Davis Conferred With Enron’s CEO During State Energy Crisis

SACRAMENTO —  Gov. Gray Davis conferred with then-Enron Chairman Kenneth Lay roughly half a dozen times last year when the Houston energy trader was riding high and California was mired in its energy crisis, but ultimately took none of his advice, the governor said in an interview Friday.

Davis made the comments as Enron struggles to emerge from bankruptcy, and as its influence on President Bush’s energy policy has become the focus of various investigations. Davis added his voice earlier this week to demands for an investigation into Enron’s impact on the California energy crisis.

The question of Davis’ contacts with Lay surfaced Friday night in a broadcast of the PBS show “Now With Bill Moyers.”

The segment focused on Lay’s influence on the Bush energy policy and with administration officials. But in an interview taped last spring for a Frontline/New York Times co-production by investigative journalist Lowell Bergman, Lay said he also had contact with the Clinton administration and with Davis. At the time, the Democratic governor publicly was labeling Texas energy companies as gougers and pirates.

“The strange thing is California,” Lay says on the broadcast. “I mean, Gray Davis will put me in that same list as one of the biggest snakes on the globe. But yet ... he very much wants to meet with me, and he can call me up from time to time and ask ... my advice on things, which is just a little bit incongruous.”

Davis, whose handling of California’s energy crisis has become a campaign issue, was quick to respond. In an interview, Davis said he spoke with Lay at the urging of top federal officials ranging from Clinton and Clinton’s energy advisors to several ranking Bush administration officials.

Their conversations date back to December 2000 and continued until last May, Davis said. The former Enron chief came across as cordial, thoughtful and professorial, Davis recalled.

Initially, Davis said, he hoped Lay would be “an honest broker” who could provide counsel and mediate between the state, other independent power generators and the Bush administration.

“I have no apologies for talking to Ken Lay,” Davis said. “Every government official in the Clinton and Bush administrations said, ‘Have you talked to Ken Lay?’ I did learn a good deal talking to Ken Lay. I learned his view was quite different than mine.... I did ask him for advice on a number of things, and he generally gave me advice that I did not take. In fact, I can’t remember any advice I took.”

Lay urged Davis to require that consumers pay the record wholesale prices being charged for power in late 2000 and last year, Davis said.

Lay also advocated that private companies be allowed to take control of the state’s massive electrical power grid, and that the state further deregulate the electric system, the governor said.

Davis said Lay, who once worked in the U.S. Department of Energy and turned Enron into the country’s seventh-largest corporation, was widely seen by officials in Washington as being “the single most knowledgeable person about energy deregulation.”

“He comes across as having no ax to grind,” Davis said. “He had a huge ax to grind in seeing that energy deregulation was not changed in any way.”

Davis’ explanation did not quiet his political rivals, who used the opportunity to again attack Davis’ handling of the energy crisis.

Secretary of State Bill Jones, seeking the Republican nomination for governor, renewed his call on Davis to return Enron campaign donations. Davis has taken $119,500 from the company since 1996, including $42,500 since taking office in 1999. Davis has indicated no plans to return the money, but says he no longer accepts campaign money from energy brokers or generators.

“It is a policy disaster and a political embarrassment,” said Jones. “It is a good example of big money and access.”

Citing calls in Washington for the Bush administration to turn over records of contacts with Lay, Jones said that “the same request could be made to Davis for phone records and documents.”

Added Margita Thompson, spokeswoman for Richard Riordan, the former Los Angeles mayor who also is seeking the GOP nomination: “We need to know what happened in those meetings and we need to know what role Enron played in Davis’ energy fiasco.”

Riordan himself met with Lay at a Beverly Hills hotel in May. At the meeting, Lay presented Riordan a four-page plan detailing his solution to California’s energy crisis. The plan called for further energy deregulation. Also attending the meeting were actor Arnold Schwarzenegger and financier Michael Milken.

Enron was in a far different financial position in May, having reported first-quarter revenue of $50.1 billion, nearly a 281% increase over the same quarter in 2000.

Davis administration officials said the governor last spoke with Lay on May 8, the date on which California had the last of its six rolling blackouts. An estimated 300,000 people were left without power for hours, and electricity was trading at record highs. Davis spokesman Steve Maviglio said Davis urged Lay to attend a meeting in Sacramento of power generators. Lay sent an underling.

Davis also met in Los Angeles and in Washington with Lay and several other executives and state and federal officials. Additionally, Lay visited the governor at his Capitol office at least once last year.

Any benefit that Lay received from the access to Davis is unclear. Davis said there were no benefits for the company. And Enron spokeswoman Karen Denne said Davis followed none of Lay’s advice: “That’s safe to say. Everything they needed to do, they did too late.”

Davis defends his handling of the energy crisis, saying his actions helped avert economic disaster and power outages during the summer.

“These people could care less about tomorrow,” Davis added. “They just wanted to bilk us for every dollar they can get today. They’re just a bunch of wildcatters. They want your money; they want it now They want your first born; they want it now.”