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Bush adviser's role in deciding crisis questioned
BY JIM PUZZANGHERA
Mercury News Washington Bureau WASHINGTON
-- One of the top energy advisers to President-elect George W. Bush, who
today becomes responsible for crucial decisions in how the federal government
will deal with California's energy crisis, has a vested interest in how that
crisis is resolved.
Ken Lay, chairman and outgoing CEO of Enron, one of the nation's biggest
power marketers, has a long and close relationship with Bush. One of his
largest political contributors, he helped raise more than $100,000 for Bush's
presidential campaign. Those roles raise serious conflict-of-interest
questions, according to public watchdog groups.
``There's no secret he has the ear of the president,'' said Larry Makinson, a
senior fellow at the non-partisan Center for Responsive Politics, which
tracks money in politics. He described Lay as ``the ultimate insider'' on
energy and in particular electricity deregulation -- the root of California's
current problem.
``Energy deregulation is one of the foundations of the business plan for
Enron,'' he said. ``They want it nationally, and Ken Lay has been one of the
company's prime movers in this area.
''In addition to potentially boosting the fortunes of his company, Lay stands
to make significant gains personally if Enron benefits from the resolution of
California's energy woes. His declared holdings in the Houston-based
company's stock are 2.9 million shares, valued at $205 million when the
market closed Friday.
Bush already appears to have followed Lay's lead on one aspect of
California's severe energy problem.
On Thursday, Bush for the first time said he opposed caps on wholesale power
prices in the West, the same position that Lay has long stated. California
Gov. Gray Davis has pressed federal regulators for such caps as energy prices
have soared.
Power marketers such as Enron and power-generating companies want no limit on
how much they can charge to sell electricity. Any price caps would have to be
approved by the Federal Energy Regulatory Commission, a five-member panel to
which Bush now will make two appointments and choose its head.
On Friday, Lay reiterated his opposition to price caps as well, saying high
electricity prices force consumers to conserve in the face of a supply
shortage.
``The biggest problem in California is consumers are not going to see the
price signals. If they don't see the price signals, they are not changing
behavior, so the problem is going to get worse,'' he said of the impact of
price caps while at a forum in Washington. ``Painful as it is, they need to
see the price signals and start modifying behavior to reduce demand until we
get new supplies.
''Lay has been involved in negotiations between California officials, federal
regulators, utility officials and energy company executives to try to resolve
the crisis by forging agreement on long-term contracts for power sales to
California. An aide to Davis said he doesn't believe there is a serious
conflict of interest.
``The governor knows that he has the president-elect's ear, and in many ways
that can be positive,'' said Davis press aide Steve Maviglio. Lay
``understands the seriousness of the situation,'' Maviglio said.
Lay, who was involved in inaugural festivities Friday, could not be reached
for comment. But a representative of Enron, which generates very little power
for California but does broker deals between utilities and other sources,
said there was no conflict between Lay's closeness to the new president and
his job.
``We're a buyer and a seller in California, so we don't have any interest in
seeing prices be high. We just have an interest in a functioning market,''
said Enron's Mark Palmer. He said the company ``does not necessarily'' stand
to gain from higher energy prices.
Lay is one of 48 members of the incoming administration's energy policy
coordinating group, set up to assist the incoming energy secretary, former
U.S. Sen. Spencer Abraham, as he prepares for the job. The group also
includes a representative from Southern California Edison, one of the state's
teetering utilities, as well as other energy and business interests.
But Lay's influence is much deeper than that. The 58-year-old Lay has long
been a close friend of his fellow Texan Bush, who was in the oil industry
before he became governor of Texas. Enron and its employees were the top
overall donor to Bush throughout his political career, giving $550,025
through June 2000, according to the Center for Public Integrity, a
non-partisan political research organization.
``They're politically very close, and on a personal basis they're very
close,'' said Craig McDonald, director of Texans for Public Justice, a
non-profit research group that tracks money in Texas elections. ``You can see
Ken Lay and the president-elect sitting side-by-side at the baseball games at
Enron Field down in Houston,'' the new home of the Astros.
During the 2000 campaign, Lay was one of 214 people, dubbed ``Pioneers'' who
raised at least $100,000 for Bush. And after the election, many speculated he
might be named energy secretary by Bush.
For today's inauguration festivities alone, Lay personally gave $100,000, a
figure matched both by the company's incoming CEO Jeff Skilling and Enron
itself.Makinson, the campaign contribution analyst, said the Bush-Lay
relationship is being watched closely in light of the record $192 million the
incoming president raised during the campaign.
``One of the early signs we're going to have from the Bush administration in
how it reacts to big donors,'' Makinson said, ``is what Bush does on this
problem.''
- Re: [CTRL] Bush Buddy To Profit From Calif. Energy Woes William Shannon
