A federal grand jury investigating California's energy crisis appears to be focusing on whether major electricity suppliers worked together to rig the energy market.
Grand juries operate in secret and its members and attorneys are forbidden by law from revealing facts about deliberations and investigations. But subpoenas issued during the last few days to major players in the state's electricity markets suggest the San Francisco-based grand jury is trying to determine whether companies colluded to intentionally withhold power or otherwise game the system. That could be a violation of federal antitrust laws.
Dynegy Inc. of Houston and Southern Co. of Atlanta on Tuesday were the latest to acknowledge they have received subpoenas from the U.S. attorney for the Northern District of California requesting information related to their operations in California. At least five other companies have received similar subpoenas from the office of U.S. Atty. Kevin V. Ryan since Friday, including AES Corp., Duke Energy Corp., Mirant Corp., Reliant Resources Inc. and Williams Cos.
Assistant U.S. Atty. Matthew J. Jacobs refused to say Tuesday what information federal prosecutors are seeking, adding only: "We are investigating pricing in the California energy markets." The San Francisco offices of the U.S. attorney and the FBI are conducting the investigation for the grand jury.
None of the companies that received the lengthy subpoenas would detail exactly what was demanded, but the broadest outlines began to emerge Tuesday through public statements and regulatory filings by the targeted companies.
The subpoenas seek records of the companies' power-plant operations and electricity sales in California back to January 1998, shortly before the state began its ill-fated experiment with deregulation. In addition, the subpoenas ask the companies about contact with other electricity generators or power traders.
Williams Chief Executive Steve Malcolm said Monday that the subpoena, which the Tulsa, Okla.-based company received Friday, contained several questions and sought documents related "to a federal antitrust investigation."
Williams and all of the companies subpoenaed promised to cooperate with the probe and denied any wrongdoing during California's energy crisis of 2000-01, which brought record electricity prices and chronic power shortages, pushing the state's two biggest electricity utilities into insolvency.
The question of whether power-plant owners and energy traders conspired to raise prices either through withholding power or questionable trading has surfaced before in various investigations looking for causes and culprits. These include a state legislative committee headed by Sen. Joe Dunn (D-Santa Ana), the Federal Energy Regulatory Commission, California Atty. Gen. Bill Lockyer and the California Public Utilities Commission.
But U.S. Atty. Ryan's swift-moving investigation is being aided by the unique insights of Timothy N. Belden, the top Western trader for Enron Corp.
Belden is believed to have been the mastermind behind Enron's questionable trading tactics. After admitting to a series of schemes to defraud California electricity customers during the energy crisis, Belden pleaded guilty Oct. 17 to a single count of conspiracy to commit wire fraud, agreed to forfeit $2.1 million in "criminally derived" compensation from Enron and promised to cooperate with federal investigators.
Belden's cooperation is considered crucial because, as the head of the California energy trading operation of what was once the world's largest energy trader, he was ideally positioned to see what was going on in the market. Internal Enron memos note that the company's traders dreamed up colorful nicknames so that they could more easily communicate about the trading ploys with brokers from other companies.
"It sounds like what's happening now is they have uncovered much more illegal activity related to price-fixing," said Michael Aguirre, a San Diego attorney who has filed two lawsuits against generators and traders that did business in California.
The only other subpoena for the San Francisco grand jury to be made public was in August to the California Independent System Operator, which operates the transmission grid for most of the state.