Calif Fails To Find Illegal Acts By Generators -Sources
By Jason Leopold
Of DOW JONES NEWSWIRES

06/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

(This article was originally published Monday.) 

LOS ANGELES -(Dow Jones)- An investigation by California's attorney general 
and state utility regulators into alleged illegal behavior by electricity 
generators has failed to turn up evidence of criminal activity, persons 
familiar with the probe said Monday.
The sources - including two commissioners on the California Public Utilities 
Commission and an aide to Attorney General Bill Lockyer - said generators 
aren't likely to be prosecuted, even though it appears they did withhold 
supply, and that the state may pursue civil remedies as an alternative. 
"We have come to the conclusion that this type of behavior is not illegal," 
one PUC commissioner said. 
California Gov. Gray Davis was briefed on the investigation Monday night, 
spokesman Steve Maviglio said. Maviglio refused to disclose details of the 
attorney general's briefing, but said the investigation was ongoing. 
"We have not called off the dogs," Maviglio said. "We're still pressing the 
attorney general to pursue the investigation." 
The governor, who has repeatedly blamed the state's year-long power crisis on 
market manipulation by generators, is pressing federal regulators to order 
substantial refunds and impose price caps until the dysfunctional market is 
fixed. 
PUC President Loretta Lynch said last month that she had enough evidence to 
take legal action against generators, but that claim was "premature," another 
PUC commissioner said. 
The PUC commissioners said the investigation has uncovered evidence that 
generators created artificial shortages by withholding supply last summer and 
earlier this year, but after dozens of interviews with economists, traders 
and power plant employees found no evidence of collusion or other criminal 
behavior. 
"We do have evidence that they withheld power from the marketplace, that's 
documented," one of the commissioners said. "The question is whether that's 
illegal, and I don't think it is." 
The state is ultimately responsible for soaring power prices, the other 
commissioner said, because it passed a flawed deregulation bill. 
"The system that we set up requires the generators and marketers, in the best 
interest of their shareholders, to do exactly what they have done," the 
commissioner said. "Unless they're talking with each other and there is 
evidence of absolute colluding, we're not going to get to first base." 
The sources said the state may be preparing for a civil lawsuit against Duke 
Energy (DUK), Dynegy Inc. (DYN), Mirant Corp. (MIR), Williams Cos. (WMB), 
Reliant Energy Inc. (REI) and others, but that too is going to be difficult. 
"How do you sue someone for being unethical," the person in Lockyer's office 
said. 
A spokeswoman for Lockyer wouldn't comment, but said the probe is ongoing. 
Spokesmen for the energy companies also wouldn't comment on the 
investigation, but said they have submitted bid data and reams of documents 
related to how their power plants operate to Lockyer and the PUC. The 
generators have repeatedly denied allegations that they acted unlawfully. 
Severin Borenstein, director of the University of California at Berkeley 
Energy Institute, said the state would have a hard time proving otherwise. 
"I would not have expected them to find evidence of criminal antitrust 
behavior," Borenstein said. Prosecuting generators is "a longshot," he said: 
"They would actually have to find a smoking gun and evidence that these guys 
were in the same room." 
Phil Verlager, an economist specializing in energy issues, said generators 
didn't even act unethically, because the setup of California's deregulation 
law allowed generators to get away with withholding power. 
Even if no smoking gun has been found, tough talk by PUC President Lynch 
scared the suppliers, the commissioner said. 
"They got the message that they ought to play the game." 
Lynch didn't return calls for comment. 
Davis said Sunday the recent decline in power prices in the West is a 
"function of the extreme pressure on the energy cartel from Sacramento." 
The Federal Energy Regulatory Commission has the responsibility to hold 
generators accountable for behavior that produces unjust and unreasonable 
prices, even if it isn't illegal, Borenstein said. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. 


Calif Gov:Evidence May Allow Criminal Case Vs Generators
By Jason Leopold
Of DOW JONES NEWSWIRES

06/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- California investigations have turned up a "growing 
body of evidence" that may allow the state's attorney general to pursue 
criminal charges against generators suspected by some of manipulating power 
prices in the state, the office of California Gov. Gray Davis said Tuesday. 
The governor's office didn't detail that evidence, however, and persons 
familiar with the probe conducted by the state attorney general and the 
California Public Utilities Commission maintained that no such evidence 
exists.
"The Attorney General gave the governor a progress report on the status of 
civil and criminal actions," Davis press secretary Steve Maviglio said in a 
short written statement. "There is a growing body of evidence that may give 
the Attorney General the opportunity to proceed with criminal as well as 
civil actions." 
Attorney General Bill Lockyer briefed Davis Monday night on the status of his 
investigation with the PUC into possible criminal antitrust behavior by 
generators operating in the state's wholesale electricity market. Maviglio 
didn't disclose further details of the investigation. 
Two PUC commissioners said the state has documented that supply was withheld, 
but hasn't been able to demonstrate such activity was illegal. 
"There is no evidence of criminal behavior," one said. "It just doesn't 
exist." 
S. David Freeman, senior energy adviser to Davis, acknowledged the 
distinction Tuesday after being asked by reporters in Washington, D.C., about 
allegations generators withheld supply to boost prices. 
"It may not be criminal conduct, but it's a crime," he said. 
Economists and energy experts deposed by Lockyer have said the attorney 
general will have difficulty trying to prosecute generators, because there's 
likely no smoking gun. 
Any claim that the investigation hasn't turned up evidence of criminal 
activity is an "overstatement," Lockyer spokeswoman Sandra Michioku said. 
The investigation is ongoing, she said. 
Davis said Sunday that pressure from Sacramento has contributed to the recent 
sharp decline in power prices in the West. An aide to Lockyer said Tuesday 
the attorney general needs to keep alive the perception that he is close to 
prosecuting the energy companies "so they will continue to play the game." 
The governor, who has repeatedly blamed the state's year-long power crisis on 
market manipulation by generators, is pressing federal regulators to order 
substantial refunds and impose price caps until the dysfunctional market is 
fixed. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com


Calif Judge To Rule On Confidentiality For Generator Data

06/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- A Los Angeles Superior Court Judge said Tuesday he 
will issue a written ruling on a lawsuit filed by Reliant Energy Inc. (REI) 
against the state's attorney general to prevent confidential subpoenaed 
documents from being shared with third parties. 
Superior Court Judge George H. Wu said he would take the case under 
submission and issue a written ruling in less than 90 days.
Reliant, Dynegy Inc. (DYN) and Mirant Corp. (MIR) agreed May 22 to turn over 
confidential documents to California Attorney General Bill Lockyer, who is 
investigating allegations of manipulation and criminal behavior in the 
state's wholesale power market. 
Reliant agreed to turn over the information, which includes bid data, as long 
as Lockyer's office agreed not to share it with third parties. 
Lockyer said last month that he wouldn't share the information pending a 
court hearing on the issue. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.