3 firms accused of plotting
Regulators allege utility manipulation

Arizona Republic
June 27, 2003
Max Jarman

Arizona's three largest electric utilities were among 60 energy companies alleged by federal regulators to have engaged in manipulative practices that disrupted Western energy markets in 2000 and 2001.

In a sweeping order to show cause issued late Wednesday, the Federal Energy Regulatory Commission ordered the Salt River Project, Arizona Public Service Co. and Tucson Electric Power Co. to explain certain questionable transactions that occurred in the California electricity market from Jan. 1, 2000, to June 20, 2001.

If the transactions are found to be an attempt to manipulate, or "game," the market, the companies could be ordered to give back any profits generated by the transactions. They also could be barred from selling wholesale electricity.

The refunds would be in addition to the $3.3 billion in excess electricity charges the FERC earlier this year ordered refunded to California. It is not clear how much of that, if any, would be owed by the Arizona companies.

The three companies say that they are cooperating with the order but that they have done nothing wrong.

Indeed, the reputed improprieties of the Arizona companies pale compared with the broad-based schemes of companies such as Enron, which was barred Wednesday by the FERC from trading electricity.

The combined amount of the Arizona companies' reputedly ill-gotten profits is less than $5,000.

APS is said to have improperly made $2,600 in a "ricochet" transaction by purchasing power from California's central power exchange and later selling it back at a profit.

TEP also is accused of a ricochet transaction, but the company claims it lost money on it.

TEP spokesman Steve Lynn said the company sold the power back to California for exactly what it paid for it.

"So with handling costs, we lost money," he said. The term "ricochet" was among a number of code names, such as "death star" and "get Shorty" that Enron coined for its various trading schemes.

The SRP is accused of improperly making $1,800 on a "death star" transaction whereby power was scheduled to be moved during a peak period in order to generate a congestion payment.

The SRP argues that there was nothing improper about the transaction.

"We're cooperating and giving them anything they want," spokesman Scott Harelson said. "But we don't believe we've done anything wrong."

Companies that are thought to have formed loose partnerships with Enron to facilitate and profit from the schemes and those that developed their own schemes and partnerships were treated more harshly.

Companies such as Public Service Co. of New Mexico, Sempra Energy and Aquila Inc. were ordered to provide much more detailed information to the FERC, including e-mails, tapes, phone logs and a list of all revenue from their partnerships, alliances or other arrangements.