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California

Trader Tapes Raise New Questions

Energy: Mirant and Xcel employees discussed ways to raise profits as the state endured power shortages, a filing shows.

June 11, 2002|From Times Wire Services

Taped conversations between energy traders discussing ways to boost profits from Western power markets in 2000 and 2001 have raised new questions about how traders structured deals as grid operators struggled to keep the lights on.

The revelations, made by Minneapolis-based Xcel Energy Inc. in a filing with federal regulators, are a further blow to an industry trying to show it acted ethically during California's energy crisis.

The conversations were between traders from Atlanta-based Mirant Corp. and Public Service Co. of Colorado, an Xcel division.

Xcel released them last month in its response to the Federal Energy Regulatory Commission, which is investigating whether energy traders practiced market-manipulation strategies discussed by Enron Corp.

In one conversation, on June 20, 2000, a Mirant trader told a Public Service trader about taking power from Northern California and moving it to the south.

"I mean, it's just kind of loop-the-looping, but it's making money," the Mirant trader said.

"So what, it works," the other trader responded. "So they got to be loving you for that."

"It's working pretty well so far. Hopefully it keeps going," the Mirant trader said.

Energy trading companies typically record their traders' telephone conversations to provide a record if a dispute arises later over a transaction or some other issue.

In a July conversation, traders of the two companies discussed ways to make money on a 300-megawatt purchase by Mirant. The Mirant trader suggested restricting the deal to 50 megawatts.

"I don't want to crush the market too bad," he said.

At that time, Californians were dealing with a severe energy shortage that had caused rolling blackouts.

Mirant executives said the traders' comments could be "easily misinterpreted" and that all of their activity was focused on providing Californians with sufficient electricity to meet demand.

"The scheduling to load and other market-related activities discussed between these employees were legal, appropriate and within the rules of the Western power market as established by FERC and the California Independent System Operator," said Marce Fuller, Mirant's president and chief executive.

The $600-billion energy-trading business is shrinking amid regulatory probes of sham transactions and the collapse of Enron, once the world's biggest trader. Williams Cos. slashed its 2002 profit forecast Monday and said it plans to cut jobs.

Williams, based in Tulsa, Okla., said earnings will be $1.35 to $1.70 a share this year, about 70 cents below a previous projection. It's reducing the cash and working capital for its trading unit by a third to $1 billion.

El Paso Corp., the biggest U.S. pipeline owner, trimmed its profit forecast and cut trading jobs by half two weeks ago.

The shares of Williams, El Paso and power producers have tumbled in the midst of investigations into trading practices and accounting after the December bankruptcy filing of Enron, which inflated revenue and hid debt.

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