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Calif. Report Widens Blame in Energy Plot

FERC is set to receive a filing naming more than a dozen power sellers. They deny the charges.

March 03, 2003|Jonathan Peterson and Nancy Rivera Brooks | Times Staff Writers

WASHINGTON — New evidence being submitted by California officials to federal regulators today will show that more than a dozen public utilities and energy generators, including the Los Angeles Department of Water and Power, Sempra Energy, Mirant Corp. and Duke Energy Corp., participated in schemes to push up prices during the California energy crisis, officials said Sunday.

The details are part of a sealed, 1,000-page filing that is intended to show that the exploitation of California's deregulated energy market in 2000 and 2001 was far more pervasive than has been proved to date and involved more participants than the few that have previously been named.

The filing will be submitted to the Federal Energy Regulatory Commission by a coalition of state government agencies and the state's two largest electric utilities, Southern California Edison and Pacific Gas & Electric. The coalition wants federal regulators to order $9 billion in refunds for overcharges during the energy crisis.

Although the findings are covered by an order of confidentiality, a group of California officials Sunday directly accused companies and municipal utilities by name of exploiting the state's energy marketplace and complained that federal regulators have taken too long to compensate the state for the unfair practices.

For The Record
Los Angeles Times Tuesday March 04, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 49 words Type of Material: Correction
Energy crisis -- In an article in Section A on Monday, a state official was quoted saying that a Mirant Corp. employee had refused to testify in an investigation of price spikes during the energy crisis. Mirant executives say the unidentified person was a former contract employee.

"The massive cover-up by generators is unraveling," Gov. Gray Davis said in a statement. "The evidence of manipulation unearthed is so overwhelming even FERC can't hide from it."

He added: "To date, FERC has not returned a single dollar in refunds from the generators. It has a moral and legal responsibility to correct this outrage."

The accusations -- including the withholding of power when it was desperately needed by California -- were denied Sunday by power sellers contacted by The Times, including Sempra Energy, Mirant, Duke Energy and the Los Angeles, Glendale, Pasadena and Anaheim municipal utilities. Several said they looked forward to reviewing the state's evidence after two years of bitter fighting over the causes of the energy crisis.

But the filing by the coalition, which also includes the state attorney general, Public Utilities Commission and Electricity Oversight Board, describes a broad range of manipulative market behavior by power providers, traders and municipal utilities.

It accuses such power suppliers as Reliant Resources Inc., Williams Cos., Dynegy Inc., Mirant and Duke of withholding power to push up prices. It also accuses a range of companies of executing strategies to boost profits by misleading the marketplace.

The strategies are similar to tactics that Enron Corp., now under bankruptcy protection, employed, according to confidential memos released last year. Those memos suggested that other companies also were gaming the market, but provided no details.

For example, the Los Angeles Department of Water and Power, Sempra, Mirant, Williams and Powerex Corp. are said to have played the Enron game known as "Ricochet," which involved avoiding price caps by selling power out of state and then trading it back again, state officials said in a briefing with reporters Sunday.

Others are said to have employed a strategy made famous at Enron known as "Fat Boy," in which a company tells electricity officials that it plans to use more power than it actually does, in the process getting extra payments. This group included Sempra, Powerex, Mirant, Dynegy and Williams, according to California officials.

"This evidence should force FERC to recognize, at long last, just how egregiously and extensively California was plundered, defrauded and ripped off by the energy pirates," said Atty. Gen. Bill Lockyer, whose office coordinated the investigation. "FERC can no longer avoid providing California the long-overdue justice it deserves."

People familiar with the filing said that a few firms also allegedly engaged in a practice that Enron traders dubbed "Death Star," in which companies would create false congestion on the power grid and then get paid a premium for easing the problem. Companies in this group included Coral Power, Sempra, Mirant, Powerex and Duke, as well as the Modesto municipal utility.

Most details remained secret Sunday because of the broad order of confidentiality imposed by FERC. But the people familiar with the state's case said they had been legally advised that they could disclose the names of firms discussed in the filing. They said the firms and utilities whose names they released had knowingly engaged in practices that distorted the market and fueled skyrocketing electricity prices.

Asked about the Los Angeles Department of Water and Power's role in the crisis, one official said: "They worked cooperatively with traders on these ricochet deals -- and took steps to conceal what they were doing."

The filing also accuses the DWP of colluding in an arrangement to share power with Powerex, and alleges a similar collusive arrangement between Glendale and Enron and Coral.

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