Tuesday, May 29, 2001 - 12:47 a.m. Pacific

Plenty of energy spent on probing California power crisis

By John Howard The Orange County Register

SACRAMENTO - Detectives would seem to be tripping over each other to discover who did what to whom, and why, in California's energy crisis.

While electricity may be scarce, investigations are plentiful. At least 10 major ones are afoot, many overlap, and more loom. The atmosphere is heated, the rhetoric strong. State, federal and local investigators, along with court officers, financial experts and special investigators, are poring over thousands of pages of documents from government agencies and private companies.

At the top of the swarming heap is the $10 million investigation mounted by the state Attorney General's Office to answer the core question: Did a handful of power sellers fix prices to bilk Californians of billions of dollars?

But it's not just the government that is busy. The companies, which have denied wrongdoing, are overwhelmed by the scrutiny.

"We are supplying reams and reams of documents. ... It is a distraction from our day-to-day work, there's no question," said Tom Williams of North Carolina-based Duke Energy, which operates several power plants in California.

"It affects our employees and their families, this barrage of innuendo. I don't know what more we can do."

Accompanying the investigations are at least six lawsuits against the companies by individuals. Like the investigations, the suits contend the companies improperly manipulated the market.

Legislative leaders, meanwhile, have sued the federal government, contending it has failed to protect consumers from price gouging.

"This all permeates our business in so many ways," said Gary Ackerman, of the Western States Power Forum, which represents power sellers and buyers in the West.

"It even affects my ability to talk to the newspapers, because we're afraid statements may turn up later and be used as evidence. We're not sure what we're dealing with, whether a suit or even a grand jury if the (attorney general) decides to take criminal action, as he said he might."

The state's top prosecutor said that, indeed, criminal charges are a possibility.

"There is an investigation under way that involves potential criminal conduct," said Sandra Michioku, a spokeswoman for Attorney General Bill Lockyer. It could be at least eight weeks before it is completed, she said.

Other investigating agencies include the Federal Energy Regulatory Commission; the California Public Utilities Commission (PUC); the city attorneys' offices in Long Beach, Los Angeles and San Francisco; California's grid manager, the Independent System Operator (ISO); the obscure Electricity Oversight Board, which oversees the ISO; and the state Senate and Assembly.

The state has even considered asking two more federal agencies, the Department of Energy and the Federal Trade Commission, to get into the act.

Some offices are conducting multiple investigations. For at least two agencies, the PUC and the Attorney General's Office, the investigations are being partly coordinated.

Some agencies are examining the same issues. The PUC, the attorney general and ISO, for example, all are looking at whether power plants were shut down to drive up demand and prices.

"There is a lot of overlap and there probably are problems of coordination," said Nettie Hoge of The Utility Reform Network of San Francisco, a grass-roots watchdog group.

With so many agencies trying to extract information, Hoge said, even those who have done no wrong are concerned about talking freely because of the greater likelihood that proprietary information will leak to competitors.

Others feel the overlap is beneficial.

"When you're up against an industry as wealthy and powerful as the energy industry, it's probably better to double-team them," said Doug Heller, of the Foundation for Taxpayer and Consumer Rights.

Hoge thinks that if any investigation is going to produce results, it will be Lockyer's, "because the governor has thrown all the resources that way."

Investigators have requested mountains of paperwork. Transaction and maintenance documents, market reports, financial records, even e-mails.

Martin Wilson, a spokesman for Texas-based Reliant, contends the intensity of the investigations could have negative long-term effects on California's business climate.

"There is a climate of instability and uncertainty that makes companies rethink their decisions about investments (in California)," he said.

But for consumer groups, the goal of all these investigations is straightforward.

"Certainly, we're really hopeful that these investigations will lead to refunds for customers," said Mindy Spatz of The Utility Reform Network. "There is a widespread belief among people who follow these issues that widespread gaming and manipulation has occurred in the market."

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-- Martin Thompson (mthom1927@aol.com), May 29, 2001