Senator Feinstein Releases Selected Unofficial Transcripts of Tapes that Contain Evidence of Fraud and Manipulation of the Western Energy Market
December 12, 2002
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Washington, DC - U.S. Senator Dianne Feinstein (D-Calif.) today released selected unofficial transcripts of audio tapes containing evidence of fraud and manipulation of the Western Energy market in 2000. A copy of the tapes is available in the public document room at the Federal Energy Regulatory Commission.

Excerpted selections available as mp3 files at http://democrats.senate.gov/actualities/feinstein

In a statement released yesterday, Senator Feinstein said: "Week after week, new revelations of widespread manipulation of the California Energy Market come to light, including these tapes released which demonstrate that the AES operator at the company's California plant prolonged maintenance at the instruction of a Williams employee, because California was paying a premium for power."

"It is very important that these tapes were released. They demonstrate very clearly that market manipulation led to the dramatic escalation of price in the Western Energy Market in 2000. This behavior is egregious, illegal, and reprehensible, and any companies or individual that are found to be involved should be severely punished.

"For the first time, I am beginning to realize the depth, breadth, and scope of the chicanery that increased California's electricity prices from an average of $30 a megawatt hour to as much as $3000 a megawatt hour, and which resulted in gas prices that were as much as $40 per decatherm more than in San Juan, New Mexico, when the cost to transport that gas was no more than a dollar.

"This is what happens when federal regulations are not adequate enough, when regulators are asleep at the wheel, and when Congress does not take an active oversight role."

Senator Feinstein also called for hearings in the Senate Energy Committee to examine the evidence. In a letter to incoming Chairman of the Senate Energy Committee, Pete Domenici (R-NM), Senator Feinstein wrote: "Based on these developments, I would like to request a hearing to learn the extent of market manipulation and to urge FERC to issue penalties against bad actors in the energy sectors. I believe there are many questions about the corporate behavior of the entire energy industry, and we must get to the bottom of what is going on."

The selected unofficial transcript follows:

Unofficial Transcript
Selected Excerpts from Williams - AES Tapes

TAPE 1 (Recordings from April 1 - April 13, 2000)
Side A

Conversation between Williams' outage coordinator Rhonda Morgan and an unidentified employee at AES:

Unidentified Male: "Southern California went way up to $175/ megawatt-hour."

Rhonda Morgan: "Cool."

Unidentified Male: "Can we pick up some more load?"

Rhonda Morgan: "You can kill the price if you shove too much out of it...at it."

Unidentified Male: "Yeah."

Rhonda Morgan: "I'll make sure they're aware it's heading up."

Conversation between Williams' outage coordinator Rhonda Morgan and an AES employee named Terry about a peaker plant operating on a limited basis:

Rhonda Morgan: "We made pretty good money on it."

Terry: "Oh we did. Good."

Rhonda Morgan: "Today the market went pretty good too, but they decided not to - yesterday they ran it without a schedule and it did drive the prices back down so they decided... the prices went to like $185 today, but they decided not to run the peaker because they were afraid it would drive the price right back down."

Terry: "Oh yeah."

Rhonda Morgan: "Your guys always said they like to hear we're making money off em."

Terry: "Yeah, yes we do."

TAPE 3 (Recordings from April 27, 2000)
Side A

Conversation between Williams' outage coordinator Rhonda Morgan and an employee at AES named Andy: This conversation is quoted in FERC's Non-public Appendix to Order Directing Williams Energy Marketing & Trading Company and AES Southland to Show Cause (Docket No. IN01-3-000):

Rhonda Morgan: "Yesterday the price went great."

Andy: "How was the price yesterday?"

Rhonda Morgan: "$750"

Andy: "Oh! There'll be some money there."

Rhonda Morgan: "From Williams' point of view, if your Unit 4 outage runs long and if you need more time, we don't have a problem with that. If you do need to run long, just let us know."

Andy: "Can you explain the financial reasons to me?"

Rhonda Morgan: "Right now the ISO needs generation at Alamitos. Since we have three on they are having to pay a premium to have that on, so that is one reason it wouldn't hurt Williams' feelings if the outage ran long. We'd probably give you a break on availability."

Conversation between Williams' outage coordinator Rhonda Morgan and Eric Pendergraft, a high-ranking AES employee. This conversation is also quoted in FERC's Non-public Appendix to Order Directing Williams Energy Marketing & Trading Company and AES Southland to Show Cause (Docket No. IN01-3-000):

Eric Pendergraft: "You guys were saying that it might not be such a bad thing if it took us a little while longer to do our work?"

Rhonda Morgan: "I don't want to do something underhanded, but if there's work you can continue to do..."

Eric Pendergraft: "I understand. You don't have to talk anymore."

TAPE 4 (Recordings from April 27 - May 15, 2000)
Side A

Conversation between Williams' outage coordinator Rhonda Morgan and an unidentified employee at AES about a plant unable to produce its full 480MW of capacity:

Unidentified Male: "I was curious, since we are going to be under-generating here for a few hours, whether there was anything we could substitute over at Alamitos."

Rhonda Morgan: "Well, let me address that. There is another situation going on over there is because the ISO potentially needs generation at Alamitos - we are somewhat at a high price there and if we pick up generation I think it will kill that price. "

TAPE 4 (Recordings from May 15, 2000)
Side B

ISO employee questions why AES and Williams need to take plant offline to clean condensers, suggesting outage may not be necessary. This conversation is also referenced in FERC's Non-public Appendix to Order Directing Williams Energy Marketing & Trading Company and AES Southland to Show Cause (Docket No. IN01-3-000):

Rhonda Morgan: "Huntington Beach Unit 1 condenser cleaning, and that's for three days beginning at 2200 on 5/6."

ISO Employee: "I don't understand that at all, I worked at that plant. I cleaned those condensers many times with the units online."

Rhonda Morgan: "For Unit 2 [unintelligible]"

ISO Employee: "Okay. I've also done that with units online."

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