WASHINGTON – Governmental Affairs Committee Chairman Joe Lieberman’s investigation into the federal oversight of Enron Corp. has produced evidence that the lead agency overseeing energy markets missed signs of potential problems just months before Enron collapsed.
Documents provided to the Committee by the Federal Energy Regulatory Commission reveal for the first time that the agency conducted an internal investigation of Enron’s energy trading practices beginning in May 2001, in the midst of massive energy price spikes in the West. In August 2001, the inquiry concluded that Enron was in no danger of failing, just two months before its eventual collapse.
“In the end, the 2001 FERC inquiry is ultimately more noteworthy for what it overlooked than for what it scrutinized,” Lieberman said in a letter to FERC Chairman Pat Wood. “At a minimum, a more searching inquiry into Enron’s opaque trading practices would, we hope have led FERC to question whether it truly was discharging its duty to maintain just and reasonable energy rates.”
The FERC investigation, initiated by the general counsel’s office conducted inadequate analyses and reached the exact wrong conclusions about Enron’s financial status. Although the report identified a number of areas that should have raised red flags – for example, the extent to which Enron was financially leveraged – the agency never completed it’s inquiry, never distributed it to agency commissioners, and took no course of action.
“This incident is symptomatic of FERC’s general failure to oversee the energy market and to protect consumers,” Lieberman said. “People were taking advantage of the system for their own profit, and despite warnings, FERC failed to take note. Had the agency followed through, this report might also have served as a warning of Enron’s eventual collapse.”
Attached is a copy of Chairman Lieberman’s letter to Commission Chairman Wood.