AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS ACT, 2004CONTINUED
AMENDMENT NO. 2087
Ms. CANTWELL. Mr. President, I call up my amendment and I send it to the desk.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:
The Senator from Washington [Ms. CANTWELL] proposes an amendment numbered 2087.
Ms. CANTWELL. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To prohibit energy market manipulation)
BREAK IN TRANSCRIPT
Ms. CANTWELL. I ask unanimous consent that Senators BINGAMAN, HOLLINGS, JEFFORDS, DORGAN, and FEINGOLD be added as cosponsors to this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ms. CANTWELL. Mr. President, I appreciate the time to discuss this issue.
Some colleagues may wonder why we are talking about energy legislation and market manipulation on the Agriculture appropriations bill. As my colleague from California pointed out in the previous amendment on derivatives legislation and market manipulation prevention, this was part of an agreement that the Western Senators worked out when we were discussing the Energy bill prior to our August recess. The fact that we were willing to move off that debate on a variety of amendments was because we had a commitment for a chance to have further discussion on important issues that impacted the economies of Western States.
That was the agreement made at that time, and today is the moment in which Senator Feinstein and I both have our opportunities to discuss what we consider very important legislation and to get the Congress on the record and make sure the Senate takes a stand against market manipulation.
Many Members know a lot has happened since the time of discussion of these issues about the energy crisis and what we should do. But we should be clear about the sequencing of things that the United States now knows and understands. The Senate knows and understands that Enron has admitted market manipulation. They have executives who have said, yes, these contracts were manipulated and prices were faulty.
We have a report by the Federal Energy Regulatory Commission so thick it is hard for me to hold in one hand that goes through a variety of issues in relation to market manipulation in which FERC found there was not only manipulation, but a demonstration for the need of explicit prohibitions on this kind of harmful and fraudulent market behavior.
That is exactly what this amendment tries to address. The amendment I have offered, and Senator Bingaman and others have offered, says something very basic and simple that probably many Americans, and I guarantee many Washingtonians, assumed would already be in a Federal statute such as the Federal Power Act. The amendment simply says that manipulation or manipulated contracts under the Federal Power Act cannot be just and reasonable.
Some of my colleagues may have remembered an earlier amendment where we prescribed some solutions. This amendment has been compromised and offers no specific remedies to the legislation but is specific in saying that market manipulation, in fact, is not something that can be just and reasonable under the Federal Power Act and it is not the kind of activity that the Commission should consider as lawful activity.
Most of my colleagues would say that manipulation and fraud surely has no place in the Federal Power Act; sanctioning those activities is somehow legal. But the absence of that prohibition in the Federal Power Act is leaving some doubt in people's minds that, in fact, manipulation is unlawful.
I bring that up because Washingtoniansas Ohio, Indiana, Nevada, California, Utahhave been suffering from high energy costs related to these manipulations of Enron contracts. Not only will they be stuck with paying those Enron contracts over a long period of time, but my State, the State of Washington, had utilities as much as a 50-percent rate increase because of Enron's contracts, and we will be stuck with those contracts over 5 years.
While Ken Lay remains uncharged, or at least not paying any dues for the crime he perpetrated, and he keeps the millions of dollars of money that he has gotten from Enron, my ratepayers in Washington State for the next 5 years will end up paying the high prices of those manipulated contracts. Not only will we end up paying the high prices of those manipulated contracts, but the utilities in my State and other StatesNevada, California, Oregon, some of the other Midwest States I mentionedhave tried to basically deal with Enron. They have been basically sued by the company. So not only is my ratepayer stuck with paying those high utility bills, they are actually trying to fight the legal battle against Enron, which is turning around and suing them.
My amendment does something very simple today. It basically says in the Federal Power Act that for the prospective issue of making sure it is clear to people throughout the country that the Senate does not tolerate market manipulation.
I have to say we have done great work on this issue as it relates to the Securities and Exchange Commission, and as it relates to making sure that accounting practices have been changed. But nowhere have we been specific in saying that market manipulation is an unlawful practice and cannot be just and reasonable under the Power Act. That is simply what we are trying to say today.
Why is that needed? I have a letter I circulated to my colleagues from one of the newest nominees to the Federal Energy Regulatory Commission, a Republican nominee who spent many hours in the legislative branch working under Energy Secretary Abraham and spent time in the House Energy and Commerce Committee, to whom I posed this question as a nominee before FERC because I wanted to understand where FERC nominees were going in the future.
Mr. Kelliher responded exactly where I think the input needs to be to the Senate. He said:
I agree with much of what you have said. I agree that the markets subject to manipulation cannot operate properly and there is an urgent need to proscribe manipulation of electricity markets.
He further states:
You have correctly noted that there is no express prohibition of market manipulation in the Federal Power Act and have proposed legislation to establish that prohibition. This is a critical point. The Federal Regulatory Commission only has the tools Congress chooses to give it, and Congress has never given the Commission express authority to prohibit market manipulation. I believe the time has come for Congress to take that step.
That is an exact quote from a letter by the FERC nominee Joseph Kelliher from the administration saying, "You want me to be a FERC commissioner? I am telling you exactly what I think about the FERC rules. And I am telling you we need the language that is in this amendment."
I ask unanimous consent that letter be printed in the RECORD.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
November 5, 2003.
Hon. MARIA CANTWELL,
DEAR SENATOR CANTWELL: I am writing at your request to explain at greater length my views on legislation to prohibit manipulation of electricity markets.
I have followed your comments on market manipulation with great interest during the two years since my nomination was announced. I agree with much of what you have said. I agree that markets subject to manipulation cannot operate properly and there is an urgent need to proscribe manipulation of electricity markets. You have correctly noted there is no express prohibition of market manipulation in the Federal Power Act and have proposed legislation to establish an express prohibition. This is a critical point. The Federal Energy Regulatory Commission only has the tools that Congress chooses to give it, and Congress has never given the Commission express authority to prohibit market manipulation. I believe the time has come for Congress to take that step.
Market manipulation is a relatively recent development in electricity markets, but it is not a new problem. Manipulation has occurred in other markets, and Congress has enacted laws to proscribe manipulation in these markets. These laws can serve as models for legislation to prohibit manipulation of electricity markets.
Securities and commodities law establish an express prohibition of market manipulation and authorize a regulatory agency to prohibit specific manipulative practices by rulemaking. That approach allows an agency to act quickly once manipulative practices are identified. These models have worked well over time and could serve as the basis for legislation to prohibit manipulation of electricity markets.
The penalties authorized by congress in the Federal Power Act are unlikely to discourage criminal behavior. For that reason, tougher penaltiesboth higher monetary penalties and longer prison termsare needed. Legislation is necessary to accomplish this. I should note that I advocated tougher penalties well before the Western electricity crisis and subsequent release of the Enron marketing memoranda. In addition to higher monetary penalties and longer prison terms, I recommend Congress grant the Commission authority to impose a lifetime ban on individuals found guilty of criminal violations of market manipulation laws. That authority exists at the regulatory agencies that oversee securities and commodities markets, and I see no reason why market manipulation in electricity markets should be subject to lesser sanction.
This is not to say that the Commission cannot take steps to prevent market manipulation under its existing legal authority. For example, the Commission can revoke the authorization of a public utility to sell electricity at market-based rates if it determines the public utility engaged in market manipulation. Further, I believe the Commission could prohibit manipulative practices under section 206 of the Federal Power Act if it determined that such practices were inherently unjust, unreasonable, unduly discriminatory or preferential. Since there would likely be legal challenges to any such effort to proscribe manipulative practices, it would be helpful for Congress to give the Commission clear authority to prohibit market manipulation.
At you request, I have reviewed your marked manipulation amendment. I support the goals of your amendment and believe it would go far towards effectively prohibiting manipulation of electricity markets.
I appreciate the opportunity to share my views on this subject with you.
JOSEPH T. KELLIHER.
Ms. CANTWELL. Mr. President, I think the Kelliher letter and the report we have seen by the Federal Energy Regulatory Commission on price manipulation in western markets is the evidence we need. We have all admitted this manipulation has taken place. What is not clear to the American public is if we plan to do anything about it or if we plan to prohibit it in the future.
I think we need to be clear. The language I have offered in this amendment, as I said, is very simple and straightforward. It is that way because we want to make sure the Federal Energy Regulatory Commission does not misinterpret the intent of Congress, that Congress needs to say manipulating prices cannot be just and reasonable or in the public interest, and their job is to basically protect electric ratepayers from these kinds of manipulation.
I am not going to continue to take up the time of my colleagues who have heard about this amendment and have had an opportunity to review it. I urge them, as part of our further understanding of where the Energy bill is, that it is being set aside. This is the opportunity before us to make sure we take a stand against market manipulation and we need to make it clear to the Federal Energy Regulatory Commission, which seems to be unclear about what authority they currently have, and to make it explicit that market manipulation cannot be tolerated.
I yield the floor.