FERC Filings
REQUEST TO FILE ANSWER OUT OF TIME AND ANSWER OF THE ELECTRIC POWER SUPPLY ASSOCIATION IN SUPPORT OF MOTION OF THE INDEPENDENT ENERGY PRODUCERS ASSOCIATION TO PRECLUDE THE USE OF CERTAIN OUTSIDE EXPERTS
BODY
In response to a Congressional request, the Commission launched the above-captioned investigation to determine whether any entity “manipulated short-term prices in electric energy or natural gas markets in the West or otherwise exercised undue influence over wholesale prices in the West, for the period January 1, 2000, forward.” Widely dubbed the “Enron investigation,” the investigation is significantly broader and much more important than any investigation of any one company. Indeed, it is one of the most important investigations that the Commission has undertaken in recent memory, and is designed to determine if any wrongdoing has occurred, to take appropriate actions if necessary, and to restore political and consumer confidence in Western energy markets. Thus, it is critically important to all involved that the Commission’s efforts not only be thorough but also its conclusions free from controversy if the interminable litigation that has plagued the Western energy markets is to abate and confidence is to be restored in the Commission’s pro-competitive policies.
Because the outcome of this investigation is so important, EPSA believes that IEP’s filing raises legitimate and serious concerns about the Analysis Group’s participation in the Commission’s fact-finding investigation. We share IEP’s recognition and support for the Commission’s effort to assemble the most highly qualified group of experts available to contribute to this important work. However, as IEP observes in its filing, that effort is necessarily subject to certain overriding considerations. In this connection, to ensure the integrity of the investigation, a potential consultant’s knowledge and capabilities must be considered in conjunction with the nature of an individual’s background, business and professional relationships and financial interests.
The import of IEP’s motion as well as El Paso and EPSA’s support thereof goes to the fundamental expectations of those who will or may be affected by the outcome of an investigation: impartiality and objectivity. These dual concepts are widely accepted as indispensable underpinnings for the procedural integrity of any investigation. Indeed, the guidelines for investigative efforts conducted by the Offices of Inspector General (OIG) in each federal agency identify three criteria that should govern those who conduct investigations: qualifications, independence and due professional care. As set forth below, Dr. Kahn and the Analysis Group fail the independence criteria.
When defining “independence,” the Quality Standards document states that an investigative organization must, “in all matters relating to investigative work…be free, both in fact and appearance, from impairments to independence.” Among other things, the document’s description of “personal impairments” includes “[p]reconceived opinions of individuals, groups, organizations or objectives of a particular program that could bias the investigation.” In its discussion of “professional impairments,” the guidelines include “[o]fficial, professional, personal or financial relationships that might affect the extent of the inquiry…or weaken the investigative work in any way.” Further,
the document also disapproves of “biases… that result from employment in, or loyalty to, a particular group or organization.” The Quality Standards attach considerable importance to professional relationships and related financial interests in assessing the independence of a potential investigator.
It strains credulity to expect that Dr. Kahn or the Analysis Group satisfies the fundamental guidelines for independence set forth in the Quality Standards. The Analysis Group’s ongoing relationship with SoCal Edison is especially troubling. The Analysis Group and Dr. Kahn were employed by Southern California Edison (SoCal Edison) in separate but related California investigative proceedings, proceedings that are no doubt relevant to this investigation. There, Dr. Kahn developed and published opinions concerning alleged market manipulation in Western markets—allegations that are at the heart of this investigation. His “White Paper” on California’s wholesale electricity market, which he co-authored in November, 2000, concluded that generators and marketers–the parties who are now subject to this investigation—deliberately withheld generation to increase prices. The Commission rejected those findings. Nevertheless, he has been paid in the past to provide an opinion on the matters that are relevant to this investigation.
Independence is a fundamental credential for potential investigators, and not something that can somehow be offset by knowledge or expertise. As the Guidelines state, “[e]vidence must be gathered and reported in an unbiased and independent manner in an effort to determine the validity of an allegation or to resolve an issue.” Simply put, for the reasons set forth above, Dr. Kahn does not meet the requirements of an independent investigator.