Jeff -- can you get LECG involved?

David
---------------------- Forwarded by David Teece/LECG on 01/19/2001 10:46 AM
---------------------------


"Pablo T. Spiller" <spiller@haas.berkeley.edu> on 01/17/2001 03:46:01 PM

To:   david_teece@lecg.com
cc:

Subject:  Water agencies sue power companies - NCTimes.net


we should get into this action.
http://www.nctimes.com/news/2001/20010117/c.html


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Water agencies sue power companies

GIG CONAUGHTON
Staff Writer
Three San Diego County water districts filed a class-action lawsuit
Tuesday against 13 power companies, charging they conspired to create an
"artificial" power shortage to drive up the cost of electricity.

The suit was filed on behalf of the Valley Center Municipal Water
District in North County, Padre Dam Municipal Water District in Santee
and Sweetwater Authority in South County, and asked for $3 million in
"over-charges" the agencies say occurred between June and November.

However, lawyers representing the agencies said that dollar figure could
increase dramatically.

The 13 power companies named in the suit included Enron; Sempra, which
owns San Diego Gas & Electric Co.; and Duke Energy Corp., the
Houston-based energy giant that operates the South Bay power plant in
Chula Vista.

Gary Arant, the general manager of the Valley Center district, said
Tuesday that he expected more water agencies would join the lawsuit.
Valley Center is one of 23 water agencies served by the San Diego County
Water Authority.

"At this point there are just three of us," Arant said. "We would hope it
would expand. We made it perfectly clear that we were inviting others. We
have some interest."

But Tom Williams, spokesman for Duke Energy Corp., said Tuesday that the
lawsuit is "just a big waste of time and money."

"There have been three independent investigations that have found no
collusion or inappropriate market behavior by generators," Williams said.

Generators have generally rebuffed claims of price-gouging, pointing to a
study by the Federal Energy Regulatory Commission that concluded that
high demand, low supplies and higher fuel costs were responsible for
higher wholesale electricity prices last summer.

Dan McMillan, the president of Padre Dam, said each of the three agencies
was being hurt badly by the increases in electrical rates, which have
doubled ---- even tripled in some cases ---- since California's
deregulation of the power industry took effect in June.

Arant said the Valley Center district alone estimates its increased power
rates have cost it $1.5 million between June and Nov. 1.

Valley Center board members voted Monday night to pass on a portion of
their electrical cost increases to their ratepayers. McMillan said Padre
Dam was expected to do the same Tuesday night.

Water pumping stations, Arant said, use a tremendous amount of electrical
power.

In fact, last-minute agreements by the California Department of Water
Resources to shut down its pumping stations helped avert "rolling
blackouts" across the state when California declared the first two Stage
3 power alerts in its history Dec. 7 and Friday. State officials declared
California's third Stage 3 alert Tuesday.

Arant said the Valley Center district's electrical use runs to about
"five or six megawatts" ---- the same amount of electricity it would take
to power 5,000 to 6,000 homes.

"Yeah, we're one of SDG&E's largest customers," Arant said.

Attorney Mike Cowett of Best, Best and Krieger, the firm handling the
class-action suit, said while residential customers received some relief
from soaring power rates when state legislators representing San Diego
County demanded rate caps in September, water agencies and other large
commercial users have not.

"You and I are exempt (from the increases) as residential users. These
water districts are paying the full freight, and it's hurting badly,"
Cowett said.

Arant said a year ago that the Valley Center district was paying an
average of 7 cents per kilowatt hour for electricity, a figure that has
jumped to an average of 17 cents per kilowatt hour since deregulation
took effect.

Cowett said there is no way of telling how long it may take for the
courts to act upon the suit.

"As you know, this is a huge, complicated mess," he said.

Cowett said there is a chance the agencies' suit could be combined with
other pending class-action suits filed against the power companies.

Cowett said the three agencies asked for "treble damages," which could
drive up the suit's $3 million price tag to $9 million.

However, he said that the $3 million figure only sought reimbursement for
what the agencies felt they lost up until Nov. 1 and that the damages
figure could also change to reflect ongoing losses.

Arant was diplomatic when asked if he felt the power companies "made up"
the power crisis plaguing California.

"We think there is cause to question whether or not all the cost we paid
are just and reasonable," he said.

However, the suit filed Tuesday said the agencies believe the power
companies purposely withheld electricity to "create an artificial
shortage."

"There's something wrong here," Arant said. "Something terribly wrong."

Staff writers Yadira Galindo and Dan McSwain contributed to this report.
Contact staff writer Gig Conaughton at (760) 739-6696 or
gconaughton@nctimes.com.

1/17/01

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