Senator Feinstein Urges Senate Investigation of Possible Improprieties in FERC’s Relationship with Energy Companies
May 25, 2001

Washington, DC – U.S. Senator Dianne Feinstein (D-Calif) today urged Senator Joseph Lieberman (D-Conn.) to hold hearings in the Senate Committee on Governmental Affairs into the possibility of an improper relationship between the Federal Energy Regulatory Commission and the industry the commission is responsible for regulating.

“Despite evidence of manipulation and price gouging in both the electricity and natural gas markets in California and the West, and a finding by FERC last November of ‘unjust and unreasonable’ rates, the commission has failed to take the actions necessary to bring reliability and stability to the marketplace,” Senator Feinstein wrote in a letter to Senator Lieberman, currently Ranking Member on the Governmental Affairs Committee.

“And now, we have a report in today’s New York Times that Enron’s Chairman Mr. Kenneth Lay told Curtis Hebert Jr., the chairman of the Federal Energy Regulatory Commission, that Enron would support him in his job if he backed a national push for retail competition in the energy business and a faster pace in opening up access to the electricity transmission grid to companies like Enron.”

Chairman Hebert told the New York Times he was “offended” by Mr. Lay’s comments, but realized that if he refused to do as Mr. Lay asked, his job could be in jeopardy. Mr. Hebert said that Mr. Lay told him “he and Enron would like to support me as chairman, but we would have to agree on principles” involving the commission’s role in expanding electricity competition.

“While Mr. Lay’s account differs, it is clear that the citizens of the United States, especially the people of California, who are suffering from FERC’s failure to do its job, deserve an investigation and full public hearing into what happened,” Senator Feinstein wrote.

“FERC is a $175 million a year agency charged with regulating the energy industry, and it would be unconscionable if any of the nation’s electricity traders or generators were in a position to be able to determine who chairs or becomes a member of the commission,” Senator Feinstein continued.

“Since FERC has refused to fulfill its legally mandated function under the Federal Power Act to restore ‘just and reasonable’ electricity rates, we need to ask whether undue influence by the companies that FERC regulates has resulted in its failure to act.

I know you are aware of the serious economic ramifications of the energy crisis in California, both to my home state and the nation as a whole. In California, the total cost of electricity in 1999 was $7 billion. This climbed to $28 billion in 2000 and is predicted to reach $70 billion this year. At the same time, with FERC refusing to act, power generators and marketers have made record profits.

The people of our nation deserve a full investigation. I know of your own interest in this area, including your request for a GAO inquiry of price gouging, and I would hope that you would hold hearings into these new revelations.”