---------------------- Forwarded by Carla Hoffman/PDX/ECT on 11/21/2000 02:11 
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	Enron Capital & Trade Resources Corp.
	
	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     11/21/2000 12:52 PM
	

To: undisclosed-recipients:;
cc:  
Subject: DJ Enron, Powerex Investigated For Alberta Price Fixing


20:31 GMT 21 November 2000 =DJ Enron, Powerex Investigated For Alberta Price
Fixing

      By Cheryl Devoe Kim
      Of DOW JONES NEWSWIRES

TORONTO (Dow Jones)--Canada's Competition Bureau raided the offices of Enron
Canada Corp. in Calgary and Powerex Corp. in Vancouver earlier this year as
part of an investigation into suspected electricity price fixing by the two
companies, according to documents obtained by Dow Jones Newswires.
Bureau investigator David Bloom alleges in an application for a warrant he
used to gain access to the offices that in the summer of 1999, Powerex and
Enron were coordinating bid restatements and inflating the price each
received for electricity as they traded on the Power Pool of Alberta.
The investigation hasn't yet produced any charges against either of the
companies, according to Enron. The Competition Bureau declined to comment on
the status of the case.
Both Enron Corp. (ENE), which owns Enron Canada, and Powerex, a unit of
provincially owned British Columbia Hydro & Power Authority (X.BCH), deny
breaking any rules or laws.
From Powerex's point of view, Albertans are looking for someone to blame for
high power prices, which have become a political issue in the province.
"They just find it easy to blame us for what are pretty fundamental market
design flaws," Powerex president and chief executive Ken Peterson told Dow
Jones Newswires in an interview.
Deregulation Spurs Search For Someone To Blame
The search for someone to blame has repeated itself across every
deregulating market Enron has participated in, Enron Corp. spokesman Mark
Palmer said.
"Almost every time that either power markets or natural gas markets or even
oil markets or gasoline markets have experienced any kind of price
volatility, there have been investigations done," Palmer said.
Enron has been scrutinized before as part of wider energy markets
investigations, he said, but never found to be breaking the rules. This is
the first such investigation into Powerex's actions, Peterson said.
The Competition Bureau, based in Ottawa, won't say whether the investigaion
is ongoing, citing disclosure rules under the Competition Act.
The companies themselves said they're not sure of the investigation's
status. Their seized files were returned several months ago, but Powerex
hasn't heard from the Bureau since then. Enron did receive a call from the
Bureau last week with a question, according to Enron Corp. spokesman Eric
Thode.
The investigation began when the Power Pool of Alberta's system controllers
noticed the clearing price for a megawatt of electricity was topping C$100
with unusual frequency.
The Pool's price is set by participants submitting bids to buy or sell power
for the following day. Until Oct. 19, 1999, a bidder could restate the
amount of power in a bid or offer an unlimited number of times, until 20
minutes before the hour of transmission. The price paid for every megawatt
of power needed by the Pool in a given hour is set by the most expensive
unit needed to meet demand.
Alleged Bid Rigging Methods Detailed
According to the Competition Bureau search warrant application, Powerex and
Enron were rigging their bids in the following manner:
Powerex would lower the volume of an existing offer. As little as two
minutes later, Enron would increase its offer for the same period by the
same volume, but at a "significantly higher price," according to the warrant
application. Sometimes, Enron would increase its offer even before Powerex
had dropped its offer.
Power Pool market analyst Owen Craig, who once worked in Enron Canada's gas
trading group, found that "as a result of restatements, involving mostly
Powerex and Enron," the Pool price was raised once to C$200/MWh, four times
to between C$354.29 and C$499.93, three times to between C$500 and C$541.63,
and 10 times to between C$801.02 and C$998.
Based on the restatement patterns, Craig, and then the Bureau's Bloom,
concluded that no new energy was being offered to the Pool. They believed
the power was just being transferred from Powerex to Enron and then offered
at the higher price, according to the warrant application. By cutting the
volume offered by Powerex, the more expensive power offered by Enron would
likely be needed, and every participant would get the higher price.
Powerex's Peterson doesn't take issue with the trade history as detailed by
the Bureau, but denies that the company's traders were doing anything wrong
or that the two companies had some sort of arrangement.
"And we're adamant about that," Peterson said. "There was no deal with
Enron. There was no expectation about what their behavior would lead to in
terms of a change in prices or anything like that."
Powerex traders were merely locking in their price, cutting the company's
risk, which Enron agreed to take on by buying the power at a fixed price,
Peterson said.
"Whenever Enron's offer of high-priced energy was declined, within moments
of Enron being advised by the Pool that their energy would not be required,
Powerex would restate an identical volume of energy back into its lower
priced unit," according to the warrant application.
Peterson's response: "We're operating in a very tight market there and we
felt an obligation to make sure the power got delivered into Alberta."
Enron also denies it broke any Power Pool rules or Canadian laws.
"It boils down to we were offered power at a price lower than we thought we
could sell it at," Enron's Thode said. "And that's what Enron and every
other company does that's in the business of trading."
The May 25 search warrant covers the companies' actions between June 1,
1999, and Oct. 19, 1999. On Oct. 20, 1999, the Pool changed its restatement
rules, essentially closing the loophole, though it did so without ever
making public its investigation into Powerex and Enron.
Power Pool spokesman Wayne St. Amour declined to discuss details of the
investigation.
"Market surveillance is in place to, among other things, protect the
interests and activities of market participants," he said.
Those convicted under Canadian law for bid-rigging can be fined an amount at
the court's discretion and/or jailed up to five years. A conviction wouldn't
likely affect Powerex's ability to trade in the U.S., Peterson said. In
Canada "there would have to have some follow-on action by the Alberta
parties to inhibit that. And so far, they still like to get our power."
Companies Concerned About Reputations
The bigger problem, Peterson said, is what the case will do to the Powerex
reputation.
"Essentially both companies are concerned about it because we have a lot at
stake from a reputational point of view," Peterson said. "Both companies, I
believe, conduct themselves in the highest possible standard. But these are
difficult times in the business with prices going crazy in Alberta and
California and people looking for somebody to blame. There's always a
possibility of collateral damage when politics gets involved."
Powerex parent company BC Hydro is also suspected by the Power Pool of
Alberta of unfairly providing access to transmission through British
Columbia, linking Washington with Alberta, as detailed in an Oct. 13 Power
Pool market surveillance report. Again, no charges have been laid.
Company Web sites: <http://www.powerex.com,> http://www.enron.com
-By Cheryl Kim, Dow Jones Newswires; 416-306-2017; cheryl.kim@dowjones.com
(END) Dow Jones Newswires 21-11-00
2031GMT Copyright (c) 2000, Dow Jones & Company Inc


G_nther A. Pergher
Senior Analyst
Dow Jones & Company Inc.
Tel.  609.520.7067
Fax. 609.452.3531

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