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State Accuses PNM, Powerex of Collusion

From Bloomberg News

The state of California on Wednesday sued Powerex Corp. and PNM Resources Inc., accusing the companies of colluding to create artificial power shortages and inflated prices during the state’s energy crisis four years ago.

The lawsuit, filed in state court in Sacramento, is the third energy-related case California has brought against Powerex, the electricity-trading unit of the British Columbia Hydro & Power Authority, Atty. Gen. Bill Lockyer said in a statement.

During the state’s energy crisis of 2000-01, California utilities such as PG&E; Corp. were forced to implement planned power outages for some customers as wholesale power prices soared and electricity supplies lagged behind demand. California officials have blamed wholesale electricity suppliers such as Powerex for manipulating power supplies during the crisis.

“This lawsuit seeks to hold them accountable for their rampant antitrust violations and recognizes a fundamental reality -- they couldn’t have done it without co-conspirators,” Lockyer said.

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In the suit, Lockyer said Powerex violated state antitrust laws by using “ricochet” trading practices during the energy crisis to buy power in California, export it to PNM, then import it back to overcharge the state by more than $1 billion.

BC Hydro spokeswoman Elisha Moreno said the company “played by the rules of the marketplace” and helped California during what she called its self-inflicted energy crisis.

An October 2003 Federal Energy Regulatory Commission probe found no evidence that Powerex engaged in improper market gaming practices on its own or in concert with others.

The investigation cleared Powerex of “all the allegations related to market manipulation,” Moreno said.

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Powerex employed the same ricochet practices by colluding with the Colorado River Commission, Lockyer claims. The commission is a Nevada agency that oversees hydroelectric generation in the state.

Lockyer spokesman Tom Dresslar said the attorney general made a “policy decision” not to name CRC as a defendant.

Frederick Bermudez, a spokesman for Albuquerque-based PNM, said federal courts had ruled that energy market disputes should be resolved by FERC, not in state courts. FERC also has cleared PNM of manipulating the wholesale energy market in California, he said, adding that a FERC probe of collusion isn’t over yet.

“If FERC found that we as a company didn’t engage in any market manipulation practices, it stands to reason that we weren’t involved in any illegal partnerships as well,” he said.

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PNM shares fell 4 cents to $27.48 on the New York Stock Exchange

The state’s two previous cases are pending in federal court in Sacramento.


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