Glendale Investigating Utility’s Link to Enron

Glendale officials said Friday that they were investigating whether power traders for the city’s utility knowingly participated in controversial electricity trading ploys with Enron Corp. and another company to boost prices in California’s deregulated markets.

City officials said the probe would examine whether any of the city’s excess electricity was used in schemes detailed in recently disclosed Enron memos, including tactics to circumvent state price caps and create false congestion.

“At this point, we’re not sure that our guys knew about these strategies or if they [the outside trading companies] were just doing them for us,” said Steven G. Lins, an assistant city attorney.

Glendale Water & Power is the first municipal utility to say it may have participated in Enron-style trading ploys.

The Times reported Friday that internal Enron documents obtained by state Sen. Joe Dunn (D-Santa Ana) through subpoena indicate that some municipal utilities may have cooperated with Enron and profited financially from the trading strategies revealed recently in legal memos written in December 2000.

Dunn, who has not released the documents obtained by subpoena, said they speak of “profit-sharing agreements” between Enron and municipal utilities. Sources have said that two of the utilities mentioned are the Los Angeles Department of Water & Power and the Glendale utility.

The DWP has denied any profit-sharing relationship with Enron but has acknowledged selling Enron and other traders excess capacity on its transmission lines.

Glendale, however, had a profit-sharing agreement with Enron from June 1999 to June 2000, City Manager James E. Starbird said in a statement. Starbird said such an agreement was not unusual: “Businesses do this on a daily basis.”

Glendale Water & Power provides electric and water service to more than 78,000 residents and businesses. The city utility generates its own power and also buys power from outside sources.

Enron contracted to sell the electricity that Glendale did not need for its own customers, and during that year Glendale split profit with Enron on a 75%-25% split.

Glendale’s 75% share brought in $3.9 million, Starbird said. California has asked federal regulators to grant $8.9 billion in refunds because of alleged electricity overcharges.

“When you look at the big picture, we’re a minor player,” Starbird said.

In August 2000, Glendale signed a five-year contract with Houston-based Coral Power, a trading company partly owned by Shell Oil Co., to manage energy services and sell excess power.

Glendale has a different profit-sharing arrangement with Coral, Lins said. Coral had denied using Enron-style trading ploys, but its name appears in handwritten notes from meetings between Enron traders and lawyers discussing trading strategies used in the California market. Coral is characterized in the notes as a trader that employed some similar techniques.

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City Cooperating With Legislative Committee

State and federal regulators have stepped up their investigations of market manipulation during the California energy crisis since the release last month of internal Enron memos detailing the company’s use of tactics to keep power supplies tight and prices high.

The Times on Friday reported the existence of another Enron memo, dated Oct. 30, 2000, that indicated that Enron continued to pursue the questionable trading tactics even after it was warned by attorneys that doing so could open them to possible criminal liability.

Enron has characterized the memo as a broad discussion of legal issues and not a warning about specific trading practices.

Starbird said the city was cooperating with Dunn’s committee but “does not want to be a party to a search for a political scapegoat.”

Glendale officials described their relationship with Enron in a letter sent Friday by Ignacio R. Troncoso, director of Glendale Water & Power, to state Sen. Bill Morrow (R-Oceanside). Morrow is vice chairman of a committee, chaired by Dunn, that is investigating manipulation of California’s energy markets.

A Dunn spokesman could not be reached for comment. Morrow’s spokesman said the senator had not seen Glendale’s letter and could not comment.