Hydro tied to power scheme
Probe uncovers references to Powerex that suggest the B.C. agency was 'up to no good'
Scott Simpson
Vancouver Sun
05 Feb 2005
COMMENT: Back in the late 1990s, BC Hydro started chumming around with all the energy shops around North America. Powerex, BC Hydro's own trading arm, found itself in a club of colleagues for whom the score was the rush, a series of successful transactions would trump sex.
In the bars and on the golf courses and at all the conferences, they'd trade stories. And they'd scheme.
So in 2000, when the Canadian Competition Bureau raided the Calgary offices of Powerex and Enron, looking for evidence that the two companies had colluded in trades that would jack up electricity prices in Alberta, it was only surprising to those outside the biz who weren't aware of the scheming that was going on within.
The Competition Bureau did not find sufficient evidence to charge either company. That's a long way from proving that the companies were innocent of bid-rigging.
Then months later, Powerex is included in the small list of energy traders - Williams, Dynegy, Mirant, Enron, etc. - who appear to have contrived to bilk California electricity buyers out of hundreds of millions of dollars. A few observers wondered if the smoke that had appeared in Alberta, was associated with the fires in California.
In 2003 the Attorneys General of California, Oregon and Washington jointly released evidence of market manipulation - hand written notes from Enron. The link is provided below. Here's an excerpt from one, in which Powerex is mentioned:
So far, in early 2005, BC Hydro and Powerex have had no successful suits against them. Again, that's a long way from innocent.
What follows is in part from the archives of http://www.sqwalk.com/ and other sources.
06 Oct 2004 Hydro back on California hook
04 Mar 2003 Powerex accused of price rigging
03 Mar 2003 Proof of energy scam
19 Dec 2002 Canadian Regulator Says Duke Overcharged for Power
22 May 2002 Affidavit of Powerex in FERC inquiry
09 May 2002 Canadian companies ensnared in Enron debacle
02 Feb 2002 The Company Hydro Keeps
03 May 2001 The Company You Keep
20 Dec 2000 Competition Bureau Closes Bid Rigging Investigation
24 Nov 2000 Alberta power company at centre of price-fixing allegations
BC Hydro's long-running battle to hang onto $750 million US in profits gained during the California electricity crisis took a new twist this week when a Washington state power authority released fresh allegations of market manipulation.
Documents and tapes uncovered in an investigation of Enron suggest that Hydro power trading subsidiary Powerex benefited from an Enron bid-rigging scheme in the Alberta electricity market, legal counsel for the Snohomish County public utility district said Friday.
The project was code-named Project Stanley, in reference to the Stanley Cup, and involved efforts by Enron to manipulate electricity prices in the Alberta Power Pool in 1999.
It was described by counsel for the Snohomish district as a field test for the scheme that Enron and other power trading utilities employed to subsequently manipulate the California electricity market and earn what California authorities allege to be illicit profits of about $9 billion US.
Powerex was investigated in connection with the Alberta scheme, but was cleared of wrongdoing by Canada's Competition Bureau. The bureau announced in December 2000 that Enron and Powerex were employing "independent business strategies."
However exhibits released this week by Snohomish investigators include a document that charted the supply and demand for electricity in Alberta -- which was in the process of market deregulation -- and "illustrates potential for exercising market power."
The document prepared by Frontier Economics contains a chart showing how Enron profited from high prices in the Alberta market, and states that Enron's strategies "likely would not have been possible" without supporting action from Alberta power generators and/or Powerex.
It says Powerex received an "indirect benefit" whenever Enron received a direct benefit, and that the companies used market power to drive up the price of electricity to more than $300 per megawatt -- compared to $42.74 before deregulation in Alberta.
Electricity market regulators in Canada and the United States regard the exercise of market power -- the ability to drive up prices -- as a serious abuse of a company's charter to operate in a given electricity market.
"It's hard to believe the Competition Bureau had access to the information we found," said Eric Christensen, assistant general counsel to Snohomish County public utility district No. 1.
"We're not privy to the information they found. But the Powerpoint presentation we found from Frontier Economics seems particularly damning. There is one slide there labelled 'Exercising market power in the Alberta pool.' It's basically a recipe book for how to exercise a system up there to extract unjust profits."
Christensen noted that the utility district's investigation focuses on Enron, not Powerex. But he said investigators have uncovered several Enron references to Powerex to suggest the taxpayer-owned B.C. agency was "up to no good."
Hydro media relations manager Elisha Moreno reiterated that Hydro has been exonerated of wrongdoing in investigations by both the Competition Bureau and FERC.
In particular, she said, FERC pointed out in a 2002 judgment that Hydro played a valuable role in supplying electricity during the California crisis.
"I think the only unfortunate side of it is that our name keeps getting dragged through the mud. It's disheartening because we do a lot of business on a daily basis with these people."
However exhibits released this week by Snohomish investigators include a document that charted the supply and demand for electricity in Alberta -- which was in the process of market deregulation -- and "illustrates potential for exercising market power."
The document prepared by Frontier Economics contains a chart showing how Enron profited from high prices in the Alberta market, and states that Enron's strategies "likely would not have been possible" without supporting action from Alberta power generators and/or Powerex. It says Powerex received an "indirect benefit" whenever Enron received a direct benefit, and that the companies used market power to drive up the price of electricity to more than $300 per megawatt -- compared to $42.74 before deregulation in Alberta.
Electricity market regulators in Canada and the United States regard the exercise of market power -- the ability to drive up prices -- as a serious abuse of a company's charter to operate in a given electricity market.
Hydro media relations manager Elisha Moreno reiterated that Hydro has been exonerated of wrongdoing in investigations by both the Competition Bureau and FERC.
She said FERC pointed out in a 2002 judgment that Hydro played a valuable role in supplying electricity during the California crisis. "I think the only unfortunate side of it is that our name keeps getting dragged through the mud."
© The Vancouver Sun 2005