Energy Policy Act of 2003

July 30, 2003

ENERGY POLICY ACT OF 2003

Ms. CANTWELL. Mr. President, I thank the clerk for reading this amendment, particularly at such an early hour of the morning. The reading of the amendment by the clerk shows exactly what we are up to this morning; that this is a simple amendment and a simple action we are asking the Senate to take. We are simply saying market manipulation under the Federal Power Act cannot be just and reasonable, and market manipulation should be found, under the Federal Power Act, by the Federal Energy Regulatory Commission, to be a wrongful act.

    It did not take long to read that amendment but, as I said to this body last night, the fact that such law is not currently on the books has caused the ratepayers in my State great harm. It has caused ratepayers in Snohomish County, where I happen to live, a 54-percent rate increase. It has caused ratepayers in King County a 61-percent rate increase. It has caused ratepayers in Vancouver, WA, and businesses in Vancouver, WA, that can easily move to other parts of the country, an 88-percent increase. In eastern Washington, the part of the State hardest hit economically, where jobs are few and farmers struggle, it has caused ratepayers a 71-percent rate increase.

    We are not talking about a rate increase that is just for 1 year. We are talking about long-term Enron contracts that were manipulated—knowingly manipulated—and my ratepayers are stuck paying those contracts for the next 5, 6, and 7 years without relief.

    We are here today to say one thing and be clear about it: This kind of manipulation that gouges ratepayers should be prohibited. This body should be clear. We should be unequivocal. We should say, as other entities have said, that this kind of manipulation is wrong and needs to be corrected.

    I have a lot to say on this amendment this morning, but I know I am going to be joined by many of my colleagues from the West who have had their economies wrecked by gouging and illegal practices. I want to give them an opportunity to say something, too, because I think the face of the west coast economy and what it has meant for ratepayers needs to be clear.

    We are trying to say with the Cantwell-Bingaman amendment that we do not want to see this kind of action happen on natural gas prices in other parts of the country. We do not want to see this take place 4 months from now, or 2 years from now.

    Let's be really clear. These kinds of practices that were deployed by Enron, the various schemes of Fat Boy, Ricochet, Megawatt Laundering, and Load Shift are illegal.

    I will yield 10 minutes to my colleague from Washington State, Mrs. Murray, who knows all too well that this crisis has caused real hardship in our State. She has been outspoken on this issue as well and sent many letters to various entities, including the Federal Regulatory Energy Commission, talking about how we need to make changes.

    I yield her 10 minutes this morning to talk about some of the impacts she has seen firsthand.
    
Ms. CANTWELL. I thank my colleague for her diligence in expressing her opinion on this issue.

    The RTO and standard market design issues she mentioned this morning show how unsound this idea is, not only in not protecting us from market manipulation but saying in a conceptual scheme, let's have a nationwide regional energy grid and let the people who will pay the most; that is, the power source that is willing to pay the most to get on to the grid, let them decide how power will be distributed.

    For people in the Northwest, if we had power produced at cost-based rates; that is, cost plus what it takes to deliver to consumers—but all of a sudden FERC is pushing a concept of standard market design and saying, Enron or Reliance has more expensive power, we will shove it on to your grid and you pay that higher rate. As Senator Murray adequately pointed out, this is not a plan we endorse.

    Some of my colleagues from the South also have concerns. Not only does this bill not do enough in protecting manipulation, it creates the possibility for more loopholes, more havoc, more chaos. Frankly, this is exactly how California got in trouble. Regarding a lot of market-based deregulation of the industry, everyone thought it would be competitive practices by which the cost of electricity would be driven down. This is not like something one can afford to have the price go up.

    One county, Snohomish County, had a 54 percent rate increase. We had printed in the RECORD yesterday an article from the New York Times that Snohomish County has a 44 percent increase. Consumers got disconnected from their electricity because they could not afford to pay. This is not one of these schemes when the "free market" does not drive down the price of a utility and ratepayers have something to do. They cannot go over to Nordstrom's and buy a cheap electricity contract and get electricity. They cannot go over to Wal-Mart and buy affordable electricity. They are stuck with these rates. They are stuck with the 54 percent increase and they will be stuck for years ahead. We had a 44 percent disconnect rate in that county.

    Mrs. BOXER. Will the Senator yield?

    Ms. CANTWELL. I yield.
    
    Ms. CANTWELL. I thank the Senator from California for asking that question and for being a cosponsor. The Senator understands all very well how painful this has been to the California economy.

    I was not aware that a third of the problem could be directly attributable to the crisis in California. I know businesses have closed in Washington State. I know people have moved to other regions and made other investments because the rate is high in our State. I know the amount of money paid by higher utility costs for our west coast region is $6 billion. Ratepayers in the West paid a $6 billion increase in their electricity bills because of the market manipulation.

    When I think about the little time we have, maybe 6 hours total to debate this amendment, we gouged the ratepayers $1 billion and we are going to talk $1 billion an hour here. That is hardly the remedy for which I think people are looking. What they are looking for is some immediate action, saying these kinds of activities will not take place again, in the future.

    So the Senator from California, Mrs. Boxer, is correct. The impact has been devastating. It has been devastating to California's economy, and obviously we would like to see some relief. For the moment, what we are trying to say in the Cantwell-Bingaman-Feinstein-Boxer-Hollings-Wyden amendment is that this kind of market manipulation ought to be outlawed specifically in the Power Act today so this does not happen again.

    As we are looking at natural gas price increases and people are getting anxious, why would we have an electricity title that is unclear as to what the penalties are? Actually, under the Oxley legislation of Senator Sarbanes and Congressman Oxley, on the SEC side, on the auditor's side, it said: We are going to get tough. These are new requirements. We are going to put this in the statute. Yet on the electricity title, we are repealing PUHCA, as my colleague from Washington State said, the one consumer protection law that has been on the books since 1935.

    Why would you change a law that has been on the books since 1935 when you just had the biggest pyramid scheme ever to defraud consumers, knowingly admitted by Enron, knowingly admitted by FERC, knowingly admitted by the Department of Justice, knowingly printed by every newspaper in the country that manipulation was going on? Why would you repeal the consumer protection laws on the books? You would actually try to enforce them.

    That is what the Cantwell amendment does today, as the clerk read this morning. It simply says the manipulation of those contracts cannot be just and reasonable and put that in the Power Act, plain and simple. Plain and simple, not the 43 pages we have in the title addressing this issue, which I am sure tries to address the issue, but it falls far short.

    Mrs. BOXER. Will the Senator yield for just a moment on this point? I am going to go into a markup and then return.

    Ms. CANTWELL. Yes.
    
    Mrs. BOXER. My colleague points out that what she is attempting to do in this amendment, of which I am so proud to be a cosponsor, is to make sure what happened to Washington and Oregon and California is not going to happen to any other State, be it Kansas, be it Illinois, be it anywhere else.

    For the life of me, I guess I need to say to my friend, does she understand why anyone in this Chamber, knowing what happened to our States, knowing what happened to our businesses, knowing what happened to our consumers, knowing what happened, in the case of California, to our State budget because our Governor protected the consumers from these rates—can my friend understand why there would be one vote against her amendment, given what we know happened to us?

    Ms. CANTWELL. My colleague from California has asked a question that is very important. No, I cannot imagine why any of my colleagues would want to vote against this amendment that prohibits market manipulation and puts that in the Power Act in a very simple way.

    She mentioned something very interesting. A lot of people talk about this as the California energy crisis—the California energy crisis. Her economy has been devastated, but California actually had a retail cap, which meant even though those prices were being charged, and it left the California economy in disarray and a bill at the State legislative level that is exorbitant, what happened in Washington State, because we didn't have retail caps, is that the ratepayers actually saw the increase in their day-to-day electricity bills. They saw it to the tune of 88 percent increases, 61 percent increases, 54 percent increases. Those disconnect notices are real. The companies that have left or are leaving the State are real. The long-term impacts on our economy are real.

    No, I cannot imagine, if this had happened to any of my other colleagues from other States, that they would not be in the same position I am in today, or Senator Murray, saying, at a minimum, outlaw this market manipulation.

    So I appreciate the question the Senator from California has asked. I appreciate her keen attention to this issue. I know she has spoken many times on the floor about what has happened to our colleagues from the West and particularly how devastating it has been to her State. I appreciate that.

    Mr. DORGAN. Will the Senator from the State of Washington yield for a question?

    Ms. CANTWELL. Yes.
    
Ms. CANTWELL. I thank the Senator from North Dakota for his question. I know he has been diligent, being at the committee hearings during the time period in which the West tried to convince the Federal Energy Regulatory Commission—the policeman on the watch, if you will, when this mugging of ratepayers was happening—we tried to convince the Federal Energy Regulatory Commission that prices were too high, that we were getting gouged. The Senator was very articulate at that time and subsequently, on the Commerce Committee, holding hearings, investigating the activities of Enron.

    At that time, we were all speculating that manipulation happened. What has since come out is that the manipulation has been admitted to. It has been admitted to in the memos by the company in those various schemes you have talked about, and we have charts showing the names, of Death Star and Fat Boy and various other schemes. We have had the Federal Energy Regulatory Commission own up: Yes, this is market manipulation.

    I have a report here, that is almost too heavy to handle, that basically documents all the manipulation that has happened. We have a Department of Justice investigating and saying yes, manipulation has happened. Yet this electricity title is very scant on putting those things in place.

    The Senator is right. This new electricity title appeared last Friday night. I don't know what time it was, but well beyond the time, I am sure, that I was home in Washington State. We started in on it on Monday. But the bottom line is this underlying Domenici title has some language about: Let's make sure there is no false reporting.

    That is in the current statute. It didn't save us. It didn't have anybody stop this or basically put everybody in jail.

    Frankly, every time I get home, I hear from a constituent who is paying this high energy cost, paying this 61 percent or 88 percent rate increase, saying: Why isn't Ken Lay in jail? Why is it I am paying this rate increase and I am going to be paying it for 5 or 6 years and Ken Lay isn't in jail?

    The transparency clause here is already on the books, making sure people do not report false information to the organization known as the Federal Energy Regulatory Commission. That is already on the books. The round trip trading, yes, is eliminated. But we have other schemes in this bill that are not included in the electricity title and are not outlawed. I think it should be simple.

    The Power Act was created to protect consumers. We decided in interstate commerce; that is, the selling of power between States, that the Federal Government should play a role in protecting consumers on wholesale power rates.

    We gave to the States the ability through their utility commissions the responsibility to protect consumers' electricity that is sold within each State. But we said as a Federal Government we want to make sure consumers have oversight of electricity. We said in the Federal Power Act we are going to make sure that rates are "just and reasonable." That is our job—"just and reasonable." We set up a commission to do it. Yet now we have seen that market abuse is continuing. And we have colleagues on the other side of the aisle who are proposing we repeal the only consumer protection law which has been on the books since 1935—the Public Utility Holding Company Act—and in its place put some language that basically smacks the hand of Ken Lay but doesn't have any teeth in it—teeth that will really bring to justice people who have manipulated this market.

    We may have another day when we can discuss what kind of relief might be given to California or Oregon or Washington. But this amendment today is geared toward protecting people from future abuse by simply saying in the Power Act that manipulated schemes are not just and reasonable; that they ought to be banned in the Power Act. I don't know what is wrong with saying that. I would like to go over the specific details so my colleagues understand exactly what we are trying to say and why the current underlying title comes up short in the sense of not doing enough to protect consumers.

    As I said, first of all, the Power Act put in place a broad prohibition on the manipulation of electricity prices. We want to continue that. We want to make sure that in this language we say manipulated electricity prices are wrong. In the Domenici substitute, we are going to say that round-trip trading; that is, buying and selling of electricity at inflated rates and inflated volumes, is illegal. That is a good thing to do. But that is particularly focused on the shareholder.

    We are saying let us protect the shareholder to make sure these guys who are in this manipulative practice of buying and selling on the same day and inflating the price and inflating the volume is wrong and illegal. That is good in protecting shareholders. But how are ratepayers protected? I want to see protection for ratepayers.

    In particular, my amendment would add a new paragraph to the act which is based on language the Federal energy commission has had in its power since 1934. This language would make it illegal for any company to use or apply any manipulative or deceptive device to circumvent the Federal Energy Regulatory Commission rules and regulations on market manipulation.

    It is simple. Let's just say it. What is wrong with saying what Enron has admitted they have done? What is wrong with saying what the Federal Energy Regulatory Commission has put in the report? What is wrong about saying what DOJ has said about manipulation? Why not be really clear and specific? Any company that uses or applies any manipulative or deceptive device to circumvent Federal Energy Regulatory Commission rules and regulations on market manipulation should be punished.

    Second, we want to say specifically that electricity rates resulting from manipulative practices are not just and reasonable under the Federal Power Act.

    As we talked about last night and as some of my colleagues have said, we have the establishment of the Power Act and the protections of "just and reasonable," and it is our responsibility as a Federal Government to regulate wholesale energy prices between States. Why? Because in the 1930s, guess what happened. A bunch of companies had too much power and jacked up the price on consumers. They held them hostage. Electricity is something no one should be held hostage for, and certainly no one should lose their home because of a manipulated contract by a company that put a scheme in place.

    We had a hearing before the Energy Committee in which I asked the Federal Energy Regulatory Commission chairman, "Do you think if you find market manipulation that it is ever going to be 'just and reasonable,' or ever in the public interest?" Chairman Wood told me, "I can't think of an instance when it would be."

    We have the chairman of the Federal Energy Regulatory Commission saying I can't think this would ever be in the public interest or ever be just and reasonable. So why not put it in the Power Act? Guess what. Chairman Wood doesn't write legislation. We write legislation. We are the body that needs to take the responsibility. We are the body that needs to say to the American people we got the message that market manipulation has occurred.

    My amendment would clear up any confusion and specifically declare in the Power Act that market manipulation is unjust and unreasonable.

    Lastly, this amendment would amend the section 206 of the Federal Power Act requiring the Federal Energy Regulatory Commission to revoke the company's authority to sell at market-based rates whenever the commission finds it "knowingly" employs a strategy to manipulate the electricity market. It says when the Federal Energy Regulatory Commission finds people have manipulated a market that they revoke their market-based rates. Market-based rates is when the company decides what the rates are.

    As I said, we in the Northwest have been traditionally comfortable with cost-based pricing that the public Power Act provided. Why? Because consumers get the power at the cost it takes to produce it. As a former business executive, I am all for marketplace competition. But marketplace competition has to have some regulation or some people basically end up controlling the market and consumers get whacked whatever they want. In this case, we know manipulation happened.

    Why is this issue so important that we have to actually say to the Federal Energy Regulatory Commission make sure when these contracts have been manipulated that you revoke the market-based rate authority? Believe it or not, even though Enron, months and months ago, admitted in various memos that they manipulated the market, it wasn't until about 2 weeks ago that the Federal Energy Regulatory Commission actually revoked their market-based rate authority. Maybe it was 17 days ago. Sometime in the last 2½ weeks, the Federal Energy Regulatory Commission finally took the action they should have taken over a year and a half ago. We have a Federal agency that has been laggard at addressing this issue.

    While we will have other amendments to address the Federal Energy Regulatory Commission and address the fact they have not stepped up to their appropriate role in being the policeman on the books as this mugging of ratepayers happens, because clearly they haven't—it took us, the Members of the Senate and House of Representatives pounding on them for months about the high cost of electricity in our region to finally get a mitigation plan. Over a year later it finally took the hearings of Senator Dorgan and many others and an investigation that we finally got the truth on the table that contracts were actually manipulated. Now it is going to take the effort and focus of this body to say, Let's make it simple. Let us make it really clear: Manipulation of contracts is unjust and unreasonable. Any company that employs such tactics should not have free rein of the market by having market-based rates allowed under the Federal Power Act and the Federal Energy Regulatory Commission. It is simple.

    I want to point out to my colleagues the fact that there are other entities that are way ahead of the game; that is, they are way ahead of us. They are way ahead of this body in saying that Enron manipulated contracts and something ought to be done about it. And that is bothersome. I think we are the protectors of the consumers in the oversight of how well an agency is doing its job and to which we have delegated the responsibility.

    I am sure there are people in this body who probably never heard of the Federal Energy Regulatory Commission until this crisis happened. I am not sure the agency has had the bright light of day shined on it too often in its Congressional history.

    In fact, the Government oversight committee, then chaired by Senator Lieberman during this energy crisis, had some hearings on whether the Federal Energy Regulatory Commission was doing its job. I thought that was very appropriate. It is very bothersome to me there are many newspaper articles and accountants of Ken Lay actually lobbying members of the Federal Energy Regulatory Commission on whether they should have a cap or a plan in trying to control or mitigate prices in the western energy market. He lobbied for Commissioners he thought would not put a cap in place. He lobbied for people he thought would continue the trend toward deregulation of the market.

    I do not know why we should listen to Ken Lay's energy plan and who he thinks should be the nominees in these instances. We even have one newspaper article that suggested he was for the renomination of the current Chairman of the FERC but only if he would continue to have a free market strategy and make sure these prices that basically had been charged were kept in place. I think that is unconscionable. We need to do something to make sure this agency has our trust in the Senate and the trust of the American people. I think that is critically important.

    Even though my colleagues have been hearing about this crisis for a couple years and some may think it is over, it is not over for the ratepayers of Washington State. It is not over for the California economy. We are stuck with this bill. We are stuck with the impact of these manipulated prices.

    But I want to be clear, there are people who knew this was going on. And they have admitted it—Enron itself. Enron knew we were going to get access to this information eventually, so basically they produced the smoking gun memos where the company said it engaged in practices to manipulate the western power market. And they knew it was wrong.

    In fact, even when these memos were starting to be uncovered, people realized these tactics had these exaggerated names that were not going to sound too positive, so they ended up saying: Well, let's change the names. I am not sure if it was Fat Boy—oh, yes, Death Star. Death Star was the name of a tactic used to manipulate the market, and they said: Well, if that comes out maybe that won't sound like such a good name. Let's change that to Cuddly Bear.

    So somehow we were not going to find out there was market manipulation in place because Death Star all of a sudden became Cuddly Bear. It does not matter whether you change the code name, the impact on my State is the same. It is wrong, and this body ought to outlaw it.

    So when FERC finally began to investigate, they realized this problem, as their report concludes, was significant and "epidemic," and the epidemic market manipulation took place in the West. Their own report says there is overwhelming evidence that suggests "Enron and its affiliates intentionally engaged in a variety of market manipulation schemes that had profound adverse impacts on the market outcomes."

    In fact, the report goes on to say:

    Enron's corporate culture fostered a disregard for the American energy customer. The success of the company's trading strategies, while temporary, demonstrates the need for explicit prohibition on harmful and fraudulent market behavior and for aggressive market monitoring and enforcement.

    That is what the Federal Energy Regulatory Commission is saying has transpired and what we need. It "demonstrates the need for explicit prohibition on harmful and fraudulent market behavior and for aggressive market monitoring and enforcement."

    It is not FERC's job to write the law. It is FERC's job to enforce it and interpret it. Our job is to act. They are telling us they need to have this market behavior monitored and enforced, and that this problem demonstrates the need for an explicit prohibition. Let's give them that explicit prohibition. Let's put into the Federal Power Act that the manipulation of prices cannot be just and reasonable and companies that participate in that practice do not deserve to have market-based rates.

    As I mentioned, FERC just came to this conclusion recently, so it is a little troubling that it took them so long, after so much damage has been done—$3-plus billion to the California economy, over $1 billion to the Washington economy, and billions more to Oregon and, I am sure, other parts of the West. So we don't want them to be confused or slow to pick up the regulatory framework and to use it as a hammer against these kinds of manipulations. So let's make it really clear.

    DOJ thinks this manipulation is wrong. The U.S. Department of Justice believes what Enron did was, as they said, wrong and fraudulent. The Department of Justice continues to conduct investigations into Enron's activities. It has filed criminal charges levied against 16 different employees, most recently resulting in one of those 16 arrested, a trading desk manager. Already, two Enron traders have pleaded guilty on charges of conspiracy to commit wire fraud. And charges are pending against another.

    So DOJ knows it is wrong. Yet in the electricity title we have not put in strict enough language to prevent it from happening again.

    One of the most recent criminal complaints filed against an Enron trader by the U.S. Attorney's Office says: Based on the facts, there is probable cause to conclude that between approximately June 1999 and January 2001 the Enron trader unlawfully conspired to commit and did commit acts in violation of the Federal law. There is probable cause to conclude that the trader committed the offense of wire fraud in violation to title 18, United States Code, and conspired to commit the offense of wire fraud in the northern districts of California and elsewhere.

    The Department of Justice knows these acts are manipulative and illegal. The fact that they only have two people indicted so far—and we still don't have justice as it relates to Ken Lay; and it was the diligence of those on the west coast and Members here saying manipulation went on—bothers me; it has taken so long. So I certainly want to make sure there is no question that we think these activities are wrong and that something should be done about it. That is why we need tough language.

    Now, this body did its job as it relates to the auditing of regulators and reform after Enron. This CRS report for Congress—basically that is part of the report about the Sarbanes-Oxley act—talked about how we stepped up and did our job as it related to the auditing and accounting practices of these organizations.

    Now, why was that important? It was important because not only did ratepayers get gouged, but people counted on those companies and their truthful reporting in their businesses. And the investors investing in those businesses counted on that truthful reporting. We uncovered that there was a lot of manipulation going on there as well. There was a lot of misinformation about what really was the cash and capital of these companies and whether the investments by investors really should have been made, given that the long-term outlook of the companies was not based on real numbers but on these manipulated schemes.

    So what did we do? We didn't repeal accounting laws that were on the books to protect consumers. We stepped up and said: Let's make this stronger. Let's get the Sarbanes-Oxley act in place. In fact, the act creates a new oversight board for auditors. It prohibits auditing firms from providing certain consulting work for auditing clients so there is no conflict of interest in who they work for. It requires the rotation of all the partners. It imposes new regulations on corporate boards and executives. It increases government oversight and criminal penalties. We took tough action as it related to the auditors. We protected the shareholders moving forward from having this kind of scheme from an auditing perspective happen again.

    If we were so ready to jump on this issue as it related to the auditing practices and the accounting practices of these companies, and we protected the shareholders and the individuals who may have had pension plans or investments in these companies, why aren't we now going to protect the ratepayers who actually got gouged with the high cost of these contracts? Why aren't we going to say this is so egregious that we should never allow it to happen again; that we, the Congress, believe that we are no apologists for Enron? We are not going to condone market manipulation. We are going to say, just as we did with accounting rules and auditing rules, we are going to have in the Power Act the same message; that manipulating contracts is unjust and unreasonable and anybody who participates in market manipulation does not get to have free market power under the Power Act. It is simple.

    Let me talk about what is in here because I believe Chairman Domenici and his staff probably did try to say that some manipulations happen and we ought to do something about it. But I don't think we have covered the full gamut of issues that need to be covered. The Domenici amendment refers to round-trip trading. Round-trip trading is simultaneously buying and selling electricity to stimulate both the amount of electricity trading that was going on and to stimulate and increase the price. So the Domenici amendment says round-trip trading is wrong. And that is good. It is good that we took one of these schemes and shot a hole into it and said this is wrong.

    But there are many other schemes that are not covered under the Domenici title: Fat Boy, also known as Icing Load, to create real-time power markets. According to Enron's own memos dated December 6 and December 8, 2000, Fat Boy was "one of the most fundamental strategies used by the traders." According to one, "the oldest trick in the book" and "is now being used by other market participants."

    What Fat Boy did, when you boil it down, is Enron submitted false power supply schedules to the California ISO—the California organization in which power was bought and sold—and other market participants for the purpose of receiving payments when it didn't actually need the extra generation. So in essence Enron received untold millions of dollars for pretending to keep the lights on in the West when it really didn't need to. There is nothing in this current Domenici title that prohibits Fat Boy from happening. Yes, you say, you can't lie to FERC. There is nothing in the act that says you can't lie to the California ISO, which is exactly what Enron did under the Fat Boy scheme.

    That was the whole point of California deregulation. That is what people went to the legislature and sold them, just as they are trying to sell us. Hey, guess what, California. If you deregulate, market competition is going to drive down the price. And we will create this mechanism, the California ISO, which stands for the independent system operator. We are going to make this scheme where an independent system operator is going to get you cheap electricity. And all those people in the marketplace who want to sell power and sell it at a cheap price, we are going to drive down the price.

    That is not what happened. The price went up. It escalated. So they defrauded the California ISO. There is nothing in this underlying bill that protects the ratepayers from having Fat Boy happen again because it does nothing to prohibit lying under these kinds of schemes to the California ISO or any other organization like that.

    Richochet was also known as Ping Pong. The sole purpose of this scheme was to evade California's attempts to put price controls in place. Knowing that FERC wasn't really paying attention, they were given market-based rates. They said: Go out and see if you can drive down the price of electricity. And under this scheme, basically to get out of the price controls that California was trying to put in place and control, the traders, instead of trading within the State of California, would ship their power outside of the State and then ship it back in. Yes, that is right, just like the ping pong ball, back and forth on a ping pong table, pushing power to one side and pushing it back—Ricochet.

    If we push it out of California, then we are not subject to those State regulations, and guess what. When we ship the power back in, we can ship it in at the price we want. That way we avoid the caps of the California ISO and the power exchange that is trying to enforce them.

    So the prohibition on round-tripping in the Domenici bill does nothing to prohibit Ricochet or Ping Pong from happening again. This kind of practice of shipping out of State and shipping back in is not illegal under the Domenici title. But it will be under the Cantwell-Bingaman amendment if this body will adopt it.

    Let me talk about Death Star for a second. That is the one, yes, renamed Cuddly Bear. I don't care what you call it, there is no way the American public, the public in Washington State, doesn't know that this wasn't a cuddly bear. This was an unbelievable scheme that has ruined our economy. The essential strategy of Death Star was for Enron to earn money by lying about its transmission needs, scheduling transmission in the opposite direction of the congestion. No energy, however, is actually put on the grid or taken off, according to the company's own memos.

    So wait a minute. We were saying to people this is what is going to be on the grid, but then we don't really put it on the grid.

    The U.S. Attorney's Office described in a June court paper that Enron submitted schedules to the ISO that pretended to move the electrons owned by Enron, but in reality it didn't. Because of this, it appeared to relieve congestion. So the ISO awarded Enron congestion relief payments. Basically by pretending it was putting power out there to relieve congestion, which it really didn't, the ISO gave them relief payments. The ISO was deceived because part of the looping scheme was outside of California and, therefore, it couldn't be detected, thereby costing more money.

    According to the Department of Justice, senior Enron traders denied they were doing this practice or violating any market rules. So basically what we are saying is that there were people at Enron who told other fine people who probably worked at Enron and who were trying to do their jobs, there is nothing wrong with this. This is totally OK to do.

    One of the trading managers was smart enough and said: We are worried that the details of the strategy would be leaked to the ISO and other power companies or the public. One of the consequences of his concern was that he was instructed to refrain from calling this Death Star. That is when they said: Gee, employees are getting nervous about this scheme; they don't think it is right. Let's change the name to Cuddly Bear and maybe everybody will be OK with it. Well, we are not OK with it.

    The underlying Domenici electricity title does not prohibit Death Star from happening again. Only the Cantwell-Bingaman amendment will do that.

    Load shifting was another ploy. To employ this tactic, Enron would distort its transmission schedule to create the appearance of congestion, or knowingly increase the congestion cost to all market participants. Again, more misinformation. The underlying Domenici title says nothing of falsified information provided to the FERC. Well, FERC already has language in there about reporting. It didn't get them to stop Enron from following these practices. It doesn't require or make illegal any of these practices of providing misinformation to the California ISO.

    Remember, the California ISO was an organization that basically was created after deregulation. After deregulation, people went to the California Legislature and said: We will create a mechanism where the marketplace buys and sells power at a cheap rate. We will let the market do it.

    Under the California ISO, the independent system operators basically were supposed to help control price. That is where the misinformation was, where the lying and fabrication of information took place. This underlying bill does nothing to protect or say that those kinds of activities to the California ISO, an independent system operator, are illegal. It has no teeth as it relates to that. So nothing in this underlying Domenici electricity title will protect us from load shifting. The Cantwell-Bingaman amendment will.

    Get Shorty. Like many Americans, I thought this was a title of a movie. I thought it was supposed to be a joke. But in my State it was not a joke to the ratepayers who actually had a premium price increase. Basically, what they did was they gambled that it would be able to find service at a cheaper price the next day. Enron's own memos admitted that "this was obviously a sensitive issue because of reliability concerns." Indeed, the company stated that it would be "difficult to justify our position if the lights go out because these services were not available, and the reason was because we were selling them without actually having them in the first place."

    They basically were saying: We are going to have a scheme where we are going to say there is power available when there is not. And then when the lights went out, they knew they were going to have concerns. They knew. How they could think the west coast economy would not be reached by this havoc being laid upon them. I cannot understand. I cannot understand the corporate greed that goes into this kind of thinking—that somehow this kind of marketing strategy would be good for California, good for Washington, good for America, good for corporate business, good for our confidence as a country—confidence that we as a government are going to say this kind of manipulation is wrong. It has created a huge deal of unrest in the West. Nothing in the Domenici electricity title prevents Get Shorty from happening.

    Wheel Out. I am not sure what marketer came up with this one. Enron would submit schedules for a transmission on line they knew was out of service. In doing so, the company would earn extra payments for their trouble. It is not even available. It is sort of like a cab driver heading straight for a traffic jam in order to keep the meter running on an unsuspecting tourist, basically saying: I am going to get you into congestion and it is going to cost you a lot. The poor passenger in the car doesn't know there is a quicker route, a cheaper way, a more expedient way to control the cost. But unlike a cab ride, the costs of this are not in the tens of dollars but in the millions of dollars, and the cost to our economy has been in the billions of dollars. There is nothing in the Domenici underlying amendment that would prohibit the Wheel Out strategy from happening again.

    The Cantwell-Bingaman amendment says that the Wheel Out strategy is manipulation of the market—it is manipulation. Under the Federal Power Act, it cannot be just and reasonable that companies that deploy these kinds of practices should not have market-based rates.

    I hope there are not any more schemes. I hope I don't have any more charts because this is enough. This is enough of the tactics that were deployed by a company that basically thought that making a few more dollars through manipulative practices was somehow OK to do.

    I read some of those quotes from employees at Enron who said: I don't think this is right; I think this is a concern. Yet they continued.

    So the Cantwell-Bingaman amendment, which is supported by Senators Hollings, Murray, Boxer, Feinstein, and others, simply says let's put into the Power Act that manipulation is not just and reasonable.

    We have had lots of support: The Northwest Public Power Association, Northwest Energy Coalition, AARP, Consumers Union, International Brotherhood of Electrical Workers, Consumers for Fair Competition, National Association of State Utility Consumer Advocates, Union of Concerned Scientists, U.S. Public Interest Research Group, and many other organizations, such as members of the AFL-CIO, and many people who are concerned about the economic impact of manipulation happening prospectively on natural gas.

    Why won't somebody just take this experiment that happened in California and the West and say, OK, we will—with the current Domenici language, Congress barely smacks the hands of those Enron traders. Gee, only one of them went to jail. I guess you have to be smart enough not to be the one who gets caught with a memo on an electronic file on your computer, and, guess what? You will get out of this. So let's take this same kind of scheme and deploy it for natural gas.

    That is what this amendment is about. This amendment is about saying that natural gas in the future will have better protections of consumers in mind regarding potential rate increases. So, if we have an increase in natural gas prices, maybe because of shortage of supply, guess what, we will really know that it is about shortage of supply. We will really know. We will be able to tell consumers in America that we really know it was about not having enough supply; it was not because some natural gas producer had tons of supply but manipulated the market through a variety of schemes and somehow gouged consumers, and that is why your rates are higher. Can we not give the American consumer that kind of confidence about our energy? I sure hope we can.

    This issue has a real impact on people, and I know my colleagues are in the Chamber, and they want to speak, but I wish to share one letter from an 11-year-old girl whom I met almost a year and a half ago. I did not know at the time she had sent this letter, but she lives in a region of the State where they have had a 71 percent rate increase—a huge increase.

    This 11-year-old girl sent an emotional letter about how the crisis was affecting her family, that her mom was living paycheck to paycheck. That actually the job her mom had was dependent upon affordable electricity. She wrote:

    This is the first time I've lived in a house. This is the most important thing in my life, that we get to live in a house. Please listen to what might happen to hundreds of kids, including myself, when my mom might lose her job and we might have to move out of our house.

    The impact is being felt by young children, not just by the parents who might lose their job. Not just by the Snohomish County ratepayers who had 44 percent disconnect notices, but by young children who are fearful that their families are not going to make it because these schemes caused these rate increases that we are stuck with for years and years.

    There is somebody sitting in their office somewhere in America saying: Gee, why don't you just sue those Enron people? Why don't you just sue them and tell them that under the Federal law, they cannot manipulate these contracts? I think people in America would be surprised to know that Enron is suing these utilities. Enron is turning around and suing these utilities and forcing them to pay these rate increases. They are suing the Snohomish County public utility district, saying: That contract—that has been manipulated—that you signed for 5 years of power, even though it is manipulated and you are paying a 54-percent increase, we are not letting you out of that contract; we are suing you.

    This is the only body that can protect people in the future. It is only the Senate and the Congress that can say: This manipulation is wrong. This manipulation, moving forward, is wrong. Then ratepayers in my State in the future, if this happens, might have a chance.

    We have had letters from senior citizens who are trying to live on a fixed income. This burden has made them make decisions about how they are going to live in the future. One woman from Okanogan County said: My friends, myself, and my neighbors cannot afford the higher rates:

    I am in a total panic because I am disabled and barely can pay for heat now. With these rates going up as much, it will make it a life-threatening situation. This will become a public health disaster. To make matters worse, many businesses are planning on shutting down here due to the terrible economy and the power costs. This is putting the last nail in our coffin in a dire economic situation in Omak, WA.

    That is what the ratepayers in my State think. Not just: Oh, please, Senator Cantwell, Senator Murray, please, Members of Congress, smack the little hand of the Enron people and tell them that was a no-no. They are saying these are dire circumstances, these are life-threatening situations, these are public health risks. We ought to stand up today and say this kind of market manipulation is not just, it is not reasonable, it is not in the public interest, and these variety of schemes from Ricochet to Fat Boy to Death Star are not legal, they are examples of manipulation, and companies that practice such manipulation should not be given market-based rates.

    I could go on about this issue and talk about how our Northwest economy has been impacted by the number of jobs lost. I know several of my colleagues wish to speak on this issue, and I am going to give them the opportunity because I know they have been engaged in such dialog and speaking out on this issue. I want to give them a chance to continue to express their opinion on this issue as well.

    I do not know if the Senator from Iowa wants to have a few minutes now, but I am happy to yield to him—for how much time?

    Mr. HARKIN. For 10 minutes.

    Ms. CANTWELL. For 10 minutes of the time I have remaining, Mr. President.

    The PRESIDING OFFICER. The Senator from Iowa is recognized.
    
The ACTING PRESIDENT pro tempore. There are 7 minutes 20 seconds remaining. The Senator from New Mexico has 5 minutes.

    Ms. CANTWELL. Does the Senator from New Mexico wish to complete his comments?

    Mr. DOMENICI. I will wait for a while.

    The ACTING PRESIDENT pro tempore. Who yields time?

    Ms. CANTWELL. Mr. President, I appreciate the chairman of the committee giving time to the Senator from California so she could explain and respond to her views on this issue. I appreciate my colleagues from the West engaging in this debate. I appreciate the Senator from Idaho coming to the floor and reiterating to this body, yes, how ratepayers in Washington, Oregon, and Idaho got stiffed. That is the right word. We got stiffed. We got stiffed with paying a bill more exorbitant than ratepayers should have to pay.

    The debate that has ensued in the last few minutes is whether the Domenici underlying amendment has enough protections in it to protect consumers or whether we need the Cantwell amendment. It is a clear and simple and plain statement that market manipulation should be outlawed in the Federal Power Act as not being just and reasonable.

    I thank the Senator from Louisiana for her comments. She supports the underlying Domenici title, but she supports my amendment as well because she knows that kind of language can be helpful and can be specific.

    Let me be clear. If anybody thinks that the Enron manipulation didn't have a profound and adverse impact on the marketplace and that this is all about poor management in California, I can assure you that is not the case. This is about whether this body is going to adopt tough standards against market manipulation so there is no question by the public. So the public doesn't debate, if there was a shortage of supply or manipulation going on?

    We know there was manipulation going on. We have proof of it. The FERC itself said:

    Enron and its affiliates intentionally engaged in a variety of market manipulation schemes that had profound, adverse impact on market outcome.

    There it is. The FERC said itself that market manipulation had profound, adverse impact on the market. So we know for a fact that market manipulation had an impact in California, it had an impact in Washington, it had an impact in Oregon, and it had an impact in Idaho. The question is whether this body is going to do enough to protect consumers in the future.

    So the chairman of the committee—I appreciate his earnest time on the electricity title, and I appreciate the fact that he wants to have some protection in this legislation. But these protections don't go far enough.

    Let me explain why. There is transparency language in the underlying Domenici title. Some of those powers are already in place with FERC. They are not doing us any good because reporting to FERC is one thing; reporting to the California ISO, the independent systems operator, who basically was the cog by which all the manipulations took place, you are not under any kind of threat or penalty for reporting falsified information to them. That is where the manipulation took place, so the Domenici title does not cover that situation.

    There is a lot of talk in the bill about the Commodity Futures Trading Commission, and there is a section in the bill that tries to beef up that language. That is a noble attempt. I much prefer the Feinstein amendment which has very specific language about closing a loophole.

    I have a letter from the National American Securities Administrators Association. They basically say the Domenici language is flawed. These are Federal regulators who are supposed to regulate this policy. They say the Domenici language is flawed because it will prohibit any Federal or State agency from obtaining information directly from a board of trade or exchange or market involving commodities, and that State and Federal agencies will be impeded from investigating violations of these wide range of commodities.
    
Ms. CANTWELL. Mr. President, the bottom line is, in this amendment, while round-trip trading is covered and some, I am sure, well-intentioned language on reporting and falsifying information to FERC, it does not cover a myriad of other manipulative schemes that have been deployed and used by Enron.

    Fat Boy is not outlined under the Domenici language. Ricochet is not outlined under the Domenici language. Death Star is not outlined under the Domenici language. Load Shift, Get Shorty, and Wheel Out are not outlined under the Domenici language.

    I understand the chairman wants to see that the manipulation stops. In this Senator's opinion, that manipulation will stop when this body stands up and says to the American people with simple language in the Power Act: Manipulated prices are not just, they are not reasonable, and anyone who deploys them are not doing so in the public interest, and we cannot give them market-based rates.

    If this body will say this, then any future debate about natural gas prices will not be about whether some company manipulated them, it will be about the real issues of the supply and demand.

    Let's give the consumers confidence that market manipulation is prohibited in Federal law and that this body does not condone Enron's activities but is going to be aggressive in outlawing them.

    Mr. President, how much time do I have?

    The ACTING PRESIDENT pro tempore. The Senator's time has expired.