1002 West Ave, Austin, Teas 78701
512-477-1155
512-797-8468 (cell)
News Release
Public Citizen calls for investigation of PUC Chair
Group calls for outside review of his ties to Enron
(Austin) Public Citizen - a watchdog group - called today for an investigation of PUC Chair Max
Yzaguirri's relationship with Enron. “Max Yzaguirri’s failure to fully disclose the extent of his employment
with Enron at the time of his appointment to the PUC has left Texas in the dark. We need to shed to light
on the holdings and business dealings between Enron and the utilities in Texas. This crisis shows how
weak our protections against conflict of interest are both in state law and in PUC statutes. We will be
calling upon the Legislature to initiate a full review of the Chairman’s actions and whether they rise to the
level of a conflict that should lead to the chairman’s removal. This crisis highlights the need for Texans to
use the upcoming review of the Ethics Commission to revise these conflict standards for all officeholders to
protect ourselves against conflicts of interest” said Tom “Smitty” Smith, Director of Public Citizen’s Texas
Office.
“The Chairman’s failure to disclose until November 15, months after he took office, that he was a Vice
President of Enron North America, a company which reported an interest in at least 15 energy companies in
Texas is frightening (a list is attached below). Enron is a major wholesaler that buys and sells power to
utilities, owns pipelines that transport gas, and owns wind companies that generate power. As Ray
Sullivan, Governor Perry’s spokesman, has said- "The important thing is to be open and honest and fully
disclose one’s background (so) appointments advisers can then make the best and right decisions."
Without full disclosure of all of the corporate positions Chairman Yzaguirri held- it was impossible for the
system of checks and balances within the Governor’s office, the Senate, the nominations committee and the
press to work to weed out conflicts” Smith said.
“So what’s the problem?” asked Smith, “Enron is a frequent filer at the Commission. As Chairman, Max
Yzaguirri has to rule frequently on cases in which Enron has stated a position or asked that specific actions
be taken to benefit its business interests. Max Yzaguirri has spent much of his professional life working for
Enron- and so his instincts have to be honed to protection Enron’s interests.”
The legislature has long recognized this problem and has instituted a two- year cooling off period. Section
§ 12.053. of the Public Utility Regulatory Act says:
(b) A person is not eligible for appointment as a commissioner if the person:
(1) at any time during the two years preceding appointment:
(A) personally served as an officer, director, owner, employee, partner, or legal
representative of a public utility, affiliate, or direct competitor of a public
utility;
The press has focussed on whether New Power- an Enron subsidiary and retail electric provider in Texas –
is a competitor under the law. “Since New Power provides electricity in a competitive market, it should be
considered a competitor ” said Smith. “But in addition, there are three other areas in which Enron may have
had interests that would have disqualified the Chairman: they bought and sold power at wholesale in direct
competition with electric utilities, they own and generate wind power from wind plants, and they are gas
suppliers and pipeline owners. Much of the data that would enable us to make a fair judgement about the
extent of conflicts in this case has been kept secret from the public because it contains ‘trade secrets.’ The
regulation of our electric utilities is too important to be kept in the dark.”
“The commission makes many decisions that affect the bottom lines of companies like Enron- including the
price paid for fuel, access to transmission lines and the price to beat. The Commission also has made some
very important decisions for consumers- such as setting the price to beat for electricity at a level higher
than consumer advocates wanted because it would "encourage competition," thereby benefiting companies
like New Power. Who are we trying to protect- competitors or consumers?” queried Smith.
“We ask that there be a full investigation of this issue by the Legislature. The law provides for conflicts to
be resolved by having the Executive Director notify the Chairman that a conflict exists. The Governor and
Attorney General are then responsible for taking action. In this case, however, the Governor has received
over $187,000 in contribution from Enron and the Attorney General has accepted over $158,000 in
contributions from Enron. So we think it unlikely that they will take action on this case” said Smith.
“Lack of adequate disclosure, poor review of appointments and conflicts of interest are not new to the
State or to the affairs of the PUC. In the late 80s Public Citizen raised questions about possible conflicts
when Paul Meek was appointed chairman of the PUC and reported substantial interests in American
Petrofina. In the early 1990s he took actions and voted on measures that would have potentially increased
the amount of natural gas purchased by Texas Utilities. American Petrofina was a supplier of gas to that
utility. Public Citizen and Citizen Action filed a formal compliant with the Attorney General who
conducted an investigation. Meek later resigned” Smith recalled.
Smith said “The current scandal shows at least five flaws in the law:
1.
2.
3.
4.
5.
It allows companies that contribute to the Governor to have their current or former employees
appointed.
The appointment process is flawed - too little information is available to the nominations committee,
the forms don’t adequately disclose conflicts or the extent of an appointees holdings, too little
investigation is done of possible conflicts, and too much deference is given by the Senate to the
Governor.
The PUC standard for conflicts doesn’t preclude Commissioners from voting to benefit companies
they may own stock in, that they have worked for or served on the board of, and that provide us utility
services in a deregulated market - such as Retail Electric Providers.
The States’ standard for conflict is flawed. We need to have a clear standard that says you can’t be
appointed, vote or take actions that affect a company that was your former employer or affects stock
that comprises 10% or more of your holdings, affects 10% or more of your income, or would change
the value your holdings by 10% or more.
The process for removing an appointee or a commissioner is flawed, too. The Attorney General has to
take action- but no time lines are set, the standards for acting are unclear and you have to question the
fairness of any process that allows the enforcer to accept campaign contributions from a company
whose former employee may be investigated.”
It may be that Chairman Max Yzaguirri's conduct doesn’t violate the law-but just because it may slide
though the loopholes and be legal doesn’t mean it should be” concluded Smith
Excerpts from:
Enron’s 2000 Annual Report
Enron North America
In North America, Enron’s physical natural gas volumes increased 77
percent to 24.7 billion cubic feet per day (Bcf/d) in 2000 from 13.9
Bcf/d in 1999. Power deliveries increased 52 percent to 579 million
megawatt-hours (MWh) from 381 million MWh the year before.
EnronOnline has been a runaway success in North America. It
accounted for 74 percent of North American volume transacted in
2000, and created liquidity on a scale never seen before. It is a
dynamic business accelerator: It took nearly a decade for Enron’s
daily gas transactions to reach 13.9 Bcf in 1999. Just 12 months
later, EnronOnline had helped to practically double daily transactions to 24.7 Bcf.
EnronOnline magnifies the success of our existing business, which
springs from the scale and scope of our established networks. We
touch more parts of North America’s energy system than any other
merchant, with access to upwards of 2,500 distinct delivery points
each day. The widespread delivery options and possibilities of our
network give us a price and service advantage. Our networks and
presence in nationwide energy markets also enable us to capture and
distribute massive amounts of information about real-time market
supply and demand, grid constraints and bottlenecks. When the market
moves, we are able to conduct business while competitors are still
fact-finding.
Our people also make a difference. We are able to attract the best
and the brightest and place them in an entrepreneurial atmosphere in
which they can thrive. With our intellectual capital, we develop
premium high-margin structured products that draw on our liquidity
and market knowledge. A good example is the gas-marketing-services
hub in Chicago we launched with People’s Energy in March 2000. Known
as Enovate, this venture optimizes People’s 30 Bcf a year of
Chicago-area storage capacity and related transportation. It played
a role in increasing our gas volumes in the central United States by
156 percent, the largest increase in our 2000 North American physical volumes.
We continually assess the necessity of adding or owning assets in a
region. Sometimes it is less expensive to own an asset than to
replicate the asset in the market through contracting and
market-making. We are developing generation plants to sell merchant
power to high-demand markets, including proposed facilities in
California, Florida, Texas, Louisiana and Georgia. But as liquidity
increases, asset ownership may no longer be necessary. We plan to
sell Houston Pipe Line Company, and Louisiana Resources Company is
now held by Bridgeline Holdings, L.P., a joint venture in which
Enron retains an interest. Additionally, in the second quarter of
2001 we expect to close the sale of five of the six electricity
peaking generation units in operation. The result is the same
earnings power with less invested capital.
Mexico’s move toward liberalizing its energy markets should gain
intensity and speed with its new government. Increased cross-border
electricity transactions between Mexico and the United States seem
inevitable. Our activities in Mexico seek to optimize both the
Mexican electricity market and cross-border activity between the two countries.
Enron also is active in South America, where we own and develop assets to help create
an energy network.
Enron delivers more than two times the natural gas and power volumes as does its nearest
energy marketing competitor. Our formidable lead comes from our willingness to enter
markets early and serve as a market-maker to build liquidity and price transparency.
Breakthrough technology applications, such as EnronOnline, accelerate our market
penetration. These competitive advantages have made us the most successful energy
marketer in the two largest deregulating energy markets, North America and Europe. We
expect to achieve a similar leadership position as we extend our business approach to new
regions, products and industries.
http://www.enron.com/corp/investors/annuals/2000/wholesale_na.html
Texas Assets of Enron North America:
Sweetwater Gas Partners, L. P., (Texas)
MidTexas Pipeline Company (Joint Venture), (Pending)
South Texas Line, (Pending
Southwest Texas Power Partners I LP, (Delaware
Texas Panhandle Power Partners I LP, (Delaware)
Southwest Texas Power Partners I LP, (Delaware
Southwest Utilities, Inc., (Texas)
Walker Water Works, Inc., (Texas)
Enron Wind Southwest Texas I LLC, (Delaware)
Enron Wind Texas Panhandle LLC, (Delaware)
Enron Wind Indian Mesa, (Delaware) (San Antonio)
Enron Wind Indian Mesa I LLC, (Delaware)
Enron Wind Indian Mesa II LLC, (Delaware)
Indian Mesa Power Partners II LP, (Delaware)
Indian Mesa Power Partners III LP, (Delaware Inc., (Texas)
This is from Enron's 10-k filing:
http://www.sec.gov/Archives/edgar/data/1024401/000102440101500010/exh21.txt