Enron Corp. traders were skilled at making money by exploiting weaknesses in California's energy markets. But did they cross the line and do anything illegal?

That's the question a newly impaneled federal grand jury in San Francisco is weighing, and experts are divided over the issue. Where some see fraud and additional high crimes, others see traders simply doing their jobs by playing one market off another or by outsmarting badly designed market rules.

Grand juries operate in secret and their thinking becomes public only if indictments are handed up.

But a trail of subpoenas and interviews indicates that the federal grand jury, aided by the U.S. attorney's office and the FBI, is examining trading ploys used to create electron traffic jams on California's high-voltage transmission grid.

Some of the top electricity traders who once worked for Enron have been contacted by investigators and are attempting to work out agreements to cooperate with the many interlocking inquiries into market manipulation in California and other Western states.

A spokesman for the U.S. attorney's office declined comment, but sources familiar with the grand jury investigation said they believe it is being steered by Assistant U.S. Atty. Patrick D. Robbins in San Francisco, who was named chief of the office's securities-fraud section a few weeks ago.

Robbins has subpoenaed trading records from the California Independent System Operator, which runs the transmission grid for most of the state. The subpoena, the contents of which were outlined in a Cal-ISO notice to market participants, seeks electricity forecasts filed by power sellers with the grid operator; the records of actual electricity flows; and any payments made to traders under a complex system to relieve congestion on the transmission grid.

"There are a number of federal and state laws that traders may well have violated and that any grand jury is going to take a very close look at," said Robert Berliner, a Washington energy lawyer who represents Los Angeles County before state and federal regulators.

"It's clear that these people were doing things they shouldn't have done."

Colorful nicknames

Berliner pointed, for instance, to evidence produced recently by federal energy regulators that Enron may have illegally traded with its own subsidiary Portland General Electric Co. to evade California's price caps on electricity generated within the state.

These trading ploys took on colorful nicknames such as Fat Boy, Death Star and Get Shorty. The monikers, one Enron lawyer noted in a December 2000 memo, were dreamed up to aid communication with energy traders at other companies.

But many market experts cast doubt on whether the trading practices by Enron and other companies crossed the blurry line into criminal territory.

Some, such as the Cato Institute, a free-market think tank in Washington, contend that a few of the byzantine trading strategies actually benefited California consumers by bringing extra power into the state -- albeit on a last-minute basis at higher cost.

Most of Enron's trading strategies are "pure arbitrage," said Gary Ackerman, executive director of the Western Power Trading Forum, an electricity industry group. Arbitrage is the practice of profiting from price differences by buying low in one market and selling high in another.

Particularly tough to prove, according to Ackerman, will be that Enron or any other traders purposely defrauded California consumers. Submitting inaccurate forecasts to California market operators of power sales or power purchases for the next day does not constitute fraud, he said, because Cal-ISO has never defined what it considers to be an acceptable scheduling error.

"It's an amazingly high standard to get a conviction on something like this," Ackerman said. "They're going to have to ... prove that" certain practices "weren't allowed -- and also demonstrate intent."

Meanwhile, the subpoena received by Cal-ISO sheds some light on which way the federal investigation is headed: It demands records from Dec. 1, 2000, through March 1, 2001, some of the darkest days of California's energy crisis. In addition, the subpoena seeks documents for May 25, 1999, a day when Enron has admitted it scheduled nearly 2,900 megawatts over a transmission line capable of carrying only 15 megawatts.

The power, of course, never materialized, resulting in higher prices and a minor power shortage. That event is known in energy circles as "the Silver Peak incident" -- named for the transmission line involved -- and is widely viewed as one of Enron's earliest attempts to profit by causing congestion on power lines.