[Congressional Record Volume 153, Number 195 (Wednesday, December 19, 2007)]
[Senate]
[Pages S16068-S16069]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



             Nomination of Jon Wellinghoff and Joe Kelliher

  Ms. CANTWELL. Mr. President, I will support the Senate moving forward 
on the confirmation of Jon Wellinghoff and Joe Kelliher to be members 
of the Federal Energy Regulatory Commission. While I am pleased that 
FERC has been using its expanded authority granted by Congress in the 
Energy Policy Act of 2005 to pursue manipulation in the electricity and 
natural gas markets, I think it is critically important to remind FERC 
of its statutory duty to oversee the energy markets and protect 
consumers.
  In light of evidence of market manipulation in the Western 
electricity crisis in 2001, I fought hard to ban market manipulation in 
electricity and natural gas markets. My amendment, adopted by Congress 
as part of the Energy Policy Act of 2005, provided FERC new authority 
under the Federal Power Act and Natural Gas Act to investigate and 
punish market manipulation in electricity and natural gas markets.
  I am pleased to see that FERC has used this expanded authority to 
conduct 64 investigations. According to FERC, 13 of these 
investigations have resulted in settlements involving the payment of 
civil penalties or other monetary remedies totaling over $40 million. 
Two investigations have resulted in FERC bringing enforcement actions 
for alleged market manipulation against Amaranth Advisors LLC for $291 
million in civil penalties and Energy Trading Partners for $167 million 
in civil penalties. Amaranth's shenanigans cost consumers upwards of $9 
billion dollars during the summer of 2006.
  However, I want to remind FERC of its responsibilities relating to 
protecting consumers under the Federal Power Act's statutory ``just and 
reasonable'' standard. In section 1290 of the Energy Policy Act of 
2005, which I authored, Congress directed FERC to exercise its Federal 
Power Act authority to enforce ``just and reasonable'' rates when it 
reviewed the validity of termination payment claims made by Enron 
during the Western energy crisis of 2000-2001.
  After entering into power contracts in a market that Enron 
manipulated, several utilities, including the Snohomish Public Utility 
District in my State, the Nevada Power Company and Sierra Pacific Power 
Company in Nevada, terminated their contracts with Enron or watched as 
Enron terminated them when the company's web of fraudulent accounting 
was revealed in late 2001. As a result, Enron tried to squeeze hundreds 
of millions of dollars of termination fee payments from the electricity 
consumers of these utilities. In my opinion, these payments demanded by 
Enron were certainly neither just nor reasonable.
  After enactment of the Cantwell amendment, the Snohomish Public 
Utility District in my State and several other entities including the 
Nevada Power Company, asked FERC to exercise its Federal Power Act 
authority, which includes enforcing ``just and reasonable'' rates, and 
deny Enron the ability to charge the fraudulent termination payments.
  Using the force of the Cantwell amendment, these Washington State and 
Nevada utilities were able to avoid protracted litigation and settle 
Enron's absurd termination fee claims, saving these utilities from 
paying hundreds of millions in unjust payments on contracts that Enron 
fraudulently induced. This has helped save electricity consumers of 
Washington and Nevada hundreds of millions of dollars.
  This spring, the U.S. Supreme Court will review a decision of the 
U.S. Court of Appeals for the Ninth Circuit which declared that FERC 
failed to use its authority under the Federal Power Act to enforce 
``just and reasonable'' rates. In a brief to the Supreme Court in this 
matter, FERC recently took the position that it was free to approve 
long-term contracts arising out of the 2000-2001 Western power crisis 
notwithstanding evidence that, in the words of Stanford University 
energy economist Dr. Frank Wolak, suppliers to the Western markets 
during this period were ``able to exercise market power at 
unprecedented levels'' resulting in ``prices vastly in excess of 
competitive levels.''
  As the Ninth Circuit's opinion makes clear, if FERC adopts market-
based rates, it has an obligation to ensure that the markets operate 
properly and it cannot simply assume that a contract is just and 
reasonable even if the contract is the product of a manipulated market, 
such as the experienced in the West during 2000-2001.
  It is troublesome that FERC continues to argue that it is free to 
ignore evidence of market manipulation and market power abuse when 
reviewing contracts affected by that abuse. Moreover, this position is 
inconsistent with its recent emphasis on enforcement of market 
standards. FERC's position in the Supreme Court essentially could allow 
market abusers to protect their ill-gotten gains by locking them up in 
contracts, undermining any incentive they might otherwise have to obey 
market rules and report abuses by other market participants.
  While I am pleased that Commissioner Wellinghoff's response to my

[[Page S16069]]

questions indicates that he does not agree with FERC's brief in this 
matter, I will continue to watch FERC very closely as this case moves 
forward. FERC is the sole forum to bring complaints of market power 
abuse and manipulation in electricity and natural gas, markets, and I 
fully expect FERC to not abrogate its Federal Power Act 
responsibilities to protect consumers and enforce ``just and 
reasonable'' rates.

                          ____________________