Calif. Alleges Massive Power Fraud

California electricity power lines. Jan. 18, 2001
California gave federal energy regulators more than 3,000 pages of confidential documents Monday that Gov. Gray Davis said prove energy companies manipulated the state's power market to drive electricity prices to record highs.

A public summary of the documents filed with the Federal Energy Regulatory Commission said that most companies that sold power in California during the state's energy crisis in 2000 and 2001 engaged in improper practices similar to those described in Enron Corp. memos that were made public last year.

Sellers of wholesale power withheld electricity, colluded by sharing nonpublic information, routed power to other states to avoid price caps and submitted false electricity schedules that gave the impression of congested transmission lines, said the state.

The state is seeking $9 billion in energy refunds for 2000 and 2001, when power prices soared and the state faced energy shortages and rolling blackouts.

The documents "establish an industrywide pattern of cheating and stealing from California ratepayers," Davis said.

The summary was provided by various state agencies and two of the state's major utilities — Pacific Gas and Electric Co. and Southern California Edison.

Representatives of several companies that sold power in California during the energy crisis said they plan to rebut the allegations. FERC has given the companies until March 20 to respond.

"The evidence confirms that the FERC correctly diagnosed the problems in the California electricity market and has applied the appropriate remedies," said Richard Wheatley, spokesman for Reliant Energy of Houston.

Reliant agreed in January to refund $13.8 million for withholding power to drive up prices in California during two days in 2000.

In 2001, FERC also capped wholesale power prices across the West and forbade energy companies from withholding power.

Other companies named in the California documents are Duke Energy Corp., Dynegy, Inc., Mirant Corp., Powerex, Sempra Energy and Williams Cos.

The new filings also said that some municipal utilities engaged in energy price gouging, in some cases by collaborating with Enron.

As part of the filing, California authorities urged FERC to open the documents to the public, saying consumers and congressional leaders, who have also investigated the crisis, have a right to know the details.

FERC spokesman Kevin Cadden said commissioners "will make a determination at some later date whether to release this information."

In December, a FERC administrative law judge found that California should get $1.8 billion in refunds, but at the same time found that energy companies were owed $3 billion from unpaid bills for power delivered to the state.

Wholesale prices in California shot up in May 2000, but the judge's findings, based on complex calculations, covered power transactions from October 2000 to June 2001. Those findings didn't take into account evidence of market manipulation.

California appealed and FERC gave the state 100 additional days -- extended another three days because of snow in Washington — to compile evidence of price gouging.