5 Min Read
* Found FERC "reticent" after Enron, so developed legislation
* Over time, agency transformed to aggressive cop on beat
* Shift took time, high-profile hires
* Cantwell hopes CFTC, FTC also get tough on enforcement
By Roberta Rampton
WASHINGTON, Nov 29 (Reuters) - A recent crackdown on suspect power trades by the Federal Energy Regulatory Commission has made a fan out of one of the most fervent critics of the nation's electricity regulator.
Maria Cantwell, a Democratic senator from Washington state, led the charge several years ago to give FERC more power to root out market manipulation after the Enron scandal. She has kept a close watch as a regulator she once viewed as "reticent" built up its team and gained expertise in monitoring traders.
In the past few months FERC fully unleashed its new clout with headline-grabbing fines, proposing a record $470 million fine on British bank Barclays, and a temporary ban on JPMorgan Chase & Co's energy trading arm from part of the domestic power market.
"Hallelujah!" Cantwell said in an interview with Reuters, explaining the fines show FERC is taking the sort of tough approach she had in mind when writing the legislation, the Energy Policy Act of 2005.
"To actually be as aggressive as they are today is a very important step. They're saying, 'We are very serious about policing this market and we'll be as aggressive as we have to be to protect consumers,'" she said.
It's a conversion Cantwell hopes eventually takes hold within other agencies that police the energy markets: the Commodity Futures Trading Commission, which oversees energy futures and derivatives, and the Federal Trade Commission, which polices fraud in wholesale markets.
Cantwell authored legislation in 2009 that gave the FTC new anti-manipulation authority, and championed a provision in the 2010 Dodd-Frank financial law that made it easier for the CFTC to prove manipulation cases.
Each of those agencies should work actively to protect consumers, she said. "Energy is the lifeblood of an economy, and if it spikes out of control, it hurts job growth, it hurts economic opportunity."
Cantwell had just been elected to the Senate in 2001 when power prices sky-rocketed in Western states. It later became known that traders at Enron, the now-bankrupt energy giant, had conspired to inflate prices with a variety of schemes.
"We had built an entire economy on cheap electricity: anybody from Boeing to server farms," she said, recalling the fears caused during the 2000-01 energy crisis. "So we had to fight back."
Cantwell said that at the time, she and other lawmakers from Western states had to push FERC to investigate Enron.
In the end a small utility in her state, the Snohomish County Public Utility District, transcribed thousands of hours of audio tapes, unearthing En ron t raders joking about driving up power prices for "Grandma Millie".
Cantwell was also frustrated that FERC, led by five appointed commissioners, was "very reticent" to making rulings that would help utilities get out of long-term power contracts based on manipulated prices. So she wrote a more explicit law.
"We passed a law that was crystal clear, and obviously supported getting people on the FERC who would use this authority," she said.
It took some time for FERC to beef up its enforcement team and learn how to better monitor the market for signs of suspect trades, Cantwell said.
FERC's office of enforcement has about 200 staff now, up from about 20 during the Enron era. It is led by Norman Bay, a former U.S. District Attorney from New Mexico, and other high-profile recruits.
The recent fines and trading ban will serve as a deterrent to others considering bending the rules, Cantwell said.
"I think it's been a gradual implementation of what was supposed to be a policeman on the beat," she said. "Now the policeman knows a lot more, and is wielding that authority more effectively."
While Cantwell said she grades FERC as an "A" for its enforcement work, she said the CFTC has so far failed to prove any new manipulation cases using its powers granted in 2010.
"Right now, I'd still give (CFTC) a 'D.' It has not totally stepped up," she said, explaining she thinks the agency needs a "cultural shift" to embrace its new enforcement powers.
Cantwell said she is also disappointed the Federal Trade Commission has not been more aggressive pursuing complaints about price spikes in West Coast gasoline prices in May and October.
Cantwell and her five fellow West Coast senators wrote to the Justice Department this week seeking a detailed probe. "Something doesn't add up, and we want this investigated," she said. (Reporting by Roberta Rampton; editing by Ros Krasny and Andrew Hay)