Electrical Hookup

[December 27th, 2006] The PGE employee central to the controversial "editing" of a Standard & Poor's research report was also a key figure in an earlier federal investigation into PGE's trading practices.

That employee, Assistant Treasurer Kristin Stathis, has drawn heat recently from customer groups and state utility regulators' staff for her role earlier this year in what the Industrial Customers of Northwest Utilities has called a "manipulation of evidence."

That alleged manipulation came as part of a rate-hike request currently pending before the Public Utility Commission (see "The Producer," WW, Dec. 6, 2006).

Documents produced in that case show Stathis made dozens of changes to a Standard & Poor's report submitted by the credit-rating agency as an "independent" assessment of PGE's creditworthiness. (Both PGE and New York-based Standard & Poor's have denied that communication between Stathis and Standard & Poor's analyst Leo Carrillo was in any way improper.)

It's not the first time Stathis has been in the middle of a fracas involving her employer.

Three years ago, in an unrelated proceeding, PGE, Oregon's largest utility, paid an $8.5 million settlement to end a Federal Energy Regulatory Commission investigation into how much help PGE had given its then-parent company, Enron, in manipulating Western electricity markets in 2000-2001.

One of the issues in the federal investigation was an allegation by FERC staff that PGE had failed to post accurate descriptions of more than 65 percent of the 1,979 transactions it completed with Enron Power Marketing between 1999 and 2001. Regulators sought to determine whether the erroneous postings contributed to Enron's deceptions.

Documents show PGE tapped Stathis, who had been the administrative manager for its trading floor during part of that period, to respond to the FERC inquiry.

Stathis, who joined PGE in 1994 from the now-defunct accounting firm Arthur Andersen, argued in her FERC testimony that the posting errors were unintentional and inconsequential.

FERC also investigated allegations that PGE improperly shared information regarding its intentions to buy natural gas and electricity with Enron's traders. Such sharing was prohibited because it would give Enron valuable information at the expense of PGE ratepayers.

In her testimony, Stathis denied PGE had shared any information improperly. But Robert McCullough, a former PGE executive who has testified as an expert witness in various Enron-related litigation, says records now show PGE regularly supplied Enron with precise information about power-purchasing plans.

"In fact, everything [relating to PGE's market positions and plans] was going to Enron," McCullough says. "Every little line item...was going to Enron."

A PGE spokeswoman reiterated Tuesday that the utility did not improperly share information with Enron.

Ultimately, rather than contest the FERC allegations in court, PGE chose to settle the case in September 2003, without admitting any fault. The $8.5 million settlement the utility paid equaled about 15 percent of its net profits for that year. (Three Enron traders, including Portland-based Tim Belden, pleaded guilty to felonies relating to the 2000-2001 market manipulations.)

Although at least one email shows Belden regularly shared market information with Stathis, McCullough says there's no evidence Stathis committed any crimes or that she was more than just a middle manager whom the company chose to explain company operations to the feds.

But he is troubled by Stathis' history—knowing about and defending PGE's role in Enron's market manipulations as well as altering a purportedly independent research report.

"There are certain ethical standards expected of PGE," McCullough says. "And in both instances, she seems to have been involved when those standards were violated."

PGE says it is "simply coincidence" that Stathis worked on both matters, and called her a "bright, hardworking professional.

The PUC is expected to rule on PGE's request to raise rates for its 793,000 customers by 9 percent by mid-January.