Edison Decries Reliant Deal as Inadequate

Saying customers are being shortchanged, Southern California Edison on Monday called for federal regulators to reconsider a $13.8-million settlement with Reliant Resources Inc. for withholding power and trying to manipulate electricity prices on two days in June 2000.

Edison said its own analysis found that Reliant earned at least $15.5 million from its traders’ activities and that the harm caused to California utilities and its customers was even greater because the withholding of power caused prices to increase for electricity purchased in the future.

“It seems evident that $13.8 million is really only a fraction of the cost of the harm that was caused,” said Gary Stern, director of Edison market monitoring and analysis.

The Rosemead-based unit of Edison International claims that it alone paid about $20 million extra in long-term electricity costs because of Reliant’s actions.

Stern also said Edison and the state are poised to present new evidence showing that the market manipulation stretched beyond Reliant and beyond the two days covered in the settlement.

“If they did this on two days and believed they were very successful ... why would anyone think that they stopped with just those two days?” Stern asked.

Under the settlement announced Jan. 31, Reliant admitted that its electricity traders orchestrated the shutdown of some of the Houston-based company’s power plants for unneeded maintenance June 21 and 22, 2000, so prices would rise.

Federal Energy Regulatory Commission officials said the $13.8-million figure was based on a worst-case estimate of what the actions cost customers of the now-defunct California Power Exchange, once the state’s primary electricity market.

Power Exchange customers will divide the proceeds from the settlement, and thus Edison and its ratepayers stand to benefit from a larger payout.

Reliant spokesman Richard Wheatley said the company had no immediate comment on Edison’s complaint.

When the settlement was announced, Reliant officials said the abuses were isolated.

The company learned of them during a review of California trading practices, executives said, and promptly brought the matter to the attention of federal officials.

To support its complaint to FERC, Edison pointed to already-released “smoking gun” transcripts of conversations between traders at Reliant -- recordings that captured them celebrating the success of their plant shutdowns and even exclaiming, “That was fu-un!”

“If there was ever any doubt concerning the causes of the California energy crisis, the evidence now released by the commission removes that doubt -- sellers helped create the crisis by withholding power,” Edison said in its filing.

“Edison was overcharged by billions of dollars and driven to the brink of bankruptcy by the market games that Reliant thought were ‘fu-un!’ ”

At the same time, Edison hinted that there is more proof of trading shenanigans still to come. “What you’ll hear from us ... is that there were many abuses by many market participants, not just Reliant,” Stern said.

The utility is one of the so-called California Parties, which are being allowed by FERC, under court order, to gather evidence of market manipulation until Feb. 28.

The group is hoping to bolster the state’s case for $8.9 billion in refunds to cover alleged electricity overcharges during the energy crisis.

Other members include the state attorney general, the California Public Utilities Commission, the Electricity Oversight Board and Pacific Gas & Electric.

A FERC judge in December ruled that electricity suppliers had overcharged California by $1.8 billion.

But the state still owed suppliers $3 billion for electricity, the judge found, resulting in a net amount due to the suppliers of $1.2 billion.

Stern, who said he receives 30 computer discs a day crammed with documents to analyze, said the state would be able to make a compelling argument on Feb. 28 that additional refunds should be ordered.

Stern noted that all of the evidence gathered so far is sealed from public release by a FERC protective order.