Thursday, September 4, 2008


5 Power Generators Sued in California

Published: May 3, 2001

Opening another front in California's war against electricity generators, the lieutenant governor and a state assemblywoman sued five of the largest ones today, charging that they had illegally gouged the state by billions of dollars.

The suit, filed in a state court here, seeks a return of the alleged overcharges as well as penalties and an injunction against future abuses. The plaintiffs did not say how much they were seeking, except to put the overcharges at many billions of dollars.

Several state agencies and the Federal Energy Regulatory Commission have already said they are investigating the power generators to determine whether they have been manipulating the market for electricity by withholding supplies, and the federal commission has said it has found evidence of as much as $120 million in overcharges.

One defendant in the suit filed today is the Duke Energy Corporation, which has been having discussions with the state about the possibility of making a payment to California in return for an end to all investigations.

But the plaintiffs in the new suit, Lt. Gov. Cruz M. Bustamante and Assemblywoman Barbara Matthews, acted not in their capacity as public officials but as private citizens, and Mr. Bustamante said today that any such settlement between Duke Energy and the state would have no bearing on the case.

The lawsuit echoes accusations made for months by Gov. Gray Davis, who said he supported it. Mr. Bustamante said he hoped the suit would lead to criminal charges and jail terms for the 14 top executives it listed.

In addition to Duke Energy, the companies named as defendants are Dynegy Inc., Mirant Inc., Reliant Energy Inc. and Williams Energy Services, a subsidiary of the Williams Companies.

''Dynegy has repeatedly stated we believe we acted appropriately and within the law in California,'' said Steve Stengel, a spokesman for that company, which is based in Houston. ''We believe time would be better served working on solutions rather than assessing blame.''

Cathy Roche, a spokeswoman for Duke Energy, of Charlotte, N.C., called the accusations ''untrue and offensive,'' and added, ''The people of California should know their politicians can't sue their way into additional power supply.''

Richard Wheatley, a spokesman for Reliant Energy, of Houston, called the lawsuit ''false, defamatory and totally without merit.'' He said the five companies had just 20 percent of the power market and thus would be unable to exert so much control over it.

Paula Hill-Collins, a spokeswoman for Williams Energy Services, of Tulsa, Okla., said its officials had not yet reviewed the suit and would not comment.

Mirant officials did not return calls seeking comment.

The suit is another shot in the increasingly bitter battle between frustrated state officials, who have so far been unable to halt either the soaring level of wholesale energy prices or the prospect of blackouts, and generating companies, which have seen their profits rocket higher but maintain that they are doing nothing more than allowing the markets to set prices at a time of shortages.

Mr. Bustamante said he believed that the five companies had formed a cartel to control prices. He said he had modeled his attack on a suit filed several years ago by Mr. Davis, then lieutenant governor, against the tobacco companies. That suit was one of many that led to a multibillion-dollar settlement between the states and the cigarette industry.

California has had serious power shortages since last summer, and the power industry has operated since Jan. 17 under a declaration of emergency by the governor. The crisis has involved rolling blackouts, has sent rates sharply higher and has left the state's largest utility, the Pacific Gas and Electric Company, in bankruptcy.

The state has had to step in to acquire the power that the utilities say they no longer have the means to buy, and it is spending about $70 million a day.

The California Independent System Operator, which oversees the power grid for the state, issued an analysis earlier this year in which it concluded that the power generators had overcharged the state by $6.2 billion in the last year, an assessment the generators have denied.



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