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

October 30, 2002

Three California Wind Facilities Caught Up in Enron Scandal

The Federal Energy Regulatory Commission (FERC) announced last week that it is investigating three California wind facilities affiliated with Enron Corporation. At issue is whether the small power producing companies in charge of those wind plants—Zond Windsystems Holding Company, Victory Garden Phase IV Partnership, and Sky River Partnership—misrepresented the extent of Enron ownership in their companies.

According to FERC, the three companies applied in May 1997 to be certified as "qualifying facilities," a status that earns regulatory and financial benefits for power plants. To earn such status, the wind plants had to be owned primarily by a person or company not involved in the sale of electricity (other than the electricity from the wind plants themselves), so Enron could not be the primary owner. To meet that standard, Enron transferred some or all of its interest in the three companies to two partnerships, called "RADR ZWS MM, LLC" and "RADR ZWS, LLC." However, as noted by FERC, a recent criminal complaint against two former top Enron executives alleges that the two RADR partnerships were created solely to disguise Enron's interest in the wind facilities.

FERC will hold a public hearing on the allegations in the near future, after which it will "establish the appropriate remedies." In the past, FERC has revoked companies' qualifying facility status and ordered partial refunds of their power proceeds. FERC says that it can also permanently revoke qualifying facility status for the wind facilities, if warranted. See the FERC order (PDF 73 KB). Download Acrobat Reader.