Senate Panel Lashes Out at 2 Energy Firms

Angered by the refusal of electricity wholesalers to surrender information about suspected price gouging, a Senate committee voted Thursday to hold two big energy companies in contempt of the Legislature.

It was uncertain what punishment, if any, may be in store for Enron Corp. of Houston and Mirant Corp. of Atlanta. But committee members said potential sanctions could include heavy fines and/or the jailing of corporate executives.

“Jailing of an individual is an option and we intend to preserve all our options,” warned state Sen. Joe Dunn (D-Santa Ana), chairman of the committee investigating whether the wholesalers had manipulated the market.

“Could we impose, say, $9 billion in fines?” Sen. Debra Bowen (D-Marina del Rey) asked rhetorically.

Enron reacted angrily. “This is a shakedown,” charged spokesman Mark Palmer. “And if this is a shakedown, we’re going to protect our legal rights.”

Enron had further enraged the committee by sending a letter saying the legislative panel had no authority to conduct its investigation because wholesale prices were the “exclusive jurisdiction” of the Federal Energy Regulatory Commission.

A spokesman for Mirant said the company intends to keep talking to the committee to reach an agreement.

The bipartisan committee had been prepared to find eight generators--mostly out-of-state companies--in contempt for refusing to produce the subpoenaed records. But by the end of the four-hour hearing, companies that said they would cooperate--AES, Duke, Dynergy, NRG, Reliant and Williams--escaped a citation, at least temporarily.

Though the committee found Enron and Mirant in contempt, its action is subject to ratification by the full Senate.

Dunn said contempt citations are so rare there are few guidelines to follow in determining a punishment. He said it “could be anything that the Senate believes is necessary and reasonable.”

The finding of contempt for failure to obey a legislative subpoena is rarely used in California. Sources said it last was done in 1929 when an officer of a cement company refused to cooperate in a price-fixing investigation.

Late in 2000 and earlier this year, the profits of major electricity wholesalers soared astronomically, throwing the state’s two biggest utilities, Pacific Gas and Electric Co. and Southern California Edison Co., into financial chaos. Edison is teetering on bankruptcy and PG&E; is in Bankruptcy Court.

The committee, which first asked the companies to provide the information voluntarily in April, encountered strong resistance from the energy companies. They complained that their trade secrets might be exposed to competitors, the public and government regulators.

Frustrated, the committee two weeks ago issued subpoenas demanding the information, including whether the power sellers had destroyed any records.

The committee set Thursday as the deadline for compliance and threatened to find violators in contempt, a tactic that appeared to turn around all but Enron and Mirant.

“Let’s move forward. We want to facilitate your investigation,” said Duke attorney Joel Kleinman of Washington, whose company had objected to its subpoena.

At the last minute, several sellers began sending urgent fax letters or witnesses to Dunn. Dunn said a quick scan of the letters showed wholesalers were pleading for a second chance and assuring that the subpoenaed data would be forthcoming.

Kleinman told the committee Duke did not want to be held in contempt.

“We will make tens of thousands of documents available for inspection,” Kleinman said.

But he said Duke and the committee staff still must settle on a confidentiality agreement, a matter he indicated was close to resolution. Other wholesalers appeared to fall into line.

Dunn said he was concerned that “minor problems” in reaching a confidentiality agreement might become a tactic for further delay.

The committee gave the six companies until July 10 to reach confidentiality agreements and turn over a vast assortment of records.

The contempt finding against Mirant and Enron would be abandoned if they, too, provided the confidential documents by July 10, when the committee will review the companies’ compliance.

The wholesalers also are the targets of similar investigations by Atty. Gen. Bill Lockyer and the state Public Utilities Commission.

Times staff writer Nancy Vogel contributed to this story.