June 13, 2004

Enron Traders on Grandma Millie and Making Out Like Bandits

LAST month, the Snohomish County Public Utility District, outside Seattle, released audiotapes of Enron energy traders discussing "stealing" from California, sticking it to "Grandma Millie" and other ways of manipulating the energy market.

The tapes, recorded in 2000, surfaced because Enron, now in bankruptcy court, pressed a claim for $122 million against Snohomish, which the company contends improperly canceled a power contract in 2001.

An Enron spokeswoman says that while the conversations are "disturbing and offensive," the contract fee is still valid.

Snohomish officials disagree, and its lawyers are using the tapes, originally subpoenaed by the Justice Department, to help them fight Enron's claim.

Senator Maria Cantwell, Democrat of Washington, estimates that if the $122 million fee stands, it will cost the average household served by Snohomish $420 in higher bills.

Excerpts from the transcripts follow.

Two Enron employees, Greg and Shari, prepare for a phone call that is part of negotiations with Snohomish about the proposed energy contract.

Greg: Um, called lies, it's all how well you can weave these lies together, Shari. All right, so um - -

Shari: I feel like I'm being corrupted now.

Greg: No, this is marketing.

Shari: O.K.

Greg: It's not as bad as trading.

Shari: Yeah, it's true. Oh yeah, you're right. O.K., cool, I'll - I'll do it.

In the now infamous Grandma Millie exchange, recorded on Nov. 30, 2000, two traders, identified as Kevin and Bob, discuss demands by California officials that electricity-generating companies and traders pay refunds for price-gouging. They also refer to the disputed presidential election, which was as yet undecided.

Kevin: So the rumor's true? They're [expletive] takin' all the money back from you guys? All those money you guys stole from those poor grandmothers in California?

Bob: Yeah, Grandma Millie, man. But she's the one who couldn't figure out how to [expletive] vote on the butterfly ballot.

Kevin: Yeah, now she wants her [expletive] money back for all the power you've charged for [expletive] $250 a megawatt hour.

Bob: You know - you know - you know, Grandma Millie, she's the one that Al Gore's fightin' for, you know?

Later in the same conversation, Kevin and Bob express little sympathy for Californians.

Kevin: Oh, best thing that could happen is [expletive] an earthquake, let that thing float out to the Pacific and put 'em [expletive] candles.

Bob: I know. Those guys - just cut 'em off.

Kevin: They're so [expletive] and they're so like totally - -

Bob: They are so [expletive].

In an earlier conversation, from Aug. 5, 2000, two traders, identified as Person 1 and Person 2, gleefully discuss how a wildfire in California has reduced the ability of a transmission line to carry electricity, boosting the value of power in parts of the state and the profits on electricity trades they have made.

Person 2: The magical word of the day is "Burn, Baby, Burn"--

Person 1: What's happening?

Person 2: There's a fire under the core line it's been de-rated from 45 to 2,100.

Person 1: Really?

Person 2: Yup. --

Together: Burn, baby, burn.

Person 1: That's a beautiful saying.

In a conversation on Aug. 8, 2000, the head of Enron's West Coast trading desk, Tim Belden, describes to an unidentified person, referred to as Person 2, how much one of his colleagues, Jeffrey Richter, was personally taking from California. Mr. Belden and Mr. Richter have both pleaded guilty to federal charges stemming from their roles in manipulating the electricity markets.

Tim: He steals money from California to the tune of about a million --

Person 2: Will you rephrase that?

Tim: O.K., he, um, he arbitrages the California market to the tune of a million bucks or two a day.

Many of the traders' conversations are about California's initial efforts to cap the price of power sold in the state, a move they feared would decrease power prices and their own profits. Two traders, Matt and Tom, discussed the subject of caps on Aug. 3, 2000:

Tom: You getting rich?

Matt: Tryin' to. I just, you know, you know what [expletive] me off so bad about [expletive] - the [expletive] caps?

Tom: You ca - it limits your profit.

Matt: Yeah. Completely [expletive] you.

Tom: What?

Matt: Completely [expletive] you.

Tom: Oh, [expletive] it does.

Later, Tom rails against what he sees as the anti-American nature of price caps.

It's just [expletive]. It's completely [expletive]. It - it just goes against everything our country's about.

Two traders, Tracey and someone identified as Person 2, in a Sept. 14, 2000, conversation, offer a similar view.

Tracey: So you're getting [expletive] because they - they - these stupid caps, right?

Person 2: Yeah [expletive], I'd be a, oh, Sonny, we'd be printin' like [expletive] 500 million dollars.

In their August conversation, Matt and Tom discussed their hope that George W. Bush, then the Texas governor, would win the 2000 presidential race because he opposed price caps. But unfortunately for Enron, Mr. Bush's picks for the Federal Energy Regulatory Commission, Patrick Wood III and Nora Brownell, moved quickly to impose price caps throughout the Western United States after they took office in summer 2001, a move that helped break the back of the power crisis.

Matt: "When this election comes, Bush'll [expletive] whack that [expletive], man. He won't [expletive] play this price cap [expletive]. I bet they impose a national price cap at a thousand dollars."

Matt and Tom also describe their dislike of President Clinton's energy secretary, Bill Richardson, as well as rumors that Enron's chairman and chief executive officer, Kenneth L. Lay would be Mr. Bush's pick for the same job.

Matt: Tell you what - you heard this here first: When Bush wins --

Tom: Caps are gone.

Matt: That [expletive] Bill Richardson, he's [expletive] gone. The [expletive], ah, Clinton, he's [expletive] all these [expletive] ah, socialists are gone.

Tom: Yeah.

Matt: And who's the biggest, ah, single contributor to the Bush campaigners?

Tom: You.

Matt: Enron.

Tom: Enron. What?

Matt: Enron.

Tom: Is it Enron?

Matt: Yeah.

Tom: [Expletive], is it - is that true?

Matt: Yeah, I think it is.

Tom: The biggest single contributor.

Matt: Yeah, the biggest corporate contributor to the --

Tom: Holy --

Tom: Really? That's huge.

Matt: And No. 1.

Tom: That's huge.

Matt: Ken Lay's going to be secretary of energy.

Statewide energy price caps imposed by California in 2000 actually produced a profitable form of manipulation known as "ricochet."

Power generated in California was exported out of state, often to Palo Verde, Ariz., then reimported to California where it was no longer subject to the limits and could fetch prices many times the price caps. Or it could be sold to other Western buyers at sky-high prices.

In a conversation on Sept. 14, 2000, about a month after the California price cap was set at $250 a megawatt hour, Tracey, the trader, and someone identified as Person 2 discuss moving power out of the state to avoid the caps.

Person 2: Take it and move it out. Bring it to the Northwest, bring it to Palo Verde so you're seeing all this energy that's supposed to be used for Californians go elsewhere - out - they export it out.

Tracey: So what do we need - we need a blackout and then they're going to move - remove the cap?