This is an excerpt from EERE Network News, a weekly electronic newsletter.

October 23, 2002

Arrest Proves Energy Trading Role in California Power Crisis

Back in 2000 and 2001, when California was facing skyrocketing electricity costs, near-bankrupt utilities, and rolling blackouts, energy analysts struggled to explain the reasons for the crisis. Although many factors contributed to the problems, some analysts pointed to the energy companies themselves, claiming that they used their market power to push electricity prices higher. That viewpoint, which was greeted with some skepticism at the time, was confirmed last week when the former Chief Energy Trader for Enron Corporation agreed to plead guilty to conspiracy to commit wire fraud. Timothy N. Belden, who worked in Enron's West Power Trading Division in Portland, Oregon, will admit that Enron's manipulation of California's energy markets was illegal, and has agreed to cooperate in the continuing investigation into the manipulation of California energy markets.

In announcing the guilty plea, U.S. Attorney Kevin V. Ryan said, "These charges answer the question that has long troubled California consumers: whether the energy crisis was spurred in part by criminal activity. The answer is a resounding yes. The U.S. Attorney's Office in San Francisco and the Justice Department will bring to justice those who served their own selfish purposes by intentionally and criminally manipulating energy consumers in California and on the West Coast." See the press release from the U.S. Department of Justice.

Another contributor to the crisis was the price and availability of natural gas, which fuels a large percentage of California's power plants. A report prepared in August by the Federal Energy Regulatory Commission (FERC) found "preliminary indications" that natural gas prices were manipulated as well. FERC's investigations are continuing. See the FERC Web site.