ICC staff seeks wider probe of Peoples, Enron dealings

CHICAGO, ILLINOIS - The staff of the Illinois Commerce Commission is asking to expand the investigation into business dealings between Peoples Energy Corp. and Enron Corp. that allegedly cost Chicago consumers millions of dollars.

Lawyers for the City of Chicago, the Citizens Utility Board and the state attorney general's office are facing off against attorneys for Peoples Energy at hearings before the ICC.

They are focusing on the latter half of 2000 and the beginning of 2001. It was over that unusually cold winter that consumer natural gas bills set records, tripling for some residents.

But during the course of a hearing April 18, commission staff counsel Sean Brady told Administrative Law Judge Claudia Sainsot that he would like to extend the investigation into 1999, when Peoples first agreed to buy two-thirds of its wholesale natural gas from Enron. That agreement and other dealings allegedly favored Enron at the expense of consumers.

Sainsot can decide later on Brady's request.

Meanwhile, lawyers for Chicago-based Peoples Energy, the corporate parent of Peoples Gas, said the deal with Enron made sense in the context of the time.

"You can't be signing these contracts with someone who is going to go out of business," said Thomas Mulroy, who represents Peoples. "In 1999, Enron was the darling of Wall Street."

For years, Enron's flashy management and seemingly uninterrupted growth entranced investors and analysts alike. At times the company was held up as a model for the future corporation.

But Enron filed for bankruptcy protection in December 2001 after its deceptive accounting practices were exposed.

Enron and Peoples shared the same auditor, Chicago-based Andersen. That firm collapsed after it was convicted of obstruction of justice in trying to destroy evidence in the Enron case.

"We did not have the use of hindsight," Mulroy said of Peoples' dealings with Enron.

But Ronald Jolly, assistant corporation counsel for the city, said a Peoples executive conducted an internal analysis of the arrangement between Enron and Peoples.

"It was a bad deal for Peoples Gas and a bad deal for the ratepayers," Jolly said of the analysis' conclusions.