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FERC Releases Flood of Evidence in Its Case Against Power Suppliers

Documents support regulators' findings of market gaming. Energy firms deny wrongdoing.

March 27, 2003|Nancy Rivera Brooks | Times Staff Writer

Federal regulators released on Wednesday hundreds of new pieces of evidence that California's energy market was manipulated -- from an e-mail message exhorting sellers to "stick it" to the state by bidding high prices to a transcript of traders discussing "wicked" plans to hold back electrons.

The documents lie at the heart of California's demands for punishment and payback from the energy crisis of 2000-01. They were made public by the Federal Energy Regulatory Commission to help illuminate staff findings that California was the victim of widespread power withholding and market manipulation.

Power suppliers say the documents released by FERC don't show any wrongdoing.

But Sen. Dianne Feinstein (D-Calif.) said a reading of the evidence prompted her to ask U.S. Atty. Gen. John Ashcroft to investigate fraud and antitrust allegations made by the state. The documents "provide significant evidence that there was a concerted effort to boost company profits at the expense of consumers," Feinstein said.

For example, one document details a June 12, 2000, conversation between a trader at Avista Corp. and another at Puget Energy in which the traders talk about working with others to keep power away from California markets.

Avista spokesman Hugh Imhof said that the traders were joking and that no power was withheld. In addition, he said, FERC staff investigated the incident, along with others cited by the agency and the state, and has cleared Avista of market manipulation charges in a proposed agreement. The agreement hasn't been approved by the commission. Puget Energy, based in Bellevue, Wash., could not be reached for comment

In the transcript, an Avista trader identified as Tony said: "I've been trying to get every prescheduler and real-time person to boycott California on Aug. 1 and 2.... so they can sit in the dark."

A Puget Energy trader identified as Anna replied: "God, you are just wicked."

Said Tony: "I shouldn't be saying this on the recorded line." Trader conversations are routinely recorded in the energy industry.

The documents released by FERC were gathered by California government agencies and two investor-owned utilities and filed with the federal commission March 3. The power suppliers blamed by the state coalition have filed their own documents disputing the charges.

Mirant Corp., an Atlanta-based energy trader, was among those California accused of alleged manipulation, such as creating false congestion on the state power transmission grid and bidding up prices with the knowledge that California was desperate for power and would pay any price to get it.

For instance, a Mirant e-mail sent to 11 traders in July 2000 urged them to "submit revised supp. [supplemental] bids and 'stick-it to 'em!" according to the filing.

Mirant also allegedly engaged in the so-called "Fat Boy" scheme, in which it gave inflated estimates of power demand to the California grid operator to create the illusion of shortages and send prices higher, according to the documents made public by FERC.

In one transcript, a trader from Public Service Co. of Colorado said to a Mirant trader, "Why don't we just do something where we over schedule, over schedule load and share an upside, dude." The Mirant trader replied, "That's fine."

Public Service of Colorado's parent, Xcel Energy Inc. of Minneapolis, noted that it previously made that transcript public, posting it on the company Web site.

"We don't have anything to hide. We didn't violate any laws," Paul Bonavia, president of the company's Xcel Energy Markets division, said Wednesday.

Mirant spokesman James Peters said Mirant "reasserts that it operated legally and appropriately with all of its trading actions within the rules designed" for the California market.

Referring to the transcripts of traders' conversations, Peters said: "Talk is just talk, and you have to look at the transactions that surround these conversations, and it will prove that these traders did nothing illegal."

California accused all the major companies that own power plants of holding back power by shutting their plants for reasons that weren't legitimate.

Dynegy Inc., for instance, shut down one California generator from Aug. 30 to Sept. 3, 2000, for repairs but kept it shut down after repairs were completed "to force prices up," the filing said.

Houston-based Dynegy, in its own FERC filing, rejected that charge, saying, "None of these claims have merit."

"We continue to stand by our actions in California," said Dynegy spokesman David Byford.

Numerous power suppliers participated in "ricocheting" schemes to avoid in-state price caps by selling power outside the state and reselling it back into the state in a market for last-minute power, according to the documents.

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