RELIABLE SOURCES
	SCHOOL FOR SCANDAL
	EDITORIAL
	Wisconsin Favorites Jurustic Park

Reliable Sources
Wisconsin boosts homegrown electricity

In government, the creation of a committee to study an issue is often as not its first step toward oblivion. Six or 12 months later, the committee report is accepted with flashbulbs popping and handshakes all around—and ceremoniously placed on a shelf to gather dust.

So it was not without reason that some believed the report and recommendations of the Governor’s Task Force on Energy Efficiency and Renewables would meet that fate. For a while, it looked like they’d made the right call.

Formed in the fall of 2003, the task force took a bit more than a year to finalize its recommendations and deliver them to Governor Doyle. But there were clear signs that stakeholder groups who liked the recommendations would turn their backs on anything but a unified, indivisible package including both a stronger renewable energy mandate and a guarantee that energy conservation funds would no longer be periodically raided to balance other parts of the state budget.

Success would require assembling a complicated and not entirely uncontroversial set of proposals that could be embraced, intact, by diverse groups with equally diverse agendas. A year after the task force report, there was no legislative draft and prospects looked dim.

Then last November, a bill draft finally emerged and the energy committees in both houses promptly held hearings. After a holiday break and several weeks of drafting revisions, the two houses approved the bill with a single dissenting vote and in mid-March the Governor signed it into law.

The Spur

There’s no mystery about what suddenly got the renewables bill moving, according to State Rep. Phil Montgomery (R–Green Bay), chairman of the Assembly Committee on Energy and Utilities.

“It was one, singular moment and that was when Senator Cowles and I decided to take the whole public benefits program back to pre-Act 9 and secure the funds,” Montgomery told Wisconsin Energy Cooperative News.

Act 9 was the 1999 electric reliability legislation that, among many other things, set up a state-controlled funding pool to promote energy conservation, financed by a fee added on to energy consumers’ monthly bills. Previously, utilities had been responsible for their own energy conservation and efficiency programs, but as Montgomery explained, “At the time we passed Act 9 everybody thought we’d be moving into a more deregulated energy market with lots of out-of-state providers, and it made sense to centralize public benefits.”

Since that was before Enron imploded, no one foresaw the non-arrival of electric deregulation in Wisconsin. Neither did anyone foresee what would happen to the alluring pool of cash accumulated in the energy conservation program.

Displaying bipartisan cooperation not often seen during the last two biennial budget cycles, the Democratic administration and Republican Legislature siphoned $109 million from public benefits programs to help finance other state spending priorities, much of it going for state aid to local governments.

When the state program was created, some criticized electric cooperatives and municipal utilities for declining to pay into the state funding pool, holding out for local retention of the fees under “commitment to community” programs. Now, ironically, public benefits will revert to something more closely resembling the co-op and muni model, the one method proven to ensure the money is spent for the intended purposes.

That was crucial to moving the renewables package through the Assembly. Montgomery explained, “I knew I couldn’t get the bill through my caucus without it.” In the Act 9 debate seven years ago, prominent members of the GOP majority labeled the public benefits program a “hidden tax” on utility bills. But with the money beyond the reach of budget-balancing maneuvers, the renewables bill sailed through the Assembly 94–0.

The Magic Number

Safeguarding public benefits money may have been the key to enacting the task force recommendations, but their centerpiece is the mandate to obtain 10 percent of this state’s overall electricity mix from renewable energy sources by the end of 2015.

Wisconsin currently gets about 4 percent of its electricity from renewables. That’s about twice what existing law required when the task force proposals were developed, so implementing them will more than double today’s share of renewables in the energy mix and more than quadruple what was prescribed by prior law.

Montgomery says that’s a practical target. Noting that the industry exceeded its requirements under the old law he told us, “You want to be ambitious and stretch technologies and the thinking and push people a little bit.” Another goal, he added, is to protect ratepayers. “We want to explore this and push as far as possible, but it doesn’t make sense to have ratepayers face tremendous pressure just to meet an artificial number.”

His Senate counterpart agrees. Robert Cowles, chairman of the Senate Committee on Energy, Utilities and Information Technology, told us the 10-percent goal is “reasonable, especially since the technology’s gotten better.”

Cowles, like Montgomery a Green Bay Republican, adds, “If we’d done this five years ago it would have been pretty problematic, but there’s so much you can do now because the technology has improved.”

A member of the original task force, a believer in its recommendations, and arguably their most tireless advocate, Cowles said on the day the bill passed the Senate that it was “not some pie-in-the-sky initiative.”

“This is about massive capital investment in Wisconsin,” he said.

Something Old, Something New

Along with new energy sources, the law promotes older ones previously unrecognized as renewables.

Hydroelectric plants of less than 60 megawatts were renewable resources under prior law. But a plant in service before 1998 could count for no more than 0.6 percent of the owner’s required share of renewables. The new law eliminates that restriction.

Another super-efficient technology previously shunned was geothermal space- and water-heating systems.

Beginning in 2002, Vernon Electric Cooperative and the Wisconsin Electric Cooperative Association waged a two-year fight for Department of Administration (DOA) consent to make the La Farge headquarters of the Kickapoo Valley Reserve the first state facility ever built with a ground-source heat pump (see July 2002 editorial archived on www.wecnagazine.com). Under the new law, in planning space- or water-heating for new or existing state buildings, the DOA must see that geothermal technologies are used to the greatest extent that’s cost effective and technically feasible.

Anaerobic digesters—converting livestock manure into clean-burning methane to fuel electric generation—are just beginning to appear in Wisconsin’s energy portfolio. Under the new law, the Department of Agriculture, Trade and Consumer Protection’s next budget request must include funds for research on anaerobic digester development.

After months of work “so demanding it just blotted out the sun,” Cowles is optimistic.

“It sends the state in a direction that will help ratepayers and the agricultural community,” he said. “With methane from manure digesters and wind power, it will bring some needed cash into the agricultural area of the economy.”

And decrease, if only by a little, the share of electricity we have to buy someplace else.—Dave Hoopman

School for Scandal
Whistleblower Recounts Enron Collapse

After stumbling across accounting irregularities involving hundreds of millions of dollars, Sherron Watkins decided she should go to the top to report her discovery. But the top levels of Enron management, she ultimately found out, were the actual source of the trouble.

Watkins, a former vice president of the now-infamous energy-trading giant, told electric cooperative leaders gathered for the recent National Rural Electric Cooperative Association (NRECA) annual meeting that she naively thought Enron Chairman Ken Lay was unaware of the fraud.

“I knew he was an asleep-at-the-switch manager,” she said, noting Lay in the fall of 2001 was just stepping back into the top management post following the resignation of CEO Jeff Skilling. “I thought, ‘I need to just ward him.’ My reactions were not too different from, say, a crew member on the Titanic.”

She knew the company had hit an iceberg, there was water coming in, and that the ship was sinking. “I was just trying to warn the captain, ‘Go man the lifeboats. Try to save jobs. Try to save some business lines.’”

To her astonishment, instead of forming a crisis management team, Lay hired a law firm to look into Watkins’ allegations—but not to examine the accounting. “This law firm was hired to look into whether or not I was bringing up any new facts,” Watkins told the co-op crown assembled at the Orange County Convention Center in Orlando, Florida. “In effect, he reassured me that we were unsinkable, but ‘Nobody go down and see if there’s a hole.’”

Enron, the flagship energy marketer, sank into bankruptcy a couple of months after Watkins discovered the accounting breach, dragging down 5,000 employees, a major accounting firm, countless clients, and those at the helm.

Shell Game

Watkins, a certified public accountant, had worked for the Arthur Andersen accounting firm prior to being hired by Enron. (The Andersen firm, one of the five largest in the country and Enron’s auditor, was ultimately decimated when it became known the company had signed off on Enron’s “creative” accounting.) She began her Enron voyage in 1993, becoming a vice president in charge of a billion-dollar asset portfolio and later spending three years traveling the globe for Enron International, looking into financing power plants abroad.

Wanting to scale back her travel and work schedule so she could spend more time with her family, in the summer of 2001 Watkins took what she thought would be a low-risk, “back office” job with Enron Chief Financial Officer Andrew Fastow.

“Andy put me in charge of a list of assets Enron was trying to sell to raise money to lower debt,” Watkins explained. “I ran across 12 assets that were hedged with an entity called the Raptors.” As she dug, she found the Raptors were just shell companies—just on paper only. They had no cash, no assets, and their only positive attribute was a promise of Enron stock in the future.

“These Raptor structures had agreed to buy these 12 Enron assets at a pretty high price. The spreadsheet I was looking at just didn’t add up,” she continued, referring to one column that “stuck out like a sore thumb,” showing a $300 million Enron loss. “I met with people who spent three hours trying to explain very, very complex business structures to me, and I could tell that they didn’t quite even understand.”

The complexity of the business schemes helped Enron intimidate employees and clients who thought to raise questions, Watkins related. People were afraid to show ignorance at not understanding, and so they kept quiet.

Cooking the Books

“I had the benefit of stumbling across them when their flaws were readily apparent,” said Watkins. “I’m a CPA, and though I hadn’t practiced accounting in a long time, I knew there’s just no way accounting gets that creative—when you set up a shell company, fund it with your own stock, and start doing business with it. I knew what I was looking at was fraud.”

She said she figured going to then-CEO Jeff Skilling would yield nothing, since he would have likely been in on the scheming. However, he surprised her by quitting Enron just two weeks after she had discovered the company was “cooking the books.” The fact he had only been in the CEO’s chair for 8 months (following a 10-year career where he strove for that top spot) told Watkins, “What I was seeing was far worse than I could have ever imagined.” That’s when she went to Ken Lay and when he essentially confirmed her worst fears about how broad—and high—the unethical practices extended.

“In Enron’s case it involved hundreds of employees; it involved Arthur Andersen, the outside auditors; the outside lawyers; and the country’s largest banks,” she said. “CitiGroup and Chase were fined $300 million by the SEC for, in effect, aiding and abetting Enron and its fraudulent schemes.” Both those banks paid more than $2 billion to settle shareholder litigation connected to their role with Enron, Watkins continued.

She detailed some other outcomes of the subsequent investigations. For instance, there were more than 30 guilty pleas or indictments of Enron executives. CFO Andy Fastow, accused of 99 criminal counts, plead guilty and will go to prison for 10 years. His wife, a former Enron assistant treasurer, has already spent a year in prison for aiding her husband. Pending trials in Houston feature Jeff Skilling and Ken Lay as defendants. Three bankers have been extradited from Britain, charged with helping Enron in its illegal schemes. There are Merrill Lynch bankers in prison for their roles.

“There are other Enron trial to come,” Watkins told the co-op crowd. “I never thought I would know so many felons.”

Reaping Wreckage

The worst part, she said, was viewing the human cost of the Enron shipwreck. The day after the December 2, 2001, bankruptcy filing, 5,000 employees were told their last paycheck would be the one from the previous Friday, and they should clear their desks of personal items and leave. “That was three weeks before Christmas, and people aren’t hiring at the end of the year. This was devastating news,” she recalled.

However, the grim tidings were amplified a month later when it was learned that 25 Enron executives had paid themselves a total of $55 million in bonuses just one week before the bankruptcy. “They feathered their nests and they told 5,000 people, ‘I’m so sorry to tell you this, but we’ve got nothing more for you,’” said Watkins. “How had I spent eight years at a company where a culture had gotten that rotten?”

As to the source of the decay, Watkins clearly points to the executive suite: “In a perverse way, Ken Lay was telling his executives, ‘When you get to the top, the company’s assets are here for you to move around and use for you and your family.’ And Andy Fastow heard that,” Watkins remarked. “So any kind of erosion in values at the top gets amplified in the trenches.”—Perry Baird

EDITORIAL
by Perry Baird

Enron Enormity

Projected high on the wall at one side of the cavernous convention center hall were the electric co-op symbol and Touchstone Energy logo, flanked by the words “members” and “accountability.” The projection remained focused there for all three days of the National Rural Electric Cooperative Association (NRECA) annual meeting, but for the closing session, the words seemed to shine with particular emphasis.

Sherron Watkins, a former vice president with Enron, took the stage to tell the 10,000 electric co-op representatives and guests how the energy-trading firm imploded from what she termed “a complete breakdown of moral values.”

“I feel at home with cooperative audiences,” she began. “I know I’m not in the middle of cutthroat business executives who are focusing on their own bottom line and are greedy.”

Core Concepts

Watkins’ tale of corrupt executives who plundered assets from customers and their own employees (see story on page 14) stood in sharp contrast to values espoused by cooperative businesses. “One of the main reasons I like talking to co-op audiences is that your priorities are in the right place. You really are looking out for your members’ best interests. It’s not for profit,” she remarked to the audience at the Orange County Convention Center in Orlando.

Outsiders regarded Enron as a high-powered, innovative company, Watkins said, relating that its stated core values were respect, integrity, communication, and excellence. “They were very similar to your own marching orders,” she told the co-op crowd. “And now Enron is known as the byword for “corporate scandal.”

Watkins said in big companies such as Enron, internal procedures are designed to help management identify ethically challenged employees. “That’s so you can rid yourself of them,” she said. “It seems like a harsh lesson, but it’s the best thing you can do.” Second chances, reprimands, salary penalties, or demotions will only teach employees that they can get away with detected ethical lapses, according to Watkins, and they will just go into “stealth mode” with the next breach they try.

Good Riddance

Her discussion of “getting rid of employees” reminded me of a statement made five years ago by none other than Enron CEO Jeff Skilling during the company’s heyday.

As the ill-fated push to deregulate the entire electric industry was underway, Skilling uttered an infamous remark, telling that his recipe for making the industry competitive included simply “getting rid of” large numbers of utility workers. He wasn’t talking about ethically challenged ones, mind you, but regular folks on the payroll. It foretold the inhumane character that Enron managers would display toward their own employees at the end.

As Watkins noted, the trouble with internal procedures in Enron’s case is that they were not designed to target high enough on the executive ladder. Had they been, Skilling himself could have topped Enron’s list of “rid of” employees—and years earlier than his 2001 departure as the company began its collapse.

The business methods—and mission— of electric cooperatives mesh in a way Watkins says should be a model for business everywhere. “You’re trying to make lives better, and I think that grows on itself,” she exclaimed. “Good breeds more good; bad breeds more bad.”

 

Jurustic Park
Junk to “Iron Age” Creatures

 

Several years ago, I was driving just north of Marshfield when my attention was riveted by hundreds of rust-colored statues, big and small, plus an enchanting wood and rock cottage that looked as if it were borrowed right out of a fairy tale.

Several people were in the yard, walking and talking among the statues. I parked and entered the premises. There, I heard their creator, Clyde Wynia, spin tall tales about the so-called “histories” of each fanciful sculpture.

Wynia, a retired lawyer, is now happily pursuing his hobby of paleontology (the study of ancient life forms and old fossils). With tongue in cheek, he describes his creations as “now-extinct creatures that inhabited the large McMillan Marsh” nearby, claiming that all the marsh creatures have “flesh and bones” of ferrous metal.

All the sculptures have elaborate stories, and Wynia is more than eager to share them with visitors. For instance, a statue of a human skeleton called Fast Eddy Biscotti is described as “a Norwegian gunfight in the marsh in the 1800s.” Further, claims Fast Eddy’s creator, “He never lost a fight, until the last time he was challenged to a draw. Just as the two fighters drew their weapons, Eddy was momentarily distracted by (the other gunfighter’s) cleavage, and she put an arrow through his heart.”

Similar sagas are supplied for each of the sculptures, from the tiny frogs to the Creature of the Marsh, more than 11 feet tall, which has recently been on loan to the Mitchel Conservatory (“The Domes”) in Milwaukee for its Merlin Show.

While Wynia continues to sculpt and spin yarns, his wife, Nancy, spins natural fibers, which she also dyes and knits into garments. A retired nurse, she inhabits the fairytale Hobbit House on the grounds of Jurustic Park. There, she also crafts and sells her colorful glass beads and jewelry, fish, flowers, and life-size soft sculptures.

So if you fancy fancies, don’t just rent a “Lord of the Rings” movie. Instead, motor over to Marshfield and get lost in Wynia’s sculptures at Jurustic Park. The critters are for sale, but it’s up to you decide what to believe about their origin—and it’s up to you to get your purchases home. Wynia has a firm policy against providing shipping for his denizens of the marsh.—Linda Hilton

Jurustic Park is open most days in spring, summer, and fall until 5 p.m. (Group tours may be booked by appointment.) It’s located four miles north of Marshfield. From Hwy. 97 at the north edge of Marshfield, turn on Hwy. E and travel north for 3-1/2 miles. Turn left on Sugarbush Lane for half a mile until sculptures appear on the right at M222 Sugarbush Lane. The site is located across from Foxfire Gardens. For more information, visit www.jurustic.com or call 715/387-1653.