Posted on 04/16/2004 9:30:54 PM PDT by NormsRevenge
SAN FRANCISCO (AP) - The legal fallout from California's energy crisis is far from settled. Among the most pressing unanswered questions are how much the energy market overcharged and whether the government will prosecute more than the seven individuals already indicted for manipulating power prices. California's energy troubles began in May 2000 with the confluence of a booming economy, an ill-fated deregulated energy market, manipulation of that market and a drought slowing hydropower stations in the West. Discord abounds over how these factors caused energy prices to skyrocket.
What remains are dozens of energy-related lawsuits and a handful of criminal proceedings with more potentially on the way. At stake are billions of dollars California says consumers and other power purchasers are owed as well as the integrity and power of the oversight system.
"Our energy investigations are ongoing," said Matt Jacobs, an assistant U.S. attorney in San Francisco and one of the lead criminal prosecutors probing the energy crisis. Citing confidentiality laws surrounding the work of a federal grand jury here, he declined to answer whether more criminal indictments were in the pipeline.
Criminal charges, he added, are more difficult to prove than civil lawsuits seeking monetary refunds. "All financial-fraud cases present certain difficulties in presenting them to juries. There's a lot of paper. The cases are complex."
The grand jury has returned indictments alleging market manipulation by three Enron Corp. workers and four from a Reliant Resources subsidiary. Investigators have sifted through thousands of boxes of documents, Jacobs said.
The Reliant subsidiary itself has also been indicted, exposing it to millions of dollars in criminal penalties on top of the millions it already paid in civil penalties for shutting down power plants to increase prices.
Reliant is fighting the criminal charges and the four Reliant employees pleaded not guilty last week. Two of the indicted former Enron executives have pleaded guilty and are cooperating, while a third, John Forney, who managed Enron's energy trading desk in Portland, Ore., is scheduled for trial here later this year.
University of San Francisco criminal law professor Robert Talbot said he expected more indictments. "Standard operating procedure is to bring charges, make deals and get more indictments."
Among the most important pending cases is California Attorney General Bill Lockyer's effort to get more than $9 billion in refunds he says the state is owed from price-gouging during the 2000-01 energy crisis, which ended when federal regulators capped energy prices.
Lockyer is demanding the Federal Energy Regulatory Commission order the refunds to utilities and ratepayers squeezed financially by the soaring energy prices that pushed Pacific Gas & Electric Co. into bankruptcy. At the time, deregulation prohibited the utility from passing along high energy costs to consumers.
California wants the 9th U.S. Circuit Court of Appeals to order the refunds. A FERC investigation last year found widespread manipulation of natural gas and electricity supplies and prices in California, but the agency says the overcharges amounted to only $3 billion.
In all, the FERC has already approved more than $100 million in settlements with energy companies. In addition, FERC mediation helped California reach a separate $1.7 billion settlement with El Paso Corp. and secure a $1.4 billion discount on a $4.3 billion energy contract with Williams Cos.
FERC also approved a $3.7 million settlement with Mirant Corp. in December, but California estimates the Atlanta-based energy company owed at least $28 million.
The legal dispute between FERC and California is based in part on language in a 1935 federal regulation allowing FERC to order refunds for inflated prices usually beginning 60 days after a first complaint is made, which in this case was on Aug. 2, 2000.
California says the refund period should begin in May of 2000, not the second day in October.
"The system has sheltered wrongdoers and left ratepayers out in the cold," said Lockyer.
Lockyer has focused on the refunds, rather than trying to get criminal sanctions. But he faces tough odds. During oral arguments on the refund case in October, 9th Circuit appellate judge Sidney Thomas suggested "There was no effective remedy" for California under the law.
"That's right, your honor," FERC attorney Beth Pacella replied.
A decision in the case is pending. Meanwhile, Congress isn't likely to reword the federal energy statutes in California's favor.
"If Congress tells us to address May through October 2000, we will," said Bryan Lee, a FERC spokesman.
The commission, he said, "has done everything within its legal authority to rectify the unjust and unreasonable prices that occurred."
In other litigation, Lockyer is trying to break up what he says is a monopoly of California power generating stations owned by Reliant and Mirant Corp. Another suit seeks millions of dollars for what the attorney general said was "double billing" by companies accused of selling the same electricity to more than one purchaser.
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