Union Tribune

February 4, 2003

A deadline speeds state search for energy data

By TOBY ECKERT
COPLEY NEWS SERVICE

WASHINGTON With a deadline looming this month, California officials are stepping up efforts to gather evidence of alleged energy market manipulation to bolster their demand for billions of dollars in refunds from power sellers.

The state has questioned energy traders and received thousands of pages of documents, tape recordings and computer disks from companies that sold power in California during the 2000-01 power crisis.

Officials have sought legal orders for more data from major players in the market like Mirant Corp. and smaller fish like Las Vegas Cogeneration Limited Partnership.

It's all part of an unusual, 100-day, evidence-gathering period launched last November by the Federal Energy Regulatory Commission, following a court order. The period ends Feb. 28.

"We're engaged in a thorough discovery process. We're going to take full advantage of the opportunity," said Tom Dresslar, a spokesman for California Attorney General Bill Lockyer.

Some officials played down expectations that they will uncover blockbuster new evidence of wrongdoing.

"We have some material that we think is useful. I'm open to finding something revolutionary. But my instincts going into this were we might find some incremental information that was new," said Erik Saltmarsh, chief counsel and acting director of the California Electricity Oversight Board.

Some information has been beyond the state's reach because of other ongoing federal investigations.

Still, Saltmarsh and other officials say the process will strengthen the state's case for $8.9 billion in refunds.

The California Public Utilities Commission and the state's two largest utilities Pacific Gas & Electric and Southern California Edison also are involved in the effort.

The California parties are seeking more information about schemes power companies may have used to influence prices. They include "megawatt laundering" exporting power from California and then re-importing it to evade price controls.

The process was triggered when a federal appeals court granted a request by the California parties to cite "additional evidence of market manipulation by various sellers before FERC" in the refund case.

Moreover, California was given a green light to seek information going back to Jan. 1, 2000, a much longer period than FERC had been scrutinizing.

State officials say that could significantly boost the amount of refunds due.

Power sellers have denied wrongdoing, blaming the huge increase in wholesale electricity prices in 2000 and 2001 on factors ranging from the weather to a lack of new power plants in California.

In December, a FERC judge said the state was due $1.8 billion in refunds for overpriced power but that power sellers were still owed $3 billion by utilities and state agencies.

As part of the new discovery process, FERC also gave the sellers an opportunity to seek evidence from the California parties to disprove allegations of manipulation.

Duke Energy demanded access to a wide array of information, including data that the utilities commission used to conclude that generators withheld power from the market to drive up prices.

"In order to respond on Feb. 28, we have to know what the specific allegations are. Without that, we are handicapped," said Geoffrey Bestor, a lawyer for Duke.

But the company's request was denied last Thursday by an administrative law judge who is mediating disputes during the evidence-gathering period. Judge H. Peter Young said allowing Duke access to the information would "unfairly advantage" the company in the case and trigger similar requests from other power sellers.

The California parties have been granted subpoenas for information from companies like Mirant and Reliant Resources and from individual energy traders, including Timothy Belden, a former top West Cost energy trader for Enron Corp.

In October, Belden pleaded guilty to conspiracy to commit wire fraud as part of a scheme to manipulate California's power market.

Dresslar of the California Attorney General's Office said Belden would be questioned in conjunction with the U.S. Justice Department, which is conducting its own price manipulation investigation.

FERC Chairman Pat Wood has said the commission would like to make a decision on the refund case by the end of March.

With less than a month to go in the evidence-gathering phase, Judge Young admonished all of the parties to minimize infighting and unnecessary requests to compel testimony, which can trigger lengthy hearings.

"I simply do not have time to deal with juvenile behavior," he said. "This is going to get more and more difficult the closer we get to Feb. 28."