FacebookTwitterGoogle+RedditEmail

Bilking California for Billions

 

The sky-high electricity and natural gas prices in California between 2000 and 2001 that bankrupted the state’s largest utility and caused several days of rolling blackouts was the result of widespread manipulation by several Texas-based energy companies with close ties to President Bush, federal energy regulators ruled Wednesday.

The energy companies, Dynegy Inc., Reliant Resources, Enron Corporation, all of which contributed heavily to Bush’s presidential campaign, must now refund California billions of dollars in profits it reaped between January 2000 and June 2001. Other energy companies, including Mirant and Williams Companies, were also identified for taking of advantage of loopholes in California’s newly deregulated energy market to boost their profits and ordered to pay refunds.

In addition, FERC harshly criticized Reliant Resources for manipulating natural gas prices at the Southern California trading hub known as Topock. In FERC’s staff report to Congress, Reliant is accused of dominating the Southern California gas market, raising prices there and selling at the top of that market.

FERC commissioners also said they planned to strip the wholesale trading privileges of Enron, Reliant and a unit of BP PLC because of their manipulative trading activities during the energy crisis.

California’s electricity crisis wreaked havoc on consumers in the state between 2000 and 2001, resulted in four days of rolling blackouts, and forced the state’s largest utility, Pacific Gas & Electric, into bankruptcy. California was the first state in the nation to deregulate its power market in an effort to provide consumers with cheaper electricity and the opportunity to choose their own power provider. The results have since proved disastrous. The experiment has cost the state more than $30 billion.

But despite Wednesday’s favorable ruling for California, state officials said they aren’t celebrating. That’s because FERC is only ordering energy companies to refund California $3.3 billion. However, the state still owes about $3 billion to suppliers, meaning that California stands to receive about $300 million. Davis said the state wouldn’t take a penny less than $8.9 billion, the amount California claims it was overcharged as a result of the crisis.

Steve Maviglio, Davis’ press secretary, said California would appeal any ruling that fails to refund the state the full $8.9 billion.

Wednesday’s ruling, the culmination of FERC’s yearlong investigation into the dysfunctional Western energy markets, is a major blow to Bush and Vice President Dick Cheney both of whom publicly denied in the Spring of 2001 that energy companies such as Enron and Dynegy were acting like a cartel and withholding much-needed electricity supplies from the state in order to increase the wholesale price and their companies’ profits.

In May 2001, during the peak of California’s energy crisis, Gov. Gray Davis met with Bush at a Los Angeles hotel to ask for federal assistance, such as price caps, to rein in soaring energy prices. Bush refused, saying California legislators designed an electricity market that left too many regulatory restrictions in place and that’s what caused electricity prices in the state to skyrocket.

That same month, the PBS news program Frontline interviewed Cheney and he was asked whether energy companies were using manipulative tactics to cause electricity prices to spike in California.

“No,” Cheney said during the Frontline interview. “The problem you had in California was caused by a combination of things–an unwise regulatory scheme, because they didn’t really deregulate. Now they’re trapped from unwise regulatory schemes, plus not having addressed the supply side of the issue. They’ve obviously created major problems for themselves and bankrupted PG&E in the process.”

It should be noted, however, that a month before the Frontline interview and Bush’s meeting with Davis, Cheney, who chairs Bush’s energy task force, met with Ken Lay, Enron’s former chief executive, to discuss Bush’s National Energy Policy. Lay, whose company was the largest contributor to Bush’s presidential campaign, made some recommendations that benefited his company financially and Cheney included some of Lay’s suggestions in the energy policy. The energy policy was released in May 2001, a couple of weeks after the meeting between Bush and Davis and after Cheney’s Frontline interview.

Moreover, in March 2001, while the energy policy was being drafted, while Davis was accusing energy companies of withholding electricity supplies from the state and while Cheney was meeting with Lay and other heavyweights in the energy industry, Tulsa, Okla., based-Williams Companies entered into a confidential settlement with FERC agreeing to refund California $8 million in profits it reaped by deliberately shutting down one of its power plants in the state in the spring of 2000 to drive up the wholesale price of electricity in California.

The evidence, a transcript of a tape-recorded telephone conversation between an employee at Williams and an employee at a Southern California power plant operated by Williams, shows how the two conspired to jack up power prices and create an artificial electricity shortage by keeping the power plant out of service for two weeks.

Details of the settlement had been under seal by FERC for more than a year and were released in November after the Wall Street Journal sued the commission to obtain the full copy of its report. Similarly, FERC found that Reliant engaged in identical behavior around the same time as Williams and in February the commission ordered Reliant to pay California a $13.8 million settlement.

In a bit of poetic justice for the state, however, many of these energy companies are now struggling financially. Enron is bankrupt and Reliant, Dynegy and Williams, once the darlings of Wall Street, have seen their stocks plummet from a high of $70 in 2001 to just above $2 a share Wednesday.

Today’s Features

March 26, 2003

Pablo Mukherjee
Watch Their Lips

David Krieger
Shock But Not Awe

Linda Heard
Winning Hearts and Minds Bush-Style

Imad Jadaa
The Beautiful Face of America

Adam Engel
Buckets of Blood

Patrick Cockburn
Kurds Unimpressed

David Lindorff
POWs, Torture and Hypocrisy

Robert Fisk
The Coup That Didn’t Happen

April Hurley, MD
A Doctor’s Outrage in Baghdad

Gloria Bergen
Chretien’s Shame

Reema Abu Hamdieh
The Smell of Death Surrounds Me

Website of the War
Iraq Body Count

Keep CounterPunch Alive:
Make a Tax-Deductible Donation Today Online!

home / subscribe / about us / books / archives / search / links /

More articles by:

JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

August 14, 2018
Daniel Falcone
On Taking on the Mobilized Capitalist Class in Elections: an Interview With Noam Chomsky
Karl Grossman
Turning Space Into a War Zone
Jonah Raskin
“Fuck Wine Grapes, Fuck Wines”: the Coming Napafication of the World
Manuel García, Jr.
Climate Change Bites Big Business
Alberto Zuppi - Cesar Chelala
Argentina at a Crossroads
Chris Wright
On “Bullshit Jobs”
Rosita A. Sweetman
Dear Jorge: On the Pope’s Visit to Ireland
Binoy Kampmark
Authoritarian Revocations: Australia, Terrorism and Citizenship
Sara Johnson
The Incredible Benefits of Sagebrush and Juniper in the West
Martin Billheimer
White & Red Aunts, Capital Gains and Anarchy
Walter Clemens
Enough Already! Donald J. Trump Resignation Speech
August 13, 2018
Michael Colby
Migrant Injustice: Ben & Jerry’s Farmworker Exploitation
John Davis
California: Waging War on Wildfire
Alex Strauss
Chasing Shadows: Socialism Won’t Go Away Because It is Capitalism’s Antithesis 
Kathy Kelly
U.S. is Complicit in Child Slaughter in Yemen
Fran Shor
The Distemper of White Spite
Chad Hanson
We Know How to Protect Homes From Wildfires. Logging Isn’t the Way to Do It
Faisal Khan
Nawaz Sharif: Has Pakistan’s Houdini Finally Met his End?
Binoy Kampmark
Trump Versus Journalism: the Travails of Fourth Estate
Wim Laven
Honestly Looking at Family Values
Fred Gardner
Exploiting Styron’s Ghost
Dean Baker
Fact-Checking the Fact-Checker on Medicare-for-All
Weekend Edition
August 10, 2018
Friday - Sunday
David Price
Militarizing Space: Starship Troopers, Same As It Ever Was
Andrew Levine
No Attack on Iran, Yet
Melvin Goodman
The CIA’s Double Standard Revisited
Jeffrey St. Clair
Roaming Charges: The Grifter’s Lament
Aidan O'Brien
In Italy, There are 12,000 American Soldiers and 500,000 African Refugees: Connect the Dots 
Robert Fantina
Pity the Democrats and Republicans
Ishmael Reed
Am I More Nordic Than Members of the Alt Right?
Kristine Mattis
Dying of Consumption While Guzzling Snake Oil: a Realist’s Perspective on the Environmental Crisis
James Munson
The Upside of Defeat
Brian Cloughley
Pentagon Spending Funds the Politicians
Pavel Kozhevnikov
Cold War in the Sauna: Notes From a Russian American
Marilyn Garson
If the Gaza Blockade is Bad, Does That Make Hamas Good?
Sean Posey
Declinism Rising: An Interview with Morris Berman  
Jack Dresser
America’s Secret War on Yemen
Howard Lisnoff
The Use and Misuse of Charity: the Luck of the Draw in a Predatory System
Louis Proyect
In the Spirit of the Departed Munsees
Binoy Kampmark
Banning Alex Jones and Infowars
Mundher Al Adhami
On the Iraqi Protests, Now in Their Second Month 
Jeff Mackler
Nicaragua: Dynamics of an Interrupted Revolution
Robert Hunziker
Peter Wadhams, Professor Emeritus, Ocean Physics
David Macaray
Missouri Stands Tall on the Labor Front
Thomas Knapp
I Didn’t Join Facebook to “Feel Safe”
John Carroll Md
Are Haitian Doctors Burned Out?
FacebookTwitterGoogle+RedditEmail