Attorney General Bill Lockyer sues wholesale power companies, alleging illegal profiteering

Sacramento, Calif., April 9, 2002 — Attorney General Bill Lockyer on Tuesday filed complaints against four wholesale power companies, alleging that they charged unjust, unreasonable and illegal rates for electricity during California’s recent energy crisis.

“We’re attacking illegal profiteering from California’s energy crisis on two fronts,” Lockyer said. “We want FERC (the Federal Energy Regulatory Commission) to order refunds for wholesale electricity sold at illegal prices in California. And, today, we are seeking to make the power pirates pay a California penalty for their illegal profiteering.”

Filed in San Francisco Superior Court, the complaints against Mirant, Williams, Powerex and Coral Power allege violations of California’s Unfair Competition Act that are subject to civil penalties of up to $2,500 for each violation. The complaints state that the companies engaged in hundreds of thousands of illegally priced sales from early 2000 through 2001, which could result in civil penalties of more than $1 billion.

“In California, a business that breaks the law faces a unique state penalty for the unfair business practice,” Lockyer said. “Our complaints today target a range of power companies – from very large price abusers such as Mirant and Williams to smaller companies like Coral. We’re still looking at some two dozen power companies and expect to file more complaints for taking unfair advantage and charging illegal rates in California’s energy market.”

The Attorney General two weeks ago challenged as illegal all wholesale power rates that were not filed with FERC as required by law. The petition seeking expanded refunds for California was filed with FERC in Washington, D.C. on March 21.

“By violating the Federal Power Act and charging illegal prices, wholesale power companies were able to distort California’s energy markets and prevent meaningful review of electricity rates by the public, by energy buyers and by FERC,” Lockyer said. “The power companies therefore avoided scrutiny of their price gouging and reaped hundreds of millions of dollars of overcharges and illegal profits.”

The complaints state that by violating the Federal Power Act the energy companies engaged in unlawful and unfair competition in California, which is prohibited by state Business and Professions Code section 17200. The state law considers unlawful, unfair or fraudulent business practices to be unfair competition. Penalties of up to $2,500 may be recovered in a civil action brought by the Attorney General or a district attorney.

Based in Atlanta, Georgia, Mirant and its affiliates operate power plants in Contra Costa and San Francisco counties. Powerex, formerly known as British Columbia Power Exchange Corp., is a Vancouver, British Columbia, company that sells wholesale energy in the western United States. Williams Energy Marketing & Trading Co., is based in Tulsa, Oklahoma. Coral is an energy subsidiary of Shell based in Houston, Texas.

The complaints are the latest resulting from the Attorney General’s investigation into potential illegal conduct by power companies and others during California’s energy crisis.

In March, the Attorney General petitioned FERC for expanded refunds and accused four major power companies of unjustly profiting by charging millions of dollars for emergency generating capacity that the companies never provided as promised.

In January, the Attorney General charged Pacific Gas & Electric Corp. with illegal, unfair and fraudulent business practices that drove its California utility into bankruptcy after siphoning over $4 billion from the subsidiary and violated promises to the state to protect California ratepayers.

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