Lockyer Says Probe Clears Power Buyers of Conflicts

Atty. Gen. Bill Lockyer cleared the state’s electricity buyers of any criminal conflict-of-interest violations Thursday.

A 10-month investigation uncovered no evidence that the consultants hurriedly hired by the state last year to buy electricity held significant stock or other financial interests in energy companies with which they did business.

“None of these people met that test,” Lockyer said.

The state’s crew of power buyers greeted the news as vindication, while Secretary of State Bill Jones, who first asked for such an investigation in July, called the decision “completely unacceptable.”

Lockyer’s decision dims the hope of consumer advocates and Republican lawmakers who had argued that potential conflicts rendered many of the state’s long-term power contracts void.

In January 2001, as high electricity prices bled the state’s major utilities of cash, the state Department of Water Resources stepped in to keep electricity flowing to 27 million utility customers. Forced to transform itself into the largest power buyer in the West practically overnight, the department hired dozens of consultants.

Months later, the consultants disclosed their financial interests, as most state employees must do. It became clear that some owned stock in or had recently done work for companies supplying California with power. Gov. Gray Davis’ administration fired five consultants in July for conflicts of interest, and Lockyer launched an investigation.

His agency’s review covered 11,000 pages of documents and 56 long-term electricity agreements, Lockyer said. Investigators scrutinized the personal finances of 21 consultants, searching for violations of a state law under which a conflict is triggered if more than 5% of the consultant’s annual income comes from the company involved in a contract or if the consultant owns more than 3% of the company’s stock value.

Lockyer’s finding of no misdeeds does not end the controversy. It remains under review at the Fair Political Practices Commission. That state agency enforces other state laws that require employees and certain contractors to disclose their personal financial interests and disqualify themselves from certain decisions.

In March, the FPPC fined the Department of Water Resources $69,500 for failing to have consultants file timely statements of economic interest. Staff members of the political watchdog agency said at the time that as they continued to investigate, individual consultants could face civil penalties or misdemeanor criminal charges.

Jones, who first raised the issue of energy consultant conflicts as an ultimately unsuccessful Republican candidate for governor, strongly disagreed with Lockyer’s conclusions. In a press conference Thursday, he called on the U.S. attorney’s office to investigate.

“I believe the public is confused and quickly losing faith and trust in Sacramento,” Jones said.

The issue is also still alive in Los Angeles County Superior Court, where state Sen. Tom McClintock (R-Thousand Oaks) filed a lawsuit this month seeking to overturn the state’s $43 billion worth of long-term power contracts based on an alleged conflict of interest.

McClintock’s suit singles out Vikram Budhraja, who was on the payroll of Edison International--the parent company of Southern California Edison--at the same time he was being paid to negotiate long-term power contracts for the state.

McClintock called Budhraja’s conflict “self-evident” because the state signed the contracts in part to keep power flowing to Edison’s customers and prevent the utility’s bankruptcy.

“I just hope the courts will do what the attorney general is refusing to do,” McClintock said, “and that is to ascertain the facts.”

Lockyer said he found no violation because Budhraja recused himself from working on the state’s contract with Mission Energy, an Edison subsidiary. Budhraja’s work on other long-term contracts that would benefit Edison was considered too speculative to constitute a violation of state law, Lockyer said.

DWR spokesman Oscar Hidalgo said Lockyer’s announcement “confirms what we’ve been saying all along.”

“We were confident from the beginning that there were no conflicts,” he said.