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Last Updated: Wednesday, 25 June 2003, 20:06 GMT 21:06 UK
'Death penalty' for Enron
Enron sign at Enron's former headquarters in Houston, Texas
Enron suffers the wrath of the regulators
The bankrupt energy trader Enron has been barred by regulators from selling gas and electricity in the US market.

The company was given the penalty as a result of its "misbehaviour" in the 2000-2001 Californian energy crisis.

The Federal Energy Regulatory Commission (Ferc) said it was the first time the agency had imposed the so-called "death penalty" for violating rules on energy trading.

"By revoking the company's authority... we send a clear signal that competitive markets must work in the interest of customers and the public interest," said Pat Wood, chairman of Ferc.

The ban applies only while Enron remains in Chapter 11 bankruptcy and does not disqualify the company from selling energy at below-market rates.

If any surviving part of the company emerges from bankruptcy and wants to re-enter in the markets, "they can reapply and the Commission will scrutinise any application", said Barbara Connors, a FERC spokeswoman.

Enron must file its Chapter 11 reorganisation plan by 30 June.

In the firing line

The ruling on Enron came as Ferc considered enforcement proceedings against other companies that had manipulated prices during the energy crisis to boost their own profits.

Some 60 companies are included in the probe and have been asked by Ferc to justify their profits during the crisis.

California experienced 12 months of rolling black-outs in 2000 and 2001, as prices of electricity soared for residents.

The state's biggest utility, Pacific Gas and Electric, was forced to seek bankruptcy protection as a result of the crisis.

The Ferc chairman said the energy industry had got itself into trouble because it had been operating without rules or enforcement prior to the creation of Ferc, Mr Wood told BBC Radio.

He said Ferc has now laid out rules covering "basic things that should be done" such as truthful reporting and keeping records.

Contracts upheld

There was some good news for energy companies, however, after Ferc voted to uphold billions of dollars in long-term electricity contracts signed at the height of the crisis.

Some companies have voluntarily re-negotiated contracts after prices came down, but others which have not stand to gain from the vote.

Buyers will be forced to honour the highly priced contracts despite the ongoing Ferc investigation.

Shares in Sempra Energy, El Paso Corp, Dynegy and investment bank Morgan Stanley - which also sells power - reacted positively to the news.

Ferc Chairman Patrick Wood
"There were no rules....there was nobody really enforcing the rules"

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