3 Power Firms Subpoenaed in Calif. Probe
Signaling the widening of a grand jury investigation into the alleged manipulation of electricity prices in California, federal prosecutors issued subpoenas for documents Friday to at least three major players in the state’s power markets.
Duke Energy Corp., AES Corp. and Williams Cos. each said they received subpoenas from the U.S. attorney’s office in San Francisco.
“It’s related to our activities in the California market,” said Pat Mullen, spokesman for Charlotte, N.C.-based Duke Energy. “As with all of the government inquiries and investigations, we will cooperate fully.”
Mullen declined to elaborate on what types of records the subpoenas seek or what time period they cover. Representatives of AES and Williams also wouldn’t provide such details. Williams markets electricity produced by AES plants in California.
A spokeswoman for U.S. Atty. Kevin V. Ryan declined to comment, citing legal restrictions on discussing grand jury activities.
Representatives of Houston-based Dynegy Inc., Atlanta-based Mirant Corp. and Houston-based Reliant Resources Inc. -- all large power suppliers to the state -- said they were unaware of any subpoenas received by their companies. A spokeswoman for Calpine Corp. would not comment on whether the San Jose company had received a subpoena.
The flurry of subpoenas follows by less than a month the only admission yet of illegal activity during California’s energy crisis of 2000 and 2001.
Enron Corp.’s top Western trader, Timothy N. Belden, pleaded guilty Oct. 17 in U.S. District Court in San Francisco to one count of conspiracy to commit wire fraud, saying he had conspired to lie to power authorities in order to boost earnings for the company. Belden headed Enron’s electricity trading operation in Portland, Ore., and is believed to have masterminded Enron trading strategies with colorful nicknames such as Fat Boy, Death Star and Get Shorty.
Belden agreed to cooperate with investigators in the 5-month-old inquiry. The next day, Ryan and San Francisco FBI chief Mark Mershon publicly warned other energy traders that they were coming after them.
“I don’t know who is playing the piano, but it sounds like Timmy Boy is singing,” said a source close to one of the separate state investigations into California market manipulation. Belden’s attorney, Cristina Arguedas, declined to discuss what Belden may be sharing with federal investigators.
Ryan’s office in August subpoenaed trading records from the California Independent System Operator, which runs the transmission grid for most of the state. The subpoena sought electricity forecasts filed by power sellers with the grid operator, the records of electricity flows and any payments made to traders under a complex system to relieve electricity traffic jams on the grid.
The subpoenas are another piece of bad news for the battered energy trading industry, which has shriveled by more than half since the collapse late last year of Enron, once the world’s largest energy trader. Revelations of questionable trading ploys by Enron and others, accounting scandals, tight credit and low power prices have decimated the business.
On Friday, El Paso Corp. became the latest big-name trading company to announce it was quitting the sector.
“I never thought I would see this,” said Gary Ackerman, executive director of the Western Power Trading Forum, an industry group that represents many of the companies now besieged. “It’s like economic McCarthyism out there: ‘I am not now nor have I ever been an energy trader.’ ”
Houston-based El Paso, which reported a third-quarter net loss of $69 million on sales of $2.7 billion, said it would spin off its trading operation to a partnership that would liquidate the portfolio in the next two years. The reason for the move, El Paso President Brent Austin said, was to eliminate a major drag on corporate earnings. A year ago, the natural gas pipeline operator posted net income of $211 million on sales of $3.2 billion.
Separately, a spokesman for California Atty. Gen. Bill Lockyer confirmed that talks were being conducted with El Paso to settle lawsuits accusing the company of withholding natural gas from the state during the energy crisis and of conspiring with others to limit competition in the pipeline business. The talks were first reported Friday by the San Francisco Chronicle.
El Paso Chief Executive William A. Wise declined to comment on the negotiations but noted that the company has a history of settling such matters if it makes sense for shareholders.
“We do understand the difference between litigating till the cows come home and getting these things behind us,” Wise said Friday during a conference call with investors.
El Paso shares fell $1.52 to $7.68 on the New York Stock Exchange. Duke lost 85 cents to $19.96, AES finished 7 cents higher at $1.99, and Williams was off 45 cents to $2.61, all on the NYSE. Disclosure of the subpoenas came after the close of the market.
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Times staff writer Jerry Hirsch contributed to this report.
