California officials sue energy firms for unfair practices

By Ann de Rouffignac
OGJ Online

HOUSTON, May 3 -- California Lt. Gov. Cruz Bustamante and assembly member Barbara Matthews (D-Tracy) filed suit as individuals and on behalf of the general public in California seeking unspecified damages from the "unlawful and fraudulent" sale of electricity by out-of-state generators.

The suit filed Wednesday in Los Angeles Superior Court names Williams, Mirant Corp., Reliant Energy Inc, Duke Energy Inc., and Dynegy Inc. and individual company CEOs and other executives as defendants.

The companies own or control 19 gas-fired generation plants in California.

The plaintiffs allege the increase in the total energy bill for California is the result of the defendants' antitrust and unlawful fraudulent and unfair business practices. Consumers paid or will pay $5 billion for power in 1998, $7 billion in 1999, $28 billion for 2000, and a projected $70 billion for 2001, according to the complaint.

The suit alleges each defendant company "acted with the anticompetitive purpose of using economic and physical withholding of electricity from the California electric generation market in order to derive monopoly profits."

Reliant Energy spokesman Richard Wheatley said these allegations and the entire lawsuit are "false, defamatory and without merit."

Gov. Gray Davis commended Bustamante and Matthews for "opening a second front in the California war against price gougers."

At a time California needs added power supplies, the rhetoric and legal actions could spawn unintended consequences. At least two generators are deliberating whether to go forward with new California power projects until the "negative atmosphere" stops.

Mirant Corp. planned to expand two existing power plants which are in the permitting stages. But the projects will not go forward until the company "reassesses the economic climate" in California, said Mirant spokesman Chuck Griffin.

Reliant Energy Inc. has discretionary capital of $1.4 billion to spend through 2003 on power projects to serve the power-starved western grid. One of the projects could be located within the state of California.

"California officials wallowing in the negative atmosphere discourage companies from bringing discretionary capital into the state," said Wheatley. He added the lawsuit clearly demonstrates the lack of focus on the real issues by California officials, and shows they have no understanding of how the electricity markets function.

Executives named include Keith Bailey, CEO of Williams; A.W. Dahlbert of Southern Co.; S. Marce Fuller, CEO of Mirant; Steve Letbetter, Reliant's CEO; Richard Priory, CEO of Duke Energy Corp.; and Dynegy's CEO Charles (Chuck) Watson.

The lawsuit alleges the individual corporate executives were "motivated to engage in unlawful acts and practices" for personal gain. "They personally profit through their stock options, personal compensation packages, and increases in the value of the stock they own in their respective companies."

Contact Ann de Rouffignac at [email protected]