Group Investigating California Energy Crisis Files Evidence Supporting More Than $7.5 Billion In Consumer Refunds

(WASHINGTON, D.C.) - A coalition of California government agencies and the state's two largest utilities today submitted to the Federal Energy Regulatory Commission (FERC) compelling new evidence that generators, traders and municipal power entities withheld significant amounts of electricity, engaged in collusion and pervasive Enron-type market manipulation, and should be compelled to return $7.5 billion in profits to the state.

The filing by the coalition - which includes Southern California Edison (SCE), Pacific Gas and Electric Company, the California Attorney General's Office, the California Public Utilities Commission, and the California Electricity Oversight Board - presents to FERC the results of over three months of investigation into why the state's wholesale power costs skyrocketed during the recent energy crisis.

The filing includes evidence supporting consumer refunds of more than $7.5 billion. However, it does not diminish the state's overall claim for refunds to buyers of approximately $9 billion. It provides strong contrasts to the $1.8 billion refund order under consideration by FERC, which resulted from a case in which the judge was precluded by FERC from considering market manipulation or from ruling on most of the transactions in which the state contends it occurred.

"The massive cover-up by generators is unraveling. The evidence of manipulation unearthed is so overwhelming even FERC can't hide from it," said Gov. Davis. "To date, FERC has not returned a single dollar in refunds from the generators. It has a moral and legal responsibility to correct this outrage."

"This evidence should force FERC to recognize, at long last, just how egregiously and extensively California was plundered, defrauded and ripped off by the energy pirates," said Attorney General Bill Lockyer, "FERC can no longer avoid providing California the long-overdue justice it deserves."

The over 1,000-page filing cites evidence of widespread market manipulation by merchant generators and marketers including withholding available power at times when additional supplies were needed, thereby artificially driving up prices, and illegally gaming various power markets. The illegal gaming revelations include evidence that sellers coordinated some of their market manipulation activities. For example, many generators shared non-public outage information. Additionally, the California parties uncovered profit sharing agreements between traders and public power entities to sell non-existent services.

Unfortunately, the vast majority of today's filing is subject to a FERC protective order that requires the California parties to keep the newly discovered evidence confidential. However, they petitioned FERC to make all of the information in the filing public - as they believe the public has a right to know what really happened in California. They will counter the sellers' efforts to keep the information confidential by pointing out that most of the information is outdated and cannot possibly be competitively sensitive.

In addition to fighting off sellers' attempts to keep this information confidential, constant false statements by sellers before Congress, before FERC, and to the public have made the process of arriving at the truth difficult. Further "gaming" of the system - whether through withholding of documents or other legal strategies - will continue to be a problem. For example, while sellers are also required to present their cases to FERC on the same day as the California parties, Duke - one of the largest sellers - has already informed the California parties that it intends to wait until March 17, 2003, the date for replies, to make its preliminary filing, depriving the California parties of an opportunity to respond.

The California parties believe that their filing reveals "just the tip of the iceberg" of the evidence that sellers manipulated the California power markets. However, the evidence they are presenting in this filing today is substantial enough to warrant the remedy California is requesting.

View the Executive Summary and Petition to lift the protective order.