Energy company indicted from California energy crisis

CNN ^ | Thursday, April 8, 2004 Posted: 5:13 PM EDT (2113 GMT) | staff

[Ernest_at_the_Beach]

WASHINGTON (CNN) -- A Reliant Resources Inc. subsidiary and four of its officers were indicted on charges of manipulating California energy markets, the Justice Department announced Thursday.

The indictments, issued by a grand jury in San Francisco against Reliant Energy Services Inc. and four of its employees, allege actions designed to drive up the price of electricity in June 2000, during the California energy crisis, the department said.

[Ernest_at_the_Beach]

Hmmm!

The Plant shutdown thing in San Diego?

I am not sure where this action happened.

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[2banana]

The indictments allege that the firm artificially drove up prices by shutting off its power generation

Someone explain to me how a company makes more money by making less of something? If Ford shut down car plants in the middle of a car buying boom, just how does that help Ford?

[Amerigomag]

Someone explain to me how a company makes more money by making less of something?

If your product sells for $1.00 per unit under normal circumstances and $100.00 per unit after you shut down production for two days there is the potential for large profit.

[lewislynn]

I hate to say, I told you so.

[Ernest_at_the_Beach]

I think it is too soon to say this is legitimate.

It is in San Fran,(a nutty place) , I would suspect that the DemonicRats are at work.

But we will see...

[lewislynn]

I think it is too soon to say this is legitimate.

Tell that to Reliant.

The federal investigation of Reliant was widely reported in California, and the company acknowledged last month that it had been notified it could face charges

I would suspect that the DemonicRats are at work.

"Ashcroft announces the indictments Thursday against Reliant Energy"

I wasn't aware our Attorney General (Ashcroft) was a Democrat

[bayourod]

Reliant has no honor. Unfortunately they provide both my gas and electricity.

[Centurion2000]

Someone explain to me how a company makes more money by making less of something? If Ford shut down car plants in the middle of a car buying boom, just how does that help Ford?

Economics lesson in supply / demand curves and price inelasticity.

Prices on some goods are VERY sensitive to supply.

Increase supply and price drops significantly, decrease it and it rises much more quickly than would be expected.

Gasoline, insulin, power are just some products that are like that. The more you need a product; the likelier that the price will be closer to inelastic.

[calcowgirl]

There's a more detailed article in today's Sac Bee. U.S. grand jury indicts energy firm

It says they closed down four out of five plants (the CNN article says two). Per the indictment, Reliant operated five power generation plants in California (Coolwater, Ellwood, Etiwanda, Mandalay, Ormond Beach). It doesn't say which were shut down.

Here's a snip from the Sac Bee... it sounds like there are many legal actions continuing against Reliant.

In other proceedings, the state Department of Justice has sued Reliant for unspecified alleged overcharges, and also has requested that the Federal Energy Regulatory Commission order a total refund of $8.9 billion from Reliant and other generators. FERC last October settled separate market manipulation allegations against Reliant for up to $50 million.

Unlike the fines sought in the federal case, which would be payable to the federal government, money reclaimed by the state would be refunded to California ratepayers, said Tom Dresslar, a spokesman for state Attorney General Bill Lockyer.

Dresslar had no figure for Reliant’s share of overcharges, but he called the company “one of the worst and biggest offenders.”

State prosecutors also are pursuing an antitrust case against Reliant and another suit accusing Reliant of “double-selling” electricity - allegedly withholding electricity it had promised to deliver under state contracts and then selling it to the state’s suppliers at inflated open-market prices.

If you're a real glutton, here's a link to the Indictment from Findlaw.com (PDF)

[Robert357]

Thought I would put in some text from the Chronicle article

They are accused of conspiring to drive up power prices to avoid a multimillion-dollar loss Reliant faced in June 2000 because of a sudden drop in market prices that conflicted with the company's trading position. The company shut most of its California power plants for two days, falsely claiming environmental limits and maintenance problems, and withheld additional electricity from the state by manipulating its own prices, prosecutors said.

Ryan said Reliant had been uncooperative during the federal investigation. The company denied that and said none of its actions had violated the law or contributed to rolling blackouts later in 2000.

"During the week in question, electricity was plentiful in California . . . and prices were relatively low,'' said company attorney Mike Jines.

So the questions seems to be... Why did Reliant shut down plants on two days during a week in June 2000?

Reliant says "environmental limits and maintenance problems" and the prosecutor says "market manipulation." That should be an interersting one for a Judge and/or jury to sort out.

My recollection is that this has all been argued out before, but hey why not one more time.

[Eva]

Supply and demand. The same thing is happening in WA state, they close down dams and lower the water levels and then charge much more for what they sell. It's called environmental fascism, the environmentalists get reduced power consumption and the energy companies get higher prices.

[Ernest_at_the_Beach]

Thanks for the info!