from Snohomish County.
Mr. Speaker, I yield to the gentlewoman from California (Mrs. Davis)
who has been a tremendous advocate from the very beginning trying to
get some action by this government for California ratepayers.
Mrs. DAVIS of California. Mr. Speaker, we did have an opportunity to
address this issue today. We had an opportunity to say something
happened 4 years ago that needs to be remedied today. Unfortunately, we
did not act.
I want to go back for a moment and talk about what our experience was
and what happened. When energy prices spiraled out of control beginning
4 years ago yesterday with the major blackout in California, we were
told it was just because California had not built enough energy plants
so there was not enough supply for the demand; but there was. Power had
been turned off by the energy companies to create a false shortage and
exorbitant prices. In fact, the power plants had 37 to 46 percent of
capacity that was untapped.
The tapes of Enron employees which were finally revealed recently
make that abundantly clear. They said, ``There are ways you can go and
run through the congestion process, get paid for congestion, and then
cut your power and just collect the money.''
But in San Diego, we have known that the market was being manipulated
for most of the 4 years since it began.
Workmen at Duke's Otay Mesa Energy plant revealed early on that they
had been ordered to turn off the generators and say that maintenance
was needed. They had been ordered to do that. Then they were told to
destroy parts so that no maintenance could be completed and the power
supply would continue to be turned off to create an artificial
shortage. Yet the Federal Energy Regulatory Commission, FERC, refused
to investigate. Their legal role was to ensure ``just and reasonable
rates,'' but they let the rates skyrocket without action.
Throughout that summer, we petitioned them to hold hearings and to
put a cap on rates, but they refused to act. For over a year and a
half, there had been details not only of Enron's manipulation, but of
gaming by other energy companies. Reliant traders also bragged of
shutting down much of the energy production, gloating, ``Isn't it fun
when you can do things like that now?''
Tapes were found of Williams employees conspiring to cut supply. I
recall public hearings at the time where representatives of these
energy companies denied any gaming of the market. A number of us were
at these hearings and we were trying to push, trying to understand, and
they denied any possible gaming of the market. With other elected
representatives I heard the president of our local utility declare they
were just ``passing on their costs,'' but they neglected to tell us
that their existing lower cost contracts for natural gas to run their
plants were not being used for the local facilities, but were being
sold on the market at an enormous profit.
And did FERC investigate these acts and hold the energy companies
accountable? Members know the answer to that. No. Instead, they held
private meetings with the power company seeking settlements out of the
public eye for a few cents on the dollar.
In San Diego where the rates first soared, so many people suffered. I
remember going to local restaurants, small business owners whose ice
cream stores could not cut back the electricity, and they had to go out
of business. A bakery that closed, mom and pop shops with very narrow
margins wiped out by triple energy prices. Frail, elderly people on
fixed incomes who could not afford to run their fans or air
conditioners when inland temperatures soared.
And when winter came, the natural gas line coming from Texas suddenly
cut off half the volume. Natural gas prices exploded, and folks could
not afford to heat their homes. Museums housing precious objects,
churches and synagogues and nonprofit agencies could not expand their
limited budgets for this enormous line-item increase, and they could
not just put a surcharge on the price of their services as some
businesses chose to do. Schools and colleges had to cut supplies and
programs. To save energy, grocery stores turned off half of their
lights, having been told supply was the problem.
I remember clearly we felt like we were in the dark no matter where
we went. Our city felt under siege. Worse, the community ratepayers,
the small businesses and families who suffered, have not received
rebates in proportion to their losses, $9 billion in unjust charges.
So we must not let this prevail. We must not be silent. We must
continue to advocate and to let our voices be heard because our voices
are the voices of our communities, and they know this was unjust and
they know this was not reasonable; and that is why we must continue to
speak out. That is why I am so disappointed today, and thank the
gentleman from Washington (Mr. Inslee) for holding this Special Order
because we could have handled this today. We could have addressed this
issue today, and we chose not to do it.
Mr. INSLEE. Mr. Speaker, I appreciate the gentlewoman's eloquent
statement, but I think it is important to state that the Democrats on
this side of the aisle, we were prevented from having this amendment
brought up. Think about the outrage, when we want democracy in Iraq, we
do not have democracy on the floor of the House. The House is not even
given an opportunity to vote on an amendment to get refunds.
To show how callous these Enron traders that the Republican Party has
now decided to accommodate by not allowing this amendment even to be
voted on, I want to read one transcript to let Members know what the
Enron corporation was like. Here is a trader that says, Kevin, there
was a guy here yesterday. He is some consultant for some ``blank''
other business we are supposed to be starting over. He said the guy
came in and he said I am in California now, and my small consulting
business, my energy costs have gone from $100 to $500 a month. It is
unbelievable. I do not know what to do.
The trader said, I just turned from my desk and looked at him and
said, Move.
Mr. Speaker, that was a very heartfelt comment, and that was Enron's
attitude and apparently that is the Republican Party's attitude. He
should have moved from the west coast because we are not going to do
anything for refunds.
The same trader continued saying, ``The best thing that could happen
is if there was a `blank' earthquake and let that thing,'' meaning the
west coast, ``float out to the Pacific where they can just light
candles.''
That is the attitude of Enron and that is the attitude of the
majority party, apparently, that would not allow us to take action to
do something about this travesty. California was hit, Oregon was hit,
Washington was hit; and we are still suffering today.
Mr. Speaker, I yield to the gentlewoman.
[[Page H4150]]
Mrs. DAVIS of California. Mr. Speaker, it is very disappointing
because when people deal with these issues, they are not dealing with
it in a political context. This is not political. This is about the
lives of people, their businesses and how they conduct themselves. When
the public hears the kinds of statements made by those traders, they
look to us, they look to us for help, for support. That is why it is
important that this House which represents the people, whether
Democrat, Republican, Independent, needs to respond; and that is why
this was such a disappointment today.
Mr. INSLEE. The reason we need to respond is the administration has
not. Beginning in 2000 and 2001, we have made every concerted effort to
get the administration to impose some type of relief, price caps or
otherwise. They refuse to take any steps. They sat on their hands. As
Bonnie and Clyde ran out with the bank notes, these people sat there
and watched this theft occur and did not lift a finger for 2 years.
Now in 2003, because they were so ashamed by what was going on, they
finally issued some price caps. But unfortunately according to their
commissioner, and this was on June 4, and this is amazing, talk about a
catch-22 here, this administration's agency, the Federal Energy
Regulatory Commission, whose job it is to protect consumers, they wrote
me a letter. I urged them to take action to get refunds for people up
and down the west coast.
They wrote me a letter and told me, number one, we have concluded
there was massive violation of the law by Enron. We have concluded that
there was manipulation. We have concluded there was gaming of the
system. We have concluded in essence that there was congestion caused
to shut down access to drive the price. We have concluded there was all
of this skullduggery and scandal. But we do not think we have the
authority to act to get refunds back from the people who had all of
this money embezzled before 2003.
So here we have this administration saying we concluded there was a
huge crime here. There was robbery, fraud, and embezzlement, and we
know how much was taken from ratepayers; but golly gosh, we cannot do a
thing about it.
Mr. Speaker, we had a chance today to do something about it to make
it the law of this land that we are going to get those refunds, and the
majority party refused to even allow that to come up for a vote, and it
is a double scandal. It is a scandal that would make Enron proud.
Let me make reference to one thing, when there was a fire that shut
down a transmission line and prevented transmission of electricity to
California which allowed Enron to boost the rates almost a thousand
percent, a trader said, ``Burn, baby, burn. That is a beautiful
thing.'' That is why Enron would be very proud of the majority party
today refusing to allow us to vote on something to get refunds for
people. The majority party adopted the ``burn, baby, burn'' approach to
not allow us to do anything to get these refunds.
If there was some question, if it was kind of a close call, like
there are close calls in baseball, was he safe, was he out, if this was
a close call whether Enron gouged west coast ratepayers, then perhaps
there might be an excuse; but there is no excuse here. These tapes are
the equivalent of a videotape of the crime, DNA of their identity,
fingerprints, and a confession after their Miranda rights; and still
when this crime occurred, the Republican Party will not help us remedy
this wrong. We are going to continue this effort.
Mrs. DAVIS of California. Mr. Speaker, we had the tapes that we just
dealt with, and there have been so many other instances along the way
that pointed to the fact that there was outright manipulation. Talk
about a smoking gun, we had a smoking howitzer, and people still did
not respond.
{time} 1845
Mr. INSLEE. Just to give you an example, I just want to read specific
language of two traders. They are talking about whether to keep a
generating plant running or not. One trader asked the operator of the
plant from Enron, ``How hard would it be for you to turn off your plant
and then if we want to start it up later?'' He said, ``It's not that
hard.'' So the Enron trader said, ``If we shut it down, could you bring
it back up in 3 or 4 hours?'' The response was, ``Oh, yeah.'' The
response was, ``Why don't you just go ahead and shut it down if that's
okay.'' And when they shut it down, they boosted these prices up,
sometimes 1,000 percent.
That type of language was found by Snohomish County in at least a
dozen specific circumstances where Enron specifically requested energy
to be shut down. We do not know all of them because we found out they
were actually taking some of these calls on cell phones to try to get
them off their recording system but we have got enough to know there
was a clear crime here.
Mr. Speaker, I yield to the gentleman from Washington (Mr. Baird),
who has so ably advocated for southwest Washington, which also suffered
in this debacle.
Mr. BAIRD. I want to thank my friend for raising this issue and for
his leadership on this and my friend from California as well. What I
would like to do is do two things: First of all talk a little bit about
the impact of this terrible practice on the people of my district and
relate a couple of stories, and then contrast that impact with what the
chairman of the Federal Energy Regulatory Commission said about this
incident.
First let me talk a little bit about schools. I visited a number of
schools in my district during the height of this crisis and asked them
what the impacts of these terribly increased energy rates were. These
were the things I was told. First of all I was told of one school
district that had scheduled to purchase new textbooks for their kids.
These were not because they just were whimsically buying unnecessary
books. I saw the books that they were using. These were books that were
almost a decade old. As you can imagine after that much use, the
binders were torn up. The books were really not serviceable, were not
up to date. But because they could not afford to pay their energy bill,
these school districts were having to forgo the purchases of new
textbooks.
In addition to that, I visited some of the classrooms. Some of the
classrooms were functioning with only half of their lights on and the
kids were literally told you need to wear extra sweaters and coats to
school because we cannot afford to heat your classroom because of these
energy rates.
I talked to senior citizens who told me, Congressman, I am not
necessarily going to be able to pay my rent because of the increase in
power rates. We had utility districts that saw almost a 100 percent
increase in power rates for residential customers. I talked to farm
product producers, refrigeration houses, et cetera, who said they were
almost faced with bankruptcy because the cost of operating their
facilities had gone up so high that they were not able to make ends
meet.
On a much larger scale, we had an aluminum smelter that had produced
some of the highest quality aluminum in the world that was forced to
shut down and is in bankruptcy now and is being parted out, basically
scrapped out. We had 700 or more workers directly affected who lost
their jobs, their health benefits, in some cases their retirement
benefits because electrical prices went through the roof.
In the backdrop of that, of schools not ordering textbooks and
turning off their lights and turning down their heat to levels that the
kids were cold, in the backdrop of senior citizens who could not pay
their rent, in the backdrop of small businesses and farmers who were
forced to close their doors, in the backdrop of more than 700 jobs
permanently lost, I want to share with you a statement by the
individual who could have stopped this but did not. Pat Wood, the head
of the Federal Energy Regulatory Commission, said this on March 4, 2002
in an interview in Business Week:
``I view Enron's collapse as an affirmation of the efficiency of
energy markets.'' I am going to say that again. ``I view Enron's
collapse as an affirmation of the efficiency of energy markets,'' said
Pat Wood.
He continued:
``Here was a player who because of bad investments in noncore
businesses, managerial shortcomings and--to be charitable--accounting
obfuscation, became tainted and lost creditworthiness. Yet, with few
exceptions, energy
[[Page H4151]]
customers have been able to work through those problems without any
real significant impact.'' Let me say that again. The head of the
Federal Energy Regulatory Commission, who refused to act when Enron was
manipulating these prices, who was recommended by the top guns at
Enron, said even as people throughout my district, throughout the West
Coast were losing their jobs, losing their homes, losing their
businesses, said, ``With few exceptions, energy customers have been
able to work through these problems without any real significant
impact.''
My good friend from Washington commented earlier, and I was in the
room with the gentleman from Washington (Mr. Inslee) when we talked to
the Vice President of the United States. We said, Mr. Vice President,
the economy of the West Coast is being devastated by these incredibly
increased power rates. We said, Mr. Vice President, wholesale markets
have gone from $30 a megawatt hour to $3,000 a megawatt hour, a 100-
fold increase. There is no justifiable mechanism that causes such a
basic commodity as this to increase 100-fold. Everybody is complaining
now about gas prices going over $2.50 a gallon. I share that complaint.
But if it were a 100-fold increase in gas prices, gas prices would be
$250 a gallon. That is the kind of price increase we sustained in
electrical wholesale markets.
The Vice President of the United States of America did nothing to
stop that. The head of the Federal Energy Regulatory Commission did
nothing to stop that. As businesses closed, our constituents lost their
jobs and our school districts went broke, they did nothing to stop it.
It is shameful, if not criminal.
Mr. INSLEE. Not only did they do nothing, this House today did
nothing while our consumers are still continuing to pay these
outrageous electrical rates in Snohomish County, Washington, 52 percent
today, still higher. This is the long, dark shadow of Enron that today
we refused to do anything about. I want to go through just a moment of
history of how this administration has and has not acted and why this
ends up with rates being so high.
It is interesting when President Bush was running for office in
October 2000, when he was in San Diego and the prices were just
starting to maybe go up, he said, ``I believe so strongly that part of
this region is going to suffer unless you have a President who is
willing to tell FERC to do what is right for the consumer.'' So when he
was campaigning, he said he was going to make sure FERC did right by
the consumers. He then took the oath of office in January 2001 and the
next thing we heard was from Lawrence Lindsey, his assistant in the
White House who said, ``They should expect no more help from the White
House.'' Message from George Bush to the West Coast: Go fish. Let them
eat cake. As a result, Enron had the green light from the President of
the United States to go embezzle, cheat, gouge as much as they could
from the West Coast and, by gum, Enron got the message. How do I know
that? Here is a quote from one of the Enron traders. This is just right
before the election. ``Matt,'' the Enron trader said, ``you know what?
I'm scooping up every bit of `blank' power I can and take next
summer,'' Tom said, ``because caps won't be there,'' meaning price
caps, meaning he knew the President would do nothing about this
problem.
Matt responded, ``They got to come for it. I'm bound to bet huge on
the election. When this election comes, Bush will `blank' whack that
stuff, man.'' I am paraphrasing the expletives out. ``He won't `blank'
play this price cap stuff. I bet they'll impose a national price cap at
$1,000 and that's fine with me.''
They bet and they won. The Enron traders won when George Bush was
elected to office and when the Republicans controlled the House of
Representatives because they have done nothing for the years 2000, 2001
and 2002 to remedy this bleeding by our consumers.
Just to make sure that people understand we are not kind of making
this stuff up as we go along, I want to read about what the
administration themselves concluded. On March 2003, the Federal Energy
Regulatory Commission issued a final report on price manipulation in
western markets. It found ``significant market manipulation,'' that
``many trading strategies employed by Enron and other companies were
undertaken in violation of antigaming provisions.'' It identified more
than 30 entities that might have manipulated the market. But Catch-22
from the Bush administration, we are not going to do anything about it.
They concluded for 2 years before 2003 there was massive market
manipulation and they refused to lift a finger to give refunds for
people who were victimized. I could understand it if they said we are
not sure if there was a crime here. But when the President of the
United States' own agency concludes that billions of dollars were
stolen from ratepayers in the western United States but they refused to
lift a finger to get refunds, something is rotten in the State of
Washington, D.C., and it is the influence of Enron Corporation still in
the political process of those who still run the Federal Government. We
have got to see some changes around here.
Mr. BAIRD. I want to underscore exactly what you said and how
prescient and remarkably so that the individual cited in the recording
said, ``I'm betting on a $1,000 per megawatt cap'' because that is
exactly the cap that was proposed. Let us put that cap into context.
Again, the average cost before this crisis was $30 a megawatt hour. So
the cap on $1,000 is a 30-fold increase. A 30-fold increase if applied
to gasoline would be over $75 a gallon today. $75 a gallon. Not a
tankful but a gallon. That is the kind of cap they were talking about.
How remarkable. And I do not think it really is remarkable that they
would speculate on precisely the cap that was put in.
Let me line this trail of evidence further. The Vice President of the
United States has claimed executive privilege and has denied this
Congress and the American people access to the names of the people with
whom he consulted in crafting his energy bill. How is it that Enron
traders would so accurately predict the level of the cap that would be
put on in the energy bill? How did they know that? And how coincidental
that the Vice President of the United States will not give us the list
of those names. He is consulting with the very people who are
manipulating the energy markets at the very time they are doing the
manipulation and he is refusing to do anything to stop that
manipulation. And the people of the United States are being hammered
and losing their jobs, losing their homes, losing their businesses, and
the people who are doing the manipulation are talking to the Vice
President about what the energy bill should contain and he is going
along with them and he is refusing to stop them, and now is it any
wonder he refuses to tell the American people with whom he was
speaking.
I want to walk through, if I may, a little bit about how this dynamic
works. Here is the situation our local utility districts were faced
with. Normally they could go on the spot market and buy energy in a
shortfall for between $30 and maybe up to $60 a megawatt hour, but
somewhere in that ballpark. But when prices spiked to $3,000 a megawatt
hour, that is a 100-fold increase, so think about that for a second. If
you have a commodity that goes up 100-fold, then in 4 days of purchase
you have blown your entire annual budget. In 8 days of purchase, that
is 2 full years of your budget. So the utilities were left with a
Hobson's choice. I personally believe Enron, et cetera, created this
choice for a very clear motive. What they did by letting prices spike
to $3,000 a megawatt hour was they then had the utilities over a barrel
and they said, ``Here, we've got a choice for you. If you don't want to
risk that $3,000 per megawatt hour, why don't you just lock in prices
at, say, $250 a megawatt hour,'' roughly the same level that that
quaint trader said he would shove somewhere up some grandmother's
anatomy. The utilities had no choice. Either you buy $250 a megawatt
hour and lock it in for the long haul, thereby forcing your ratepayers
to pay as much as eight times the normal going rate, or you run the
risk of $3,000.
So some of our utilities had no choice but to lock in these long-term
contracts because they had to protect themselves against the risk of
these outrageous short-term power rates. We
[[Page H4152]]
are still paying the cost of that today in Cowlitz County, a county in
my district that saw that aluminum smelter close, saw the loss of more
than 700 jobs, is one of the leading counties in my State in
unemployment, or had been. It is a wonderful county with hardworking,
decent people. Their public utility district saw 97 percent rate
increases. The Social Security COLA runs somewhere between 2 to 4
percent a year, depending on the year. If you are a senior citizen on a
fixed income and you have to heat and light your home, when the Social
Security COLA increases 2 or 3 percent but your power rate increases 97
percent, how do you possibly make ends meet?
{time} 1900
And how does Pat Wood, the head of the FERC, say most consumers have
gotten through this without any difficulty? And, frankly, how does the
Vice President of the United States sleep at night?
Two questions that I hear from my constituents all the time. First,
where is the money? Who profited from this? Where did the money go when
these rates went through the ceiling? And the second is, why does
someone not go to jail? People ought to go to jail for this. They
clearly broke the law. They clearly defrauded the public. They ought to
go to jail, and those who profited from it ought to pay back the money.
And one final thing. I can tell them where part of the money went.
Part of the money went into campaign contributions. Part of the money
went into campaign tricks to help the very people who refused to
regulate this market get reelected, and here I am sorry to say that as
these energy markets went through the roof and were manipulated
criminally, we received almost no assistance, virtually no help from
our colleagues on the other side of the aisle. They said, no, we are
going to let the market take care of itself. We are not going to
intervene. Indeed, there was a certain condescension on their part that
how dare we try to control these markets.
And let me point out that regulated cost-based pricing was the model
that worked in this country for many decades before Enron, et al.
persuaded various governments and the administration that we ought to
deregulate the markets, and they took advantage of that. They helped
write the law. They then took advantage of that, and they deceived the
public in the process, and our friends on the other side of the aisle
were silent, in fact, blocked our efforts to try to impose regulations.
Mr. INSLEE. Mr. Speaker, unfortunately, our friends on the other side
of the aisle were worse than silent. They absolutely choked off any
consideration of the Enron scandal on the floor of the House today.
Here we have this enormous scandal breaking with the exposition of
these tapes, and they refused to allow any Enron discussion even or
action on the floor of the House.
The gentleman brings up campaign contributions. It is interesting
because so did the Enron traders. I want to read from a transcript of a
tape of two Enron traders talking shortly before the election. The
first one, his name was Matt. Matt was talking to Tom, and the
transcript says: ``Tell you what. You heard this here first: When Bush
wins--
``Tom: Caps are gone,'' meaning price caps, some action to keep
prices reasonable.
``Matt: That `blank' Bill Richardson,'' former Secretary of Energy,
``he's gone, and Clinton, he's gone. All those socialists are gone.
``Tom: Yeah.
``Matt: And who's the biggest single contributor to the Bush
campaigners?
``Tom: You.
``Matt: (Laughs) Enron.
``Tom: Enron. What?
``Matt: Enron.
``Tom: Is it Enron?
``Matt: Yeah.
``Tom: Is that true?
``Matt: Yeah, I think it is.
``Tom: The biggest single contributor.'' Enron Corporation.
``Matt: Yeah, the biggest corporate contributor.
``Holy--really? That's huge.
``And that is number one.
``Ken Lay,'' CEO of Enron, ``is going to be the Secretary of Energy.
``Tom: Get out of here!''
Tom does not have to get out of here because he got what he wanted.
He got a compliant administration that let Enron rip off American
citizens, Democrats, Republicans, Independents alike. They were
bipartisan victims, and he got an administration to let them run
rampant through the energy markets and steal billions of dollars from
our citizens and neighbors who cannot afford it. He got what he wants.
Now it is up to this Congress to do something to get what we want and
what our citizens, Republicans and Democrats alike, want, which is a
refund for the money.
Where did this money go? It went to buy a lot of mansions in Houston
where the President used to be Governor, where his Vice President met
with Ken Lay, the CEO of Enron, in a secret meeting to come up with a
secret energy plan that is no secret any longer. There is no secret
about what happened here. Enron got what they wanted, a compliant
administration to let them take as much as they want from consumers and
do nothing about it. And they got a Vice President, when we laid out
the facts to them, when it was clear as a bell that this manipulation
was going on, they got a Vice President, and do my colleagues know what
he said? The same months that there were brownouts in California, he
said ``The basic problem in California was caused by Californians.''
Maybe he is referring to the traders in Enron. Maybe they lived in
California. I do not know, but I do not think so because it was obvious
what was going on here. Thirty-two percent of all the steam-generated,
gas, coal-fired plants feeding the west coast United States had been
turned off, and the Vice President and the President of the United
States told victims of that skullduggery that they were not going to do
anything about it.
And now Congress needs to act, and we are going to continue to press
on this because we have learned an interesting thing. We can actually
get this administration sometimes to change behavior. For 2 years they
refused to do anything about this. We finally shamed them into action,
and in 2003 they finally adopted price caps that they said were going
to ruin the U.S. economy and that this was a communist plot to have
price caps. They finally did it in 2003 because they could not take the
heat anymore. We are hoping this administration, when they feel enough
heat, and our colleagues across the aisle, when they feel enough heat,
maybe they will not see the light; but maybe they will feel the heat,
and maybe they are going to then knuckle under and do something for the
consumers that are owed so much. I would like a closing comment from
the gentleman from Washington (Mr. Baird) as we close our discussion
tonight.
Mr. BAIRD. Mr. Speaker, I would just add to this that when
appropriations runs around in this Congress, we often, all of us, send
out press releases to our constituents. We help get X amount of dollars
to come back to our district for a school or a highway or you name it.
But I wonder why my friends on the other side of the aisle have not
sent letters back to their constituents saying because of our inaction
in 2000 and 2001, billions of dollars were taken from people's pockets,
from their families, from their schools, from their businesses and
given to large energy corporations. Because whatever they may bring
back to their district, Mr. Speaker, they have allowed to be taken out.
Because of their inaction, because of the inaction of this
administration, because of their actions in allowing this deregulated
debacle to move forward, billions of dollars have been taken out of
hard-working Americans' pockets, put into large corporations who have
broken the law, rewritten the law to their own advantage. It has been
cynical. It has been destructive.
The one final thing I would say is, and it is a little bit of a
deviation, but there is a pattern here. It is not only a pattern
evident in the energy bill. We saw in the Medicare bill, which was also
written to a large degree by special corporate interests and some of
our own colleagues who helped write that legislation are going to work
for those special interests, to prohibit the Secretary of Health and
Human Services from negotiating lower drug prices. When I tell this to
my friends back home in town meetings, they sometimes do not believe
it. They say,
[[Page H4153]]
Do you mean to tell me that the very people who benefit, who raise our
prices on energy or on pharmaceuticals are writing the laws and
Congress is doing nothing?
And the sad truth is we are doing worse than nothing. We are enabling
this.
Mr. INSLEE. Mr. Speaker, we do not want to believe that the U.S.
Congress would allow such a massive rip-off of Americans to take place
and not do something. We do not want to believe that just because Ken
Lay was so close to President Bush that the whole Federal Government
will do nothing. We do not want to believe that massive political
contributions could end up with the Federal Government not doing its
job. We do not want to believe that when the Federal Government itself
concludes that there was a crime, that there was manipulation, that
there was gamesmanship, that there was defrauding, that there was
embezzling, that they would do nothing. We do not believe that is the
right thing to do, and we think ultimately we have some confidence that
we will actually prevail on this. Even if it takes November and we get
a new Congress that will finally take action to get a refund for
Americans, that is the route we will go.
I want to thank the gentleman from Washington (Mr. Baird) for joining
me this evening.
____________________