While the White House insists that details of its talks with Enron officials remain
secret, a memo outlining those discussions reveals the extent to which the Houston
energy giant lobbied to influence government policy.
The memo, a copy of which was obtained by The Chronicle, was handed by former
Enron Chairman Ken Lay to Vice President Dick Cheney last April when the two met
to discuss the administration's response to California's energy crisis.
The White House acknowledged last night that aspects of the memo resembled
elements of Cheney's energy plan, but it refused to say whether the document was
included in notes that Cheney now refuses to divulge to congressional investigators.
The General Accounting Office is threatening to sue the administration if it
doesn't disclose details of its talks with Enron officials.
The three-page document contains eight points spelling out Enron's case for
why federal authorities should refrain from imposing price caps or other measures
sought by California officials to stabilize runaway electricity prices.
A number of the positions in the memo subsequently made it into Cheney's energy
plan or were reflected in comments by senior administration officials.
"Events in California and in other parts of the country demonstrated that the
benefits of competition have yet to be realized and have not yet reached consumers,"
the memo argues.
"The following actions need to be taken," it continues, outlining positions
on a series of matters. Some of the topics, such as equal access to transmission
grids and interconnection of power networks, are largely technical in nature.
ENRON FROWNED ON PRICE CAPS
The key point as far as California was concerned was whether soaring wholesale
power prices should be limited or whether such prices were merely a reflection
of normal supply-and-demand dynamics.
"The administration should reject any attempt to re-regulate wholesale power
markets by adopting price caps or returning to archaic methods of determining
the cost-base of wholesale power," the memo says.
It adds that even temporary price restrictions "will be detrimental to power
markets and will discourage private investment."
The memo blames California officials for having made only "limited progress"
in tackling the state's power woes. It says that if the administration were to
follow all of Enron's recommendations, the measures "would mitigate this crisis."
An Enron spokesman confirmed that the memo had been given by Lay to Cheney
during their one-on-one talks.
Mary Matalin, an adviser to the vice president, said Cheney's energy plan included
input from many sources. "Just because some of the things (in the memo) are included
in the plan doesn't mean they were from the talks" between Cheney and Lay, she
LIMITS CALLED 'A MISTAKE'
Still, as far as price caps go, the administration was quick to fall into lockstep
with Enron's opposition to any federal regulatory moves. "We think that's a mistake,"
Cheney said just weeks after his meeting with Lay.
Nevertheless, federal regulators finally imposed price limits in June based
on the cost of the least-efficient, and thus most expensive, generating plant.
Democrats in Washington had threatened to act on their own if the regulators did
not come up with a remedy for California's troubles.
Cheney also echoed Enron's position on the culpability of California's leaders
in exacerbating the state's energy problems.
"When the problem became obvious last year, over a year ago, they didn't respond,"
he said in May.
Noting that California had experienced rolling blackouts and the bankruptcy
of its biggest utility, he also said, "I don't think that's a sterling record
of leadership, I would guess, on their part."
SHARED FAITH IN DEREGULATION
To be sure, Cheney, Lay and President Bush, as well as other industry players,
shared a belief in deregulation well before the lights went out in California.
But the memo underscores the broad kinship between Enron and the administration
in drafting official policy.
Steve Maviglio, a spokesman for Gov. Gray Davis, said it came as no surprise
that Enron had substantial clout in formation of the Bush administration's stance
on California's difficulties.
"What the federal government did during the energy crisis was pretend that
the problem didn't exist and say that the markets can solve everything, and that's
the same thing Ken Lay told the governor," Maviglio said.
He added that "the administration was espousing what Enron was espousing --
that the markets should fix themselves."
Whatever else, it's extraordinary for a private company, particularly one accused
by California officials of having gouged the state with wildly inflated energy
prices, to have played such a prominent role in the White House's response to
'CONSUMERS SHOULD BE OUTRAGED'
"If the administration was allowing Enron to guide its policy during the California
energy crisis, consumers should be outraged," said Janee Briesemeister, senior
policy analyst at Consumers Union in Austin, Texas.
"It's not unusual for a company to hand policymakers their ideas for what should
be done," she added. "Things break down when policymakers refuse to admit that
they used what was brought to them by industry."
Cheney's argument, as he told an interviewer Sunday, is that revealing details
of his talks with Enron would undermine "the ability of the president and the
vice president to solicit advice from anybody they want in confidence."
Bush echoed this sentiment a day later, saying that confidential talks are
necessary to "get good, sound opinions." He reiterated that stance yesterday in
a meeting with congressional leaders.
Craig McDonald, director of Texans for Public Justice, a watchdog group, called
it laughable for the administration to cast its secrecy as a defense of high-minded
"All they're fighting for is to keep the wraps on how much clout Enron had
over Dick Cheney's energy plan," he said.
©2002 San Francisco Chronicle