After one of the Enron meetings, Vice President Cheney's energy task force changed a draft energy proposal to include a provision to boost oil and natural gas production in India. The amendment was so narrow that it apparently was targeted only to help Enron's troubled Dabhol power plant in India. [Washington Post, Jan. 26, 2002]
Other parts of the Bush energy plan also echoed Enron's views. Seventeen of the energy plan's proposals were sought by and benefited Enron, according to Rep. Henry Waxman, D-Calif. One proposal called for repeal of the Public Utility Holding Company Act of 1935, which hindered Enron's potential for acquisitions.
Bush also put Enron's allies inside the federal government. Two top administration officials, Lawrence Lindsey, the White House's chief economic adviser, and Robert Zoellick, the U.S. Trade Representative, both worked for Enron, Lindsey as a consultant and Zoellick as a paid member of Enron's advisory board.
Lay exerted influence, too, over government regulators already in place. Curtis Hebert Jr., a conservative Republican and ally of Sen. Trent Lott, R-Miss., had been appointed to the FERC during the Clinton administration. Like Bush and Lay, Hebert was a promoter of "free markets," and Bush elevated him to FERC chairman in January 2001.
But Hebert ran into trouble when he broke ranks with Lay on Enron's plan to force consolidation of state utilities into four giant regional transmission organizations, or RTOs. By quickly pushing the states into RTOs, Enron and other big energy traders would have much larger markets for their energy sales.
Hebert, who advocated state rights, told the New York Times that he got a call from Lay with a proposed deal. Lay wanted Hebert to support a faster transition to a national retailing structure for electricity. If he did, Enron would back him to keep his job.
The FERC chairman said he was "offended" by the veiled threat. Lay already had demonstrated sway over selection of administration appointees by supplying Bush aides with a list of preferred candidates and personally interviewing a possible FERC nominee.
Lay offered a different account of the phone call. He said Hebert was the one "requesting" Enron's support, though Lay acknowledged that the pair "very possibly" discussed issues involving FERC's authority over the nation's electricity grids.
Hebert also raised Enron's ire when he started an investigation in early 2001 into how Enron's complex derivative financing instruments worked. "One of our problems is that we do not have the expertise to truly unravel the complex arbitrage activities of a company like Enron," Hebert said. [NYT, May 25, 2001]
At the time, those complex - and deceptive - derivative schemes were concealing Enron's worsening losses.
Energy Crisis
The California energy crisis also was spinning out of control. Rolling blackouts crisscrossed the state, where the partially deregulated energy market, served by Enron and other traders, had seen electricity prices soar 800 percent in one year.
After taking power, Bush turned a deaf ear to appeals from public officials in California to give the state relief from the soaring costs of energy. He also reined in federal efforts to monitor market manipulations.
As California's electricity prices continued to soar, Democratic Gov. Gray Davis and Sen. Dianne Feinstein voiced suspicions that the "free market" was not at work. Rather they saw corporate price-fixing, gouging consumers and endangering California's economy.
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