Subject: Follow-up on Davis, Lockyer meeting
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Date: Tue, 12 Jun 2001 15:41:42 -0700 (PDT)

Calif Fails To Find Illegal Acts By Generators -Sources
By Jason Leopold
Of DOW JONES NEWSWIRES

06/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

(This article was originally published Monday.) 

LOS ANGELES -(Dow Jones)- An investigation by California's attorney general and state utility regulators into alleged illegal behavior by electricity generators has failed to turn up evidence of criminal activity, persons familiar with the probe said Monday.
The sources - including two commissioners on the California Public Utilities Commission and an aide to Attorney General Bill Lockyer - said generators aren't likely to be prosecuted, even though it appears they did withhold supply, and that the state may pursue civil remedies as an alternative. 
"We have come to the conclusion that this type of behavior is not illegal," one PUC commissioner said. 
California Gov. Gray Davis was briefed on the investigation Monday night, spokesman Steve Maviglio said. Maviglio refused to disclose details of the attorney general's briefing, but said the investigation was ongoing. 
"We have not called off the dogs," Maviglio said. "We're still pressing the attorney general to pursue the investigation." 
The governor, who has repeatedly blamed the state's year-long power crisis on market manipulation by generators, is pressing federal regulators to order substantial refunds and impose price caps until the dysfunctional market is fixed. 
PUC President Loretta Lynch said last month that she had enough evidence to take legal action against generators, but that claim was "premature," another PUC commissioner said. 
The PUC commissioners said the investigation has uncovered evidence that generators created artificial shortages by withholding supply last summer and earlier this year, but after dozens of interviews with economists, traders and power plant employees found no evidence of collusion or other criminal behavior. 
"We do have evidence that they withheld power from the marketplace, that's documented," one of the commissioners said. "The question is whether that's illegal, and I don't think it is." 
The state is ultimately responsible for soaring power prices, the other commissioner said, because it passed a flawed deregulation bill. 
"The system that we set up requires the generators and marketers, in the best interest of their shareholders, to do exactly what they have done," the commissioner said. "Unless they're talking with each other and there is evidence of absolute colluding, we're not going to get to first base." 
The sources said the state may be preparing for a civil lawsuit against Duke Energy (DUK), Dynegy Inc. (DYN), Mirant Corp. (MIR), Williams Cos. (WMB), Reliant Energy Inc. (REI) and others, but that too is going to be difficult. 
"How do you sue someone for being unethical," the person in Lockyer's office said. 
A spokeswoman for Lockyer wouldn't comment, but said the probe is ongoing. 
Spokesmen for the energy companies also wouldn't comment on the investigation, but said they have submitted bid data and reams of documents related to how their power plants operate to Lockyer and the PUC. The generators have repeatedly denied allegations that they acted unlawfully. 
Severin Borenstein, director of the University of California at Berkeley Energy Institute, said the state would have a hard time proving otherwise. 
"I would not have expected them to find evidence of criminal antitrust behavior," Borenstein said. Prosecuting generators is "a longshot," he said: "They would actually have to find a smoking gun and evidence that these guys were in the same room." 
Phil Verlager, an economist specializing in energy issues, said generators didn't even act unethically, because the setup of California's deregulation law allowed generators to get away with withholding power. 
Even if no smoking gun has been found, tough talk by PUC President Lynch scared the suppliers, the commissioner said. 
"They got the message that they ought to play the game." 
Lynch didn't return calls for comment. 
Davis said Sunday the recent decline in power prices in the West is a "function of the extreme pressure on the energy cartel from Sacramento." 
The Federal Energy Regulatory Commission has the responsibility to hold generators accountable for behavior that produces unjust and unreasonable prices, even if it isn't illegal, Borenstein said. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; [email-masked]

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. 	

Calif Gov:Evidence May Allow Criminal Case Vs Generators
By Jason Leopold
Of DOW JONES NEWSWIRES

06/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- California investigations have turned up a "growing body of evidence" that may allow the state's attorney general to pursue criminal charges against generators suspected by some of manipulating power prices in the state, the office of California Gov. Gray Davis said Tuesday. 
The governor's office didn't detail that evidence, however, and persons familiar with the probe conducted by the state attorney general and the California Public Utilities Commission maintained that no such evidence exists.
"The Attorney General gave the governor a progress report on the status of civil and criminal actions," Davis press secretary Steve Maviglio said in a short written statement. "There is a growing body of evidence that may give the Attorney General the opportunity to proceed with criminal as well as civil actions." 
Attorney General Bill Lockyer briefed Davis Monday night on the status of his investigation with the PUC into possible criminal antitrust behavior by generators operating in the state's wholesale electricity market. Maviglio didn't disclose further details of the investigation. 
Two PUC commissioners said the state has documented that supply was withheld, but hasn't been able to demonstrate such activity was illegal. 
"There is no evidence of criminal behavior," one said. "It just doesn't exist." 
S. David Freeman, senior energy adviser to Davis, acknowledged the distinction Tuesday after being asked by reporters in Washington, D.C., about allegations generators withheld supply to boost prices. 
"It may not be criminal conduct, but it's a crime," he said. 
Economists and energy experts deposed by Lockyer have said the attorney general will have difficulty trying to prosecute generators, because there's likely no smoking gun. 
Any claim that the investigation hasn't turned up evidence of criminal activity is an "overstatement," Lockyer spokeswoman Sandra Michioku said. 
The investigation is ongoing, she said. 
Davis said Sunday that pressure from Sacramento has contributed to the recent sharp decline in power prices in the West. An aide to Lockyer said Tuesday the attorney general needs to keep alive the perception that he is close to prosecuting the energy companies "so they will continue to play the game." 
The governor, who has repeatedly blamed the state's year-long power crisis on market manipulation by generators, is pressing federal regulators to order substantial refunds and impose price caps until the dysfunctional market is fixed. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; [email-masked]

Calif Judge To Rule On Confidentiality For Generator Data

06/12/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- A Los Angeles Superior Court Judge said Tuesday he will issue a written ruling on a lawsuit filed by Reliant Energy Inc. (REI) against the state's attorney general to prevent confidential subpoenaed documents from being shared with third parties. 
Superior Court Judge George H. Wu said he would take the case under submission and issue a written ruling in less than 90 days.
Reliant, Dynegy Inc. (DYN) and Mirant Corp. (MIR) agreed May 22 to turn over confidential documents to California Attorney General Bill Lockyer, who is investigating allegations of manipulation and criminal behavior in the state's wholesale power market. 
Reliant agreed to turn over the information, which includes bid data, as long as Lockyer's office agreed not to share it with third parties. 
Lockyer said last month that he wouldn't share the information pending a court hearing on the issue. 
-By Jason Leopold, Dow Jones Newswires; 323-658-3874; [email-masked]

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.