Arnold's Enron Connection

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A month before the Frontline interview and Bush's meeting with Davis, Cheney, who chairs Bush's energy task force, met with Lay to discuss Bush's National Energy Policy. Lay, whose company was the largest contributor to Bush's presidential campaign, made some recommendations that would financially benefit his company. Lay gave Cheney a memo that included eight recommendations for the energy policy. Of the eight, seven were included in the final draft. The energy policy was released in late May 2001, after Schwarzenegger, Riordan, and Milken met with Lay and after the meeting between Bush and Davis and Cheney's Frontline interview.

The policy made only scant references to California's energy crisis, which Enron was accused of igniting, and did not indicate what should be done to provide the state some relief. Cheney said the policy focused on long-term solutions to the country's energy needs, such as opening up drilling in the Arctic National Wildlife Refuge and freeing up transmission lines. That's why California was ignored in the report, Cheney said.

What‚s unknown to many of the voters who will decide Davis's fate on Oct. 7 is that while Cheney dismissed Davis's accusations that power companies were withholding electricity supplies from the state, one company engaged in exactly the type of behavior that Davis described. But Davis would never be told about the manipulative tactics the energy company engaged.

In a confidential settlement with the Federal Energy Regulatory Commission, whose chairman was appointed by Bush a year earlier, Tulsa, Oklahoma-based Williams Companies agreed to refund California $8 million in profits it reaped by deliberately shutting down one of its power plants in the state in the spring of 2000 to drive up the wholesale price of electricity.

The evidence, a transcript of a tape-recorded telephone conversation between a Williams employee and an employee at a Southern California power plant operated by Williams, shows how the two conspired to jack up power prices and create an artificial electricity shortage by keeping the power plant out of service for two weeks.

Details of the settlement had been under seal by FERC for more than a year and were released in November after the Wall Street Journal sued the commission to obtain the full copy of its report. Similarly, FERC also found that Reliant Energy engaged in identical behavior around the same time as Williams and in February the commission ordered Reliant to pay California a $13.8 million settlement.

Had the evidence been released in 2001, when Davis accused energy companies of fraud, it would have helped California's case and voters may have viewed the governor more positively. But if FERC were to publicly release the details of the Williams settlement it wouldn't have jibed with Bush's energy policy, which was made public in May 2001. It's highly unlikely that Bush, Cheney, and members of the energy task force were kept in the dark about the Williams scam, especially since the findings of the investigation by FERC took place around the same time the policy was being drafted.

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