Legislator Accuses Electricity Firm of Perjury

A state senator accused a San Diego electricity trading company of perjury Wednesday and said other sellers to California during the energy crisis five years ago, including the Los Angeles Department of Water and Power, could face similar charges.

State Sen. Joe Dunn (D-Santa Ana) said he would refer evidence to the Sacramento County district attorney that Sempra Energy Trading Corp. executives lied to legislative investigators in June 2002 when they denied using trading strategies -- nicknamed “Fat Boy,” “Ricochet” and “Death Star” by employees of Enron Corp. -- to artificially boost profits. Dunn also said he would ask the Senate Energy Committee to censure Sempra for perjury, which could expose the company to a variety of punishments.

A Sempra official strongly denied Dunn’s allegations and accused him of misrepresenting the company’s sworn testimony “to suit his political purposes.”

“The problem is that everyone defines these tactics differently, and if you’re somebody like Sen. Dunn, you’ll define the activities as broadly as possible to encompass any transaction that somebody might have made in the marketplace,” said Sempra spokesman Doug Kline.

The action by Dunn marks a revival of the Legislature’s attempt to hold power sellers accountable for alleged manipulation of the semi-deregulated market it helped create in 1998. The market was supposed to deliver cheaper electricity, but it brought blackouts and soaring prices instead. State officials have asked federal energy regulators to order power sellers to return California $9 billion in overcharges.

The March 2001 internal Sempra e-mail that Dunn cited as proof that the company had used a trading scheme called “Ricochet” appears to show the involvement of the DWP as well as the power department run by Burbank.

The municipal utilities are described by a Sempra trader as potential power sellers in “two plays that have really worked out this week.” The “plays” involved buying electricity and reselling it several times before finally selling it to the state, which by March 2001 had stepped in to buy electricity on behalf of nearly bankrupt private utilities.

In the past, Dunn has accused the DWP of involvement in a “Ricochet” scheme to push up prices. But DWP officials have consistently denied gaming the market, and they were cleared by federal energy investigators in 2003. However, the state attorney general has challenged the DWP’s exoneration.

Henry Martinez, chief operating officer of the DWP, said the department had always been truthful to Dunn’s committee. “I don’t have a concern that we have a perjury problem here,” he said.

Dunn, who intends to run for attorney general, said he was focused not on illegal market behavior but on whether energy officials lied to the Senate Energy Committee, which he led at the time.

“We take lying to the Legislature very seriously,” Dunn said.

California officials have long accused energy companies of manipulating the state’s power market. They got some proof in May 2002, when federal regulators released memos written by traders at Texas-based Enron that detailed and identified strategies for increasing profits in California.

Shortly after release of the memos, Dunn’s committee sent questions to electricity sellers, asking them to say under penalty of perjury whether they engaged in the Enron strategies or knew other firms that did.

In June 2002, Sempra Energy Trading Corp. Managing Director Christine Mastro Cantor of San Diego answered “no” to each question, sometimes with elaboration.

Dunn said he looked more closely at Sempra after witnesses at an April 2004 Senate Energy Committee hearing implicated the company. Dunn said he reviewed some of the thousands of pages of records and e-mails his committee had subpoenaed from electricity sellers and found evidence submitted by Sempra that appeared to contradict their answers.

Besides the internal e-mail that discusses reselling electricity, Dunn cited another from a Sempra trader who appeared to discuss “fake load,” a false demand for electricity. What Dunn called evidence of perjury also included an e-mail from the California Independent System Operator, which balances the flow of power moving through most of California’s transmission grid. In that e-mail, workers discussed various “ploys” by Sempra traders and suggested complaining about them to higher officials.

“Our schedulers have clearly explained to Sempra’s operators the problems caused by these practices,” states an e-mail from November 2000.

Sempra officials said their company “has complied with the energy market rules and regulations wherever it does business.” They said the Federal Energy Regulatory Commission was aware of the documents Dunn referred to when Sempra agreed in October 2003 to pay $7.2 million to settle allegations that it manipulated the market.

State Atty. Gen. Bill Lockyer disputes that settlement and continues to investigate the company’s behavior during the electricity crisis.