Enron's regulator

Posted: Jan 28, 2002 12:00 AM
WASHINGTON -- Enron's greatest political coup before its fall was last year's appointment of a federal electric power regulator whose decisions could maximize its profits. But this does not prove that the now bankrupt energy company purchased vast influence with massive political contributions. The change at the Federal Energy Regulatory Commission (FERC) was mainly influenced by President Bush's dedication to the Texas buddy system. Enron CEO Kenneth Lay was never more brazen in his pressure, unsuccessful, than on then FERC Chairman Curtis Hebert to increase federal regulation for Enron's benefit. Those steps are now being taken by Hebert's Bush-appointed successor, Texan Pat Wood. Even before Lay definitively ruled out Hebert, however, Bush signaled Senate Republican Leader Trent Lott that he was making the change. Lay got what he wanted: increased federal authority over electric transmission to benefit the high-flying company. Spraying money to lawmakers across party and ideological lines, Enron's objective was to enhance its bottom line. That's why this presumed exemplar of private enterprise pressed for government regulation of carbon dioxide emissions and power transmissions. In the case of electricity, Enron had the help, however unwitting, of George W. Bush. At issue is control of huge power lines carrying electricity from one state to another. Enron and other independent power producers have lobbied for federalization of the entire system through regional transmission organizations. The decision was in the hands of FERC, which in recent years has been a low-profile agency that seldom attracts public attention. Curtis Hebert, from Trent Lott's hometown of Pascagoula, Miss., and a protege of the senator, was a prodigy in his state's Republican politics. Elected to the Mississippi Legislature at age 23 and appointed to the state's Public Service Commission at age 29 in 1992, Hebert in 1997 was named by President Clinton to a Republican seat on FERC at Lott's recommendation. As the only Republican commission member, Hebert was named FERC chairman two days after President Bush's inauguration last year. But a place in Washington was needed for another youthful Republican: 39-year-old Pat Wood III, who had been chosen by Gov. Bush to be chairman of the Texas Public Utility Commission. After the 2000 election, the word from Austin indicated Wood was destined for one of two chairmanships: FERC or the Federal Communications Commission (FCC). A backstage campaign against Wood was launched in the communications industry, and Washington lawyer Michael Powell (the secretary of state's son) was named to the FCC. That left FERC for Wood. Lott had heard nothing good about Wood and argued with Bush on behalf of Hebert, as a staunch advocate of free markets. Lott encountered a stonewall in the president and Clay Johnson, another Texan who is Bush's steely personnel chief. Lott knew nothing about the intervention by Enron (which he thought was a pipeline company). Enron from the start wanted Wood for the FERC chairmanship so vital to the company, but had not abandoned the possibility that Hebert might be retained. So, in a now infamous telephone conversation with Lay a year ago, Hebert was given the impression he might get Enron's support if he changed his position on electrical regulation to benefit the company. When he refused, according to Hebert, Lay said he could not support him. Wood at FERC has not disappointed Enron, most recently issuing new rules for wholesale power transactions issued Nov. 20. FERC is dividing the country into a few regional transmission organizations, attempting to coordinate electric power through government regulation rather than the open market. Economist Thomas Lenard of the conservative-oriented Progress & Freedom Foundation, in analyzing the new regulatory agenda at FERC, contends that the commission's course is "antithetical to the goal of a competitive electricity market. If the agency won't reverse course on its own, the Congress should step in and curtail its authority." That suggests free market advocates have given up on President Bush on this issue. "Here we have the most conservative president since Herbert Hoover," Vermont's Democratic Gov. Howard Dean has said, "and he is proposing that government can take your property to put up a power line." That's the result when the president makes a political appointment that benefits a rapacious corporation.