Subject: Enron's secret bid to save deregulation - PRIVATE MEETING Chairman pitches his
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Sat, 26 May 2001 05:22:44 -0700 (PDT)

Jeff
 
Candidly, this wouldn't have been my approach  (posh location, closed format, odd group, seemingly self-serving agenda).  
 
I read the article below  as unsympatheticand almost  mocking in its tonetoward Enron.  It's  noteworthy theBeverly Hills meeting was not covered in the Los Angeles  papers.  Instead, this article comes fromthe front page of the Bay Area's San Francisco Chronicle (Democratic bastion and  home to both of California's United States Senators, power broker Willie Brown,  Attorney General Bill Lockyer and the state's public utility commission).  
 
Consistent with myconcern about a "coast-to-coast  firestorm"engulfing Enron, the New York  Times ran two articles today that were  unsupportiveof the  company.
 
q        Senator Calls  for Hearings Into Energy Regulators' Moves
By CHRISTOPHER MARQUIS
Senator  Dianne Feinstein called for hearings into possible improprieties between members  of the F.E.R.C. and private energy interests.
 
q        Enron's  Dispute With Utility in India Grows More Tangled
By SARITHA RAI
The  dispute between the Enron Corporation and Indian federal and state government  officials keeps getting messier.
 
These follow the Times'  tough piece on Ken Lay yesterday.   Undoubtedly, the Washington Post will have to get into fray  soon.
 
My feeling is that just as  with the "business" side, Enron's public policy strategy needs be well informed,  sophisticated and comprehensive.  I  fear that anything less will fuel the potential of undesirable outcomes for  Enron's reputation, leadership and shareholdervalue.
 
Kevin
213-926-2626
 
PS - May I have a copy  of the position paper that was circulated in the Beverly Hills  meeting.
 
The Gate         www.sfgate.com          Return  to regular view  
Enron's secret bid to save deregulation 
PRIVATE  MEETING: Chairman pitches his plan to prominent Californians  Christian Berthelsen, Scott Winokur,  Chronicle Staff Writers 
Saturday, May 26, 2001  ?2001 San Francisco Chronicle   
URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/05/26/MN209410.DTL   
Energy executive Kenneth Lay, head of powerful Enron Corp., quietly courted  Arnold Schwarzenegger, Richard Riordan, Michael Milken and other luminaries  this week in Beverly Hills to drum up support for his solution to California's  energy crisis.  
His prescription called for more rate increases, an end to state and  federal investigations and less rather than more regulation.  
Lay, a close friend of President Bush and one of his largest campaign  contributors, hosted a private 90-minute meeting in a conference room at the  Peninsula Hotel in Beverly Hills on Thursday.  
Among the participants were Milken, the former head of the Drexel Burnham  Lambert investment banking firm who pleaded guilty to fraud charges in 1990  and who now runs a think tank based in Santa Monica; movie star  Schwarzenegger;  
and Riordan, the mayor of Los Angeles. Schwarzenegger and Riordan have been  courted recently as GOP gubernatorial candidates.  
One participant, who agreed to speak on the condition he not be identified,  said the meeting appeared to be geared toward getting participants to support  Lay's vision and then champion it to officials who are trying to solve the  state's energy mess.  
PLAN TO RESCUE DEREGULATION
The source said the timing and tone of the meeting suggested Lay is  concerned that California will abandon its disastrous experiment with power  markets by either re-regulating the system or creating a government authority  to provide electricity. Gov. Gray Davis signed legislation last week to create  and fund a state power authority that would build, buy and run power plants in  California.  
"They're trying to rescue deregulation," the source said of Enron  executives. "They think the whole state power authority is a bad idea."  
At the meeting, Enron representatives circulated a four-page position paper  titled "Comprehensive Solution for California," which was obtained by The  Chronicle. It said ratepayers should bear responsibility for the billions in  debt incurred by the state's public utilities and that investigations of power  price manipulation and political rhetoric are making matters worse.  
The paper made no mention of the possibility that much of the runaway  electricity costs in California is due to market manipulation by power  generators and traders -- a possibility given credibility in studies by  regulators and economists.  
One of the talking points read: "Get deregulation right this time --  California needs a real electricity market, not government takeovers." Another  point suggested giving consumers monetary rebates for conserving electricity.  
INVOLVED IN EARLY DAYS
Lay has been an aggressive champion of deregulated electricity markets and  was an early advocate in persuading California to begin its experiment with a  competitive power market system.  
Lay has created a new kind of company in the process, one that essentially  produces nothing but makes money as a middle-man, buying electricity from  generators and selling it to consumers. During the first quarter of this year,  Enron's revenues increased 281 percent to $50.1 billion.  
Asked about the purpose of the meeting, Karen Denne, a spokeswoman for  Enron, said she would "look into that" and then did not return repeated  telephone calls seeking comment. One participant said Denne was present at the  meeting.  
D.C. CONNECTIONS
Meanwhile, Lay's power in Washington is reported to have reached  unprecedented heights. According to a story in yesterday's New York Times, Lay  supplied the Bush administration with a list of candidates for jobs regulating  the power industry and even interviewed one of them. The story also said Lay  essentially threatened to seek the removal of the chairman of the Federal  Energy Regulatory Commission, Curt Hebert, if he does not support Lay's desire  to further deregulate the nation's electricity system. Lay denied the  allegation.  
Also in attendance at this week's meeting were Bruce Karatz, chief  executive of home builder Kaufman & Broad; Ray Irani, chief executive of  Occidental Petroleum; and Kevin Sharer, chief executive of biotech giant  Amgen.  
Among those who were invited but did not attend were former Los Angeles  Lakers star Earvin "Magic" Johnson; supermarket magnate and Bill Clinton  supporter Ron Burkle; and Dennis Tito, recently returned from the world's  first civilian space trip.  
Milken, through a spokesman, confirmed that he attended the meeting, but  declined to be interviewed. Schwarzenegger could not be reached for comment  through a publicist, and Sharer did not return a call yesterday afternoon.  
A spokesman for Riordan, Peter Hidalgo, said the Los Angeles mayor  attended,  
but was "not intending to formulate any kind of policy position on this  issue.  
His intent is to listen to all sides."  
Attached to the Enron handout was a two-page open letter, addressed to  Davis and the state Legislature, apparently prepared for those who support  Lay's position and would be willing to sign their names to it. The source who  participated in the meeting said those assembled appeared noncommittal and  asked a number of questions of Lay, but did not agree to champion his agenda.  
E-mail the writers at [email-masked]  and  Scott Winokur at [email-masked] .  ?2001  San Francisco Chronicle    Page A - 1