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Suit Seeks $2 Billion From 4 Energy Firms

April 10, 2002|NANCY VOGEL | TIMES STAFF WRITER

SACRAMENTO -- Atty. Gen. Bill Lockyer accused four energy companies Tuesday of gouging Californians and demanded at least $2 billion in penalties.

Lockyer filed four lawsuits in state court alleging violation of California's business and professions code. The suits are the latest in a series of actions by Lockyer to recoup money Californians paid for electricity in 2001. They won't be the last, he said.

"No business who rips off Californians should expect us to walk away from that fight," said Lockyer, who is running for reelection against state Sen. Richard Ackerman (R-Irvine).

In San Francisco County Superior Court, Lockyer sued Williams Energy Marketing & Trading Co., Mirant Corp., Coral Power and Powerex Corp., the marketing arm of British Columbia's provincial utility. Similar suits against other companies are "in the pipeline," Lockyer said.

The attorney general alleged that hundreds of thousands of electricity sales to California by these companies exceeded a fair price. To determine what a fair price would have been, state attorneys used a federal formula that takes into account the cost of natural gas, the efficiency of a company's power plants and other factors.

Each incident of price gouging is subject to a $2,500 penalty under a California business code that forbids unfair competition, Lockyer said. The alleged penalties could amount to half a billion dollars or more for each company, he said.

The attorney general also alleges that the companies' electricity sales in California are illegal because they failed to properly submit quarterly sales reports to the Federal Energy Regulatory Commission. Such reports are supposed to detail the range of prices a company intends to charge for power.

Energy industry officials called Lockyer's action "a legal stretch" and said the lawsuits are based on a failure to understand how energy markets work.

"This is all in response to the fact that the market got highly volatile," said Jan Smutny-Jones, executive director of the Independent Energy Producers, a lobbying group for electricity sellers in California.

He said no company submits quarterly reports to FERC in the manner Lockyer suggests must be done. To do so would be impractical, said Smutny-Jones, who compared it to asking Boeing Co. to predict what its stock price will be three months ahead of time.

After more than a year of investigating possible wrongdoing in California's electricity market, state attorneys have burst forth with a flurry of filings.

The lawsuits Lockyer announced Tuesday parallel a petition he filed last month at FERC seeking nearly $3 billion from energy companies. The petition alleges that the companies' power sales were illegal because they failed to give regulators enough information to determine if their prices were just and reasonable.

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