* Found FERC "reticent" after Enron, so developed
* 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 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
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
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
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
CFTC NEEDS A CULTURAL SHIFT
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
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