Addressing the 2000-2001 Western Energy Crisis

Western Energy Crisis Settlements

The Federal Energy Regulatory Commission's wide-ranging response to the 2000-2001 Western energy crisis is a detailed and complex narrative. It still is unfolding to this day.

Commission staff concluded in a March 2003 final investigation report on the Western energy crisis that market conditions involving diminished power supplies due to drought conditions, inadequate infrastructure and a flawed power market design contributed to the market manipulation that prolonged and exacerbated the economic harm caused by the crisis.

FERC was a critical player in disclosing the role Enron and other energy providers played in exploiting and exacerbating the crisis. The Commission collected and analyzed more than 5 terabytes of data, issued subpoenas and show cause orders, and conducted hearings. To date, the result of this unprecedented and comprehensive investigation has been $6.3 billion in monetary settlements stemming from the crisis. Findings by the Commission contributed to numerous criminal prosecutions by the Department of Justice and $300 million in civil penalties imposed by the Commodity Futures Trading Commission.

FERC policies and programs today are very different now from what they were during the energy crisis. The Commission in 2002 established the Office of Enforcement to provide a real-time window into the workings of electricity and natural gas markets. This information provides the Commission with the analysis it needs to respond to market problems.

The Energy Policy Act of 2005 recognized that FERC needed enhanced tools to oversee rapidly changing and increasingly sophisticated energy markets. The law gave FERC broad authority to assess civil penalties for market manipulation and violations of Commission rules and standards.

It is national policy to support competitive wholesale power markets. FERC continues to seek steady reform to strengthen wholesale competition, encourage new entry into power generation, improve access to markets and the power grid, prevent exercise of market power and market manipulation, assure that enforcement of market rules is effective, enforcement and improve market transparency.