A public hearing has been set for April in the Federal Energy Regulatory Commissions investigation of possible misconduct by Avista Corp., Avista Energy Inc., and two affiliates of Enron Corp., and an initial decision in the case could come next August, FERCs chief administrative law judge says.


Meanwhile, both the commission and its staff have rejected Avistas contention in June that it was used by Enron in the spring of 2000 to execute the Houston-based energy giants so-called Death Star power-trading strategy.


FERC has defined that strategy as scheduling electricity transmissions on the interstate power grid to get congestion-relief paymentsthen canceling the transmissions and still collecting the payments.


The commission, in its Aug. 13 order directing the investigation, says Avistas claim that it was used unwittingly by Enron is not reconcilable with Avistas acknowledged practice of acting as an affiliate go-between in transactions between Enron Power Marketing Inc. and Portland General Electric that were prohibited because the two are Enron affiliates.


While Avista had said its traders believed they were performing a common industry function by acting as an intermediary between two parties, Avista fully admits now that its own traders did have questions about the transactions, the order says.


Avista spokesman Hugh Imhof said last week that the commissions rejection of Avistas contention might have been due to how the commission interpreted Avistas response to its request for information. Maybe there was some misreading or misinterpretation of what we said, Imhof said.


Also, Enrons code of conduct allowed transactions between Enron Power Marketing and Portland General, and the two Enron affiliates were authorized by the commission to transact at market-based rates, Imhof said.


The commission also said that Avista, in providing information to FERC, made no attempt to go beyond 17 transactions, in which Avista was involved, that Portland General had disclosed to FERC in May. Avistas ability to review the taped telephone conversations of its energy traders is at the heart of that dispute.


Avista argues that, because its tapes cannot be reviewed by electronic search methods, there was no way for Avista Utilities to conduct any kind of meaningful review of all, or even a portion, of the telephone conversations in its possession and no way to focus such a review, the commissions order says. The commission says it was unconvinced by Avistas claim that, without electronic search methods, it is incapable of coming forth with a thorough analysis of its own activities. This response is in sharp contrast to many other (companies) that made a considerable effort to provide full and complete responses to the staff data requests. FERCs staff criticized Avistas response as less than forthcoming.


Imhof counters that when Avista responded to the commissions initial demand for information, We went through all of our electronic data for two years, interviewed all of our employees who were involved, and looked at our paper documentsand then we found out about the 17 transactions the night before Avista submitted its response. Then, he says, we went in and focused on those 17 trades.


Avista was hit in June with a second demand from FERC for information, but Imhof says that while Avista had been preparing to respond to FERCs first demand for information, it had found no indication that its traders were involved in any of Enrons other trading strategies. He says Avista is still reviewing tapes of traders, but as far as we know, theres nothing.


The commissions scalding of Avista for being uncooperative in its response contrasts with treatment received by Williams Energy Marketing & Trading Co., which, like Avista, had been ordered to show cause why its privileges to trade energy at market rates shouldnt be revoked.


FERCs staff says Williams Energy invited it to visit the companys offices and to view and download data from the companys computers relevant to an investigation of allegations that Williams had manipulated natural gas prices in the West. After reviewing supplemental answers from Williams, FERCs staff concluded that the company had complied with the order.


Yet, Imhof says, Williams communications-reviewing equipment is digital, which allows much faster and more efficient reviewing of trading activities, while the equipment Avista had when it began reviewing its traders taped conversations is analogand slow. Avista since has bought better equipment, he says.


Avista has invited FERCs staff to come to Spokane to look at its trading data, but FERCs staff hasnt been willing to do that so far, Imhof says.


We were rebuffed, he says. It was puzzling to us. Avista still hopes to persuade FERCs staff to visit its offices, he says.


FERC Chief Administrative Law Judge Curtis L. Wagner Jr. said in a report to the commission last week that a public hearing in the case would begin on April 28, 2003, in Washington, D.C.


In addition, Wagner estimated he would issue an initial decision in the case next Aug. 13, but added that because the commission wants the case to be completed as soon as possible, he might accelerate the procedural schedule.


FERC has said that if Avista, Avista Energy, or any of the other companies under investigation were found to have violated federal law, it could revoke their authority to sell wholesale electricity at market rates, which Avista has said would be a blow. FERC also has said that if any of the companies were found to have violated a commission rule, regulation, tariff, or order, they might be ordered to disgorge any profits obtained while engaging in the prohibited activities.


In its order, the commission says the investigation will address the extent to which Avista engaged in or facilitated the trading strategies identified in three sensational Enron memorandums FERC released in May. The memos, which jolted agencies that had been investigating the dramatic runup in energy prices in California and the West in 2000 and 2001, outlined market-manipulating trading schemes with colorful names such as Fat Boy, Get Shortly, and Ricochet that FERCs staff said involved deceit, including the provision of false information. California politicians said the memos proved the market had been manipulated and ripped FERC for not putting a cap on Western wholesale energy prices months before it did.


In the Avista case, 12 intervenors, including the California and Oregon public utility commissions and the city of Tacoma, have filed motions or notices to intervene in the last few weeks.


In its filing, the city of Tacoma said its pursuing in a separate FERC proceeding net claims of $65.4 million against Avista Energy Inc. and 31 others because of energy-price inflation during the price runup.


Avista and Avista Energy, meanwhile, have sought a protective order, saying that FERCs staff had sought salary information for employees, and they dont want personal information from taped phone calls to be divulged. They also sought to protect business secrets.